The Poverty Line

• In pre-independent India, Dadabhai Naoroji was the first to discuss the concept of a ‘Poverty Line’.
• He used the menu for a prisoner and used appropriate prevailing prices to arrive at what may be called ‘jail cost of living’.
• However, only adults stay in jail whereas, in an actual society, there are children too. He, therefore, appropriately adjusted this cost of living to arrive at the poverty line.
• For this adjustment, he assumed that one-third population consisted of children and half of them consumed very little while the other half consumed half of the adult diet. This is how he arrived at the factor of three-fourths: (1/6) (Nil) + (1/6) (Half) + (2/3) (Full) = (3/4) (Full).
• The weighted average of consumption of the three segments gives the average poverty line, which comes out to be three-fourth of the adult jail cost of living.

Source: Ramesh Singh