UNIT 2 POVERTY

I structure
2.1 Introduction
2.2 Poverty: Meaning and Features
2.3 Poverty Situation: Global and India
2.4 Measurement and trends of poverty in India
2.5 Vicious Circle of Poverty
2.6 Dimensions of Poverty in India
2.7 Causes and Remedies of Poverty in India
2.8 Planned Efforts for Alleviation of Poverty in India
2.9 LetUsSumUp
2.10 References and Selected Readings
2.11 Check Your Progress: Possible Answers

2.1 INTRODUCTION
Poverty involves an infinite variety of circumstantialmisfortune experienced both at
the household level and the societal level. Poverty has many faces, changing from
place to place and across time, and has been described in many ways. Extreme
poverty strikes when household resources prove insufficient to secure the essentials
of dignified living. The very poor are those who can hardly afford more than one
meal a day and depend exclusively on a single source of income. That fragility is
definedby a lack of education,the absence of work opportunities, the diminution of
household backup resources, and exclusion fiom valuable social and decisionmaking
networks. The trend of migration from poor farming regions has raised the incidence
ofurban povaty, especially in the slum zones of the world's major cities. Nevertheless,
poverty remains inextricably llnked with the disappointing progress in agriculture in
developingcountries. Rural poverty rates are more than double those in cities, often
embracing the majority of the rural population. The most persistent poverty is found
amongst ethnic minorities,scheduled castes,tribal and indigenous people experiencing
discrimination,nomadic pastoralists, and landless labourer toiling on marginal land.
Most often, poverty is a situation people want to escape. So poverty is a call to
action - for the poor and the wealthy alike - a call to change the world so that many
more may have enough to eat, adequate shelter, access to education and health,
protection fiom violence, and a voice in their communities.
After studying this unit you should be able to:
explain the meaning and featuresof poverty I

I
examine the global poverty and historical trend of poverty in India
describe the trends and dimensions of poverty in India
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 analyze causes and remedies of poverty Poverty

narrate measures for poverty alleviation, under taken during different Five year
Plans in India.

2.2 POVERTY: MEANING AND FEATURES

2.2.1 Measuring of Poverty
India is poor compared with the USA, and, within India, Bihar and Orissa are poor
compared to Punjab and Haryana. You might be aware about the poor - those who
have inadequateincome, housing, clothing etc. You also know that the definition and
methods of measuring poverty differ fiom country to country. Poverty is the syndrome
of assetlessness, landlessness,joblessness, deprivation and helplessness. It is not a
pure economic phenomenon. It has social, cultural, political, historical, and
geographical dimensions. It is lack of livelihood security and food security. It is
hunger, starvation, and vulnerability.Poverty is lack of shelter, and lack of education, .
and lack of access to health care. Poverty is being sick and not being able to see a
doctor. Poverty is not being able to go to school and not knowing how to read.
Poverty is not having a job, is fear for the future, living one day at a time. Poverty is
losing a child to illness brought about by unclean water. Poverty is powerlessness,
lack of representation and freedom. To know what helps to alleviate poverty, what
works and what does not, what changes over time, poverty has to be defined,
measured, and studied - and even lived.As poverty has many dimensions, it has to
be looked at through a variety of indicators-levels of income and consumption,
social indicators, and now, increasingly, indicators of vulnerability to risks, and of
socio/political access. It has many non income and non quantifiable dimensions.
Attempts to define or measure poverty do not give justice to the reality of its
experience. The extreme poverty of the developing countries crushes the human
spirit. It draws out many of finest qualities ofhuman being. Family loyalties survive
the desperate search for livelihoods. They display stoicism in the face of exclusion
and dignity amongst deprivation. Extreme poverty strikes when household resources
prove insufficient to secure the essentials of dignified living. That fi-agilityrefers to
lack of education, the absence of work opportunities,and exclusion from valuable
it social networks.
I Poverty md inequality are multidimensional-consumptionand income, education,
health, opportunities,voice, etc., and have multiple determinants: geographic and
agro-climatic factors, services, infrastructure, etc. It has to be looked at through a
variety of indicators - levels of income and consumption, social indicators,
and indicators of vulnerability to risks, and of socio/politicalaccess. In general,
poverty can be defined as a situation when people are unable to satisfy the basic

