THE report by economist Suresh Tendulkar used money spent by a person on specific household goods and services to define the poor.
People living in the states of Orissa, Bihar and Chhattisgarh were found to be among the poorest, the report said.
It also found that the number of poor in cities had decreased, while those in villages had gone up.
The report has moved from the traditional method of enumerating the number of people living in poverty by measuring their calorie intake to one based on their spending on essential goods and services.
Based on the new method, it found 37.2 per cent of Indian people living below the poverty line.
The report found that over 40 per cent of rural people survive on a per capita expenditure of 447 rupees ($9.6) every month, spending on bare essentials like food, fuel, clothing and footwear.
Correspondents say that for all of India’s impressive economic progress, the number of Indians living in extreme poverty is not declining fast enough.
Unless India commits itself to greater social spending and intervention, it will be difficult to reduce poverty, correspondents say.