Investment Valuation in India

The announcement of poverty line for India pegged at Rs 32 per day in urban areas and Rs 26 for rural areas based on June 2011’s price index had gathered much attention and criticism itself. The planning commission has taken another bold step to revise it further downward to Rs 29 for urban areas and Rs 22 for rural areas on March 19.  The Planning Commission has cited that there is a decline in poverty level from 37.2 percent in 2004-05 to 29.8 percent in 2009-10. Even the absolute number of poor in the country has fallen. While the critics see this as an excuse from the government – already struggling to meet its expenditures - to avoid serving the poor by providing subsidies. But there is an economic sense in what the planning commission or the government seems to be doing. Let’s assume that the entire daily income of the country is Rs 100 and is earned by 5 people as follows: A: Rs 50 B: Rs 20 C: Rs 15 D: Rs 10 E: Rs 5 The government has limi...