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needs of life.
The picture of dire poverty is found in India where the incidence of absolutepoverty
abounds. Absolute poverty is not related to income or the consumption level of the
household but to some minimum standard of living. The concept of absolute poverty
is relevant for less developed countries. In order to measure it, absolute norms for
living are first laid down. It is expressed in terms of income or expenditure. Aperson
falling below this norm (called the poverty line) is classified as poor. In India, the
poverty norm is anchored in terms of daily intake of food.According to the definition
by the Planning Commission of India,the poverty line is drawn at an intake of 2400 29
Basic Issues in
Development
calories in rural areas, and 2 100 calories in urban areas. If a person is unable to get \
that minimum level of calories, then he, or she, is considered as living below the
poverty line. The consumption basket representing this calorie intake is then
converted into a monetary equivalentby using price indices separately for rural and
urban areas.
2.2.2 Features of Poverty
Poverty has many faces, many causes and many effects. It has several monetary and
non monetary dimensions. It has several manifestations. It is caused by several
obstacles and constraints,which do reinforce each other. It is characterizedby the
followingfeatures.
i Few assets, landlessness and low income
ii Low consumption, no savings and high indebtedness
', ,.I

...
lu. Jobless, employment insecurity and food insecurity
iv. Illiteracy and lack of formal education and training
v. Poor health, housing, or ill health, poor sanitation
vi. Marginalization and high dependency
vii Few contacts with key personslinstitutions -
viii. Little involvementin influential forum
ix Competition for resources among the poor
x Economic vulnerability and subordination
xi Low self esteem, low social status and resignation .
xi. Subsistenceliving and no fuhue plan.

2.3 POVERTY SITUATION: GLOBAL AND INDIA

1

The World Bank calculates an internationalpoverty line by reference to the average I

of the national poverty lines in 15 of the world's poorest countries.According to the 1
World Bank, the number of people living below the international poverty line of j
$1.25 per day fell from 1.8billion to 1.4 billion between 1990 and 2005. China
accounted for 465 million of this reduction, implying that poverty has increased
elsewhere over this period. In sub-Saharan Africa, the increase was 100 million.
However, expressing global poverty as a percentage reverses the trend due to the
rising global population. For example, extreme poverty in sub-Saharan Africa has
fallen slightly from 57per cent to 5 1 per cent between 1990 and 2005. The wealth
of our new millennium has tended to increase ineq&lity rather than reduce ~overty.
The UNDP has reported that, in 2005, the richest 500 people in the world earned
more than the poorest 4 16 million. Global poverty is then assessed by reference to
i
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"data from 675 household surveys across 116 developing countries", according to
the World Bank. This data is compared to the $1.25 benchmark, not by standard
currency exchange rates, but by purchasing power parity (PPP) rates which smooth
out the differentbuying power of the dollar in each country. The World Bank figure
of $1.25 per day was intended to be a bottom marker. Unfortunately, the two
30
countrieswith the largest populations in the world, India and China, have both defined
 Poverty
national poverty lines which are even lower. India's poverty line is $1.02 which
gives a national poverty rate of 26 per cent compared to 42 per cent on the
internationalbasis. In China the gap is evenwider,tripling its nationalpoverty numbers
to over 200 million. These inconsistent measures are the source of much conhsion.
A second tier international poverty line of $2 per day is derived from the average of
national poverty lines in all lower and middle income counties. The World Bank
reports that 2.6 billion people live below this benchmark, a figure which has changed
little since 1981. Indeed, a slightly higher benchmark of $2.50 per day captures
more than half of the world's population. The population living below international
poverty line in various countries is given in Table- 1.
Table-1: International Poverty Line

Population (in per Population (in per

Country Year
cent) below $1 /day cent) below $21 day

China
- -2001 -16.6 A
India -
- 2000 34.7 52.4
Nepal 2003-04 24.1 68.5
Pakistan 2002 17.0 73.6
Sri Lanka 2002 5.6 41.6

