Internationally, an income of less than $1.90 per day per head of purchasing power parity is defined as extreme poverty. By this estimate, about 12.4% of Indians are extremely poor. Income-based poverty lines consider the bare minimum income to provide basic food requirements; it does not account for other essentials such as health care and education

In its Ninth Five-Year Plan (1995–2002), BPL for rural areas was set at annual family income less than Rs. 20,000, less than two hectares land, and no television or refrigerator. The number of rural BPL families was 650,000 during the 9th Plan. The survey based on this criterion was again carried out in 2002 and the total number of 387,000 families were identified. This figure was in force until September 2006.

There were debates around the comparability of the 1999-2000 NSS data with the 2004-05 data, especially for the rural areas. Data showed a decline in poverty from 36% to 28%, but higher poverty rates in certain areas. Different groups proposed different methods of measuring poverty, but the Planning Commission chose the Tendulkar Committee’s method that “updated the expenditure basket and revised the poverty line and consequently estimated the percentage of poor people in India at 37% or 435 million in 2004-05.

In its Tenth Five-Year Plan (2002–2007) survey, BPL for rural areas was based on the degree of deprivation in respect of 13 parameters, with scores from 0–4: landholding, type of house, clothing, food security, sanitation, consumer durables, literacy status, labour force, means of livelihood, status of children, type of indebtedness, reasons for migrations, etc.

The Planning Commission fixed an upper limit of 326,000 for rural BPL families on the basis of simple survey. Accordingly, families having less than 15 marks out of maximum 52 marks have been classified as BPL and their number works out to 318,000. The survey was carried out in 2002 and thereafter but could not be finalised due to a stay issued by the Supreme Court of India. The stay was vacated in February 2006 and this survey was finalised and adopted in September 2006. This survey formed the basis for benefits under government of India schemes. The state governments are free to adopt any criteria/survey for state-level schemes.

In its Tenth Five-Year Plan BPL for urban areas was based on degree of deprivation in respect of seven parameters: roof, floor, water, sanitation, education level, type of employment, and status of children in a house. A total of 125,000 upper families were identified as BPL in urban area in 2004. It has been implemented since then.

Those spending over Rs 32 a day in rural areas and Rs 47 in towns and cities should not be considered poor, an expert panel headed by former RBI governor C Rangarajan said in a report submitted to the BJP government last week. The recommendation, which comes just ahead of the budget session of Parliament, is expected to generate fresh debate over the poverty measure as the committee's report has only raised the bar marginally.