The draft fifth Plan has quantified poverty. It assumed that there were 173 million people in 1973-74 who were living below the poverty line of Rs. 40 per month. According to that draft report, the number of people below the poverty line would be 190 million in 1978-79 and 211 million in 1985-86.
The seventh Finance Commission (1978) has questioned the validity of earlier estimates of poverty on the ground of their narrowness. To obviate the problem, the seventh Finance Commission has developed the concept of “augmented poverty line”.
To have a comprehensive measure of poverty the benefits of public expenditure is added to the private consumption expenditure for calculating the augmented poverty line.
The augmented poverty line envisages the addition of the monthly private expenditure to the per capita monthly public expenditure by each State Government under the following categories: (i) health and family planning, (ii) water supply and sanitation, (iii) education, (iv) administration of police, jails and courts, (v) roads and (vi) social welfare.
The poverty estimate made by the seventh Finance Commission, based on the comprehensive definition of poverty, indicated that 53 per cent of the rural and 51 per cent of the urban population lived below the poverty line.
The estimate of the Commission reveals that in 1970-71, the percentage of people below the augmented poverty line was 52. The percentage of people below the poverty line is expected to decline to 26 by the end of the seventh Plan and subsequently to 5 by the turn of the century.