There are two contrasting and complementary reasons for reducing global poverty.
The first reason is ethical. It springs from religious teaching. This finds secular
expression in the 1948Universal Declaration of Human Rights which asserts that
"everyone has the right to a standard of living adequate for the health and well-being
of himself and of his family." The second reason lies in self interest. In a globalized
I world, countries, large and small, are interdependent. Poverty anywhere is a threat
I to prosperity everywhere. Extreme poverty is the engine of international labour
migration which the richer countries are notoriously reluctant to accommodate.The
spread of any disease is more difficult to control ifweak countries lack the capacity
to deliver an appropriate response. Whilst the risk of terrorism is often complex in
origin, extreme poverty is the ideal recruiting ground for its foot soldiers.
The failure of the macroeconomic policies of the 1980s and 1990screated pressure
on world leaders to find an approach which delivered measurable results for poverty
reduction. This led to the MillenniumDeclaration, committing governments to eight
Millennium Development Goals (MDGs) with targets to be met by 20 15.Apart
from the goal to provide primary education for all, the targets aim for reduction
rather than elimination of poverty.

2.4 MEASUREMENT AND TRENDS OF POVERTY

IN INDIA
2.4.1 Measurement of Poverty in India
Poverty has been measured by several economists and non economists.Among
them, the most prominent scholars are: Dandekar and Rath, A K Sen, B S Minhas,
Ojha, Ahuliwalia and Kakwani. The Planning commissionof India has also estimated
the poverty ratio during different plan periods. There are three commonly used 31
Basic Issues in measures ofpoverty.They are:
Development
1. Head Count Ratio (HCR): H=M/N
2. Poverty Gap Ratio (PGR): R = 1-ilz
3. Amartya Sen's Index (ASI): S=H[R+(lWR)G]
Where H is the proportion of households who are poor; N is total number of
households, M is number of poor households having incomes at, or below, the
poverty line z. The mean income of the poor is i ; and R is the mean income
shortfall of the poor, expressed as a proportion of the poverty line. G is the Gini
Coefficient computed over the vector of poor incomes. The 'Sen Index', S satisfies
the relative deprivationproperty since a regressive transfer (which leaves H and R
unchanged) rises and hence S to rise.
The World Bank estimates that 456 million Indians (42per cent of India's population)
now live below the global poverty line of $1.25 per day (PPP). This means that a
third of the globalpoor now reside in India. However, th~salso represents a significant
decline in poverty from 60 per cent in 1981 to 42 per cent in 2005. Income inequality
in India (Gini coefficient:32.5 in year 1999-2000is increasing. On the other hand,
the Planning Commission of Indiauses its own criteria and has estimated that 27.5
per cent of the population was living below the poverty line in 2004-2005, down
from 5 1.3 per cent in 1977-1978, and 36 per cent in 1993-1994-The source for
this was the 6 1st round of the National Sample Survey (NSS) and the criterion used
was monthly per capita consumption expenditure below Rs. 356.35 for rural areas,
and Rs. 538.60 for urban areas. About 75 per cent of the poor are in rural areas,
and most of them are daily wagers, self employed householders and landless labourers.
Although the Indian economy has grown steadily over the last two decades, its
growth has been uneven when comparing different social groups, economic groups,
geographic regions, and rural and urban areas. Between 1999 and 2008, the
annualized growth rates for Gujarat (8.8 per cent) Haryana (8.7 per centj and Delhi
(7.4 per cent) were much higher than for Bihar (5.1 per cent), Uttar Pradesh (4.4
per cent), and Madhya Pradesh (3.5 per cent). Poverty rates in rural Orissa (43 per
cent) and rural Bihar (4 1 per cent) are among the world's most extreme.
According to the India State Hunger Index (2008) by the International Food Policy
Research Institute, Punjab has the best nutritional situation, whereas malnutrition in
Madhya Pradesh is worse than in Ethiopia or Sudan. India has a higher rate of
malnutrition among children under the age of three (46 per cent in year 2007) than
any other country in the world. Despite significant economic progress, 114 of the
nation's population earns less than the government-specified poverty threshold of
Rs. 12per day (approximatelyUSD $0.25). Official figures estimate that 27.5 per
cent of Indians lived below the national poverty line in 2004-2005. A 2007 report
by the state run National Commission for Enterprises in the unorganised Sector
(NCEUS) found that 77 per cent of Indians (or 836 million people) lived on less
than 20 rupees (approximately USD $0.50 nominal; $2 PPP) per day.

32
 Povertv

Figure 2.1 :Trend and Level of Poverty

Poverty in India is reducing but it continues as a major national issue. Rural Indians
depend on unpredictableagriculture incomes, while urban Indians rely on jobs that
are, at best, scarce. Since independence, the issue of poverty within India has
remained a prevalent concern.According to the common definition ofpoverty,when
a person finds it difficult to meet the minimum requirement of acceptable living
standards, he, or she, is considered poor. Millions ofpeople in India are unable to
meet these basic standards, and according to government estimates, in 2007 there
were nearly 220.1 million people living below the poverty line. Nearly 2 1.1per cent
of the entire rural population and 15 per cent of the urban population of India exists
in this difficult physical and financial predicament. The above chart presents the
t poverty situation.

1 2.4.2 Trend of Poverty in India

1 The proportion of India's population below the poverty line has fluctuated widely in
the past, but the overall trend has been downward.However, there have been roughly
three periods of trends in income poverty.
1950 to mid-1970s: income poverty reduction showed no discernible trend. In
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195 1,47 per cent of India's rural population was below the poverty line. The
I proportion went up to 64 per cent in 1954-55; it came down to 45 per cent in
1960-6 1, but in 1977-78, it went up again to 5 1 per cent.
Mid-1970s to 1990:Income poverty declined significantly between the mid- 1970s
and the end of the 1980s. The decline was more pronounced between 1977-78
and 1986-87,with rural income poverty declining from 5 1per cent to 39 per cent.
It went down further to 34 per cent by 1989-90.Urban income poverty went down
from 4 1 per cent in 1977-78 to 34 per cent in 1986-87, and further to 33 per cent
in 1989-90.
After 1991: This post-economic reform period evidenced both setbacks and
progress. Rural income poverty increased from 34 per cent in 1989-90to 43 per
I
cent in 1992 and then fell to 37 per cent in 1993-94.Urban income poverty went up
from 33.4 per cent in 1989-90to 33.7 per cent in 1992 and declined to 32 per cent
I
in 1993-94.Also, NSS data for 1994-95 to 1998show little or no poverty reduction.
The evidence till 1999-2000 was that rural poverty had increased during post-
reforms period. However, the official estimate ofpoverty for 1999-2000 was 26.1
Basic Issues in per cent, a dramatic decline that led to much debate and analysis. The latest NSS
Development
survey (2004-05) shows poverty at 28.3 per cent in rural areas, 25.7 per cent in
urban areas and 27.5 per cent for the country as a whole, using uniform recall
period consumption. These suggest that the decline in rural poverty over the period
during 1993-94 to 2004-05 actually occurred afler 1999-2000. In summary, the
official poverty rates recorded by NSS are as shown in the following table:
Table-2: Profile of Poverty in India (in per cent)

Source: Economic Survey (Different Volumes), Government of India Publication, Delhi

After going through the definitionand meaning ofpoverty,the measurement of poverty,

in the global and Indian contexts, now Check Your Progress-1 .
Check Your Progress 1
Note: a) Write your answer in about 50 words.
b) Check your progress with possible answers given at the end ofthe unit.
1) What is poverty? Examine its features and manifestation.

...................................................................................................................
2) How do we measure poverty?
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...................................................................................................................
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...................................................................................................................
What are the reasons of reducing global poverty?
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 ! Povert!,
2.5 VICIOUS CIRCLE OF POVERTY
The vicious circle of poverty refers to the interconnectedness of different factors
that reinforce each other for generating poverty. They are poor because they are too
many. They are too many because they are poor. According to Nurkse and
Kindleberger the reasons for this vicious circle of poverty can be classified into
three groups.
e) Supply side factors
f) Demand side factors
g) Market imperfection.

2.5.1 Supply Side Factors

The supply side of the vicious circle indicates that in underdeveloped countries,
productivity is so low that it is not enough for capital formation. According to
Samuelson, "The backward nations cannot get their heads above water because
their production is so low that they can spare nothing for capital formation by which
their standard of living could be raised." According to Nurkse on the supply side
there is small capacityto save, resulting from low level ofnational income. The low
real income is the result of low productivity, which in turn, is largely due to the lack
of capital. The lack of capital is a result of the small capacity to save, and so, the
circle is vicious.

Low Income
17 Low Saving
O Low Investment
O Low Production
/ \
LOW
INVESTMEIVT
E:!kl
SUPPLY
LOW
SAVING

\ /
Cl Low Income

PRODUCTIVITY
LOW

Figure 2.2 :Low Supply

Thus, it becomes clear from the above diagram that the main reason of poverty is
the low level of saving. Consequently, investment is not possible in production
channels.Ahuge chunk of GDP is used for consumption purposes. People cannot
save. So, there is lack of investment and capital formation.Although rich people can
save, they spend their surplus in some on luxurious goods instead of saving. They
gave preference to high priced items and foreign products. Thus, their demand
does not enlarge the size of the market. The developing countries, therefore, lack
investment facilities.

2.5.2 Demand Side Factors

According to Nurkse, poverty is caused by several factors in the demand side. In
underdeveloped countries the inducement to invest is low because of the low
purchasing power of the people, which is due to their small real income. It is illustrated
in the followingdiagram.
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 LOW

Low Income
Low Demand LOW
/
PRODUCTIVITY
INCOME
DEMAND
\ LOW
O Low Investment SIDE DEMAND
13 Low Productivity
0 Low Income
' INVESTMENT

Figure 2.3 :Low Demand

The main reason for poverty in these countries is the low level of demand.
Consequently,the sizes of markets remain low. The small size of the market becomes
a hurdle in the path of inducement to invest.

2.5.3 Market Imperfections

According to Meier and Baldwin, the existence of market imperfections prevents
optimum allocation and utilization of natural resources, and the result is
underdevelopment, and this, in turn, leads to poverty. The development of natural
resources depends upon the character of human resources. But due to lack of skill
and low level of knowledge, natural resources remain unutilized, underutilised and
misused. The vicious circle of poverty caused by market imperfections is shown in
the following diagram.

DIMENSION OF POVERTY IN INDIA

The two main dimensionsof poverty in India are:
(i) regional dimensions of poverty
(ii) social dimensions of poverty.

2.6.1 Regional Dimension of Poverty

Poverty in India has a regional dimension. Poverty profiles differ in rural and urban
areas. They also differ widely across states and regions of India. This is primarily
due to wide regional disparities. Regional imbalance in economic growth in major
states is observed from the variations in the growth of Net State Domestic Product
(NSDP). There is wide interstate imbalance in the economic growth of rich and
poor states of India. During the post reforms period (1990-2004), some states
have accelerated and some states have decelerated in terms economic development.
There is a wide difference in the investment climate of different states of Indian
union. Kerala's achievement in social development and reduction in poverty are
very impressive. The percentage of poor in rural areas of Kerala declined from 50
per cent in 1973 to 12.7 per cent in 1999-2000. Its record of overcoming poverty,
even with moderate economic growth has been attributed to its effective
implementation of land reforms, comprehensive social and food security coverage,
decentralized system of governance, and highly conscious civil society (see table.
3). The rural-urban divide in India is widening after economic reforms. There is
deceleration in agricultural growth, which is the matter of concern in employment
generation and ~overtv reduction.
Table 3 also shows the incidence of poverty across the states of India. It is seen that
both rural and urban poverty ratios in India are declining over the decades. But
some states are lagging behind. Orissa has the highest poverty ratio followed by
Bihar and Madhya Pradesh. The percentage of chronically poor is quite high in
Bihar (25 per cent in rural and 19 per cent in urban areas), Orissa (24 per cent in
rural and 22 per cent in urban areas) and MP (2 1 per cent in rural and 22 per cent
in urban areas). Chronic poverty is very low in Punjab, Haryana, Kerala, Himachal
Pradesh, and Jarnmu and Kashrnir.
Table3 : Inter -Regional Poverty Profile in India

Note: R = Rural Poverty Ratio, U= Urban Poverty Ratio

It is observed that in 1973rural poverty was the highest in West Bengal and urban
poverty was the highest inMP. During 1993,rural poverty was the highest in Orissa.
The poverty level of STs in rural areas of Orissa is the highest at 73 per cent, and
that of Bihar it is 59 per cent. The division of resources, as well as wealth, is very
uneven in India, and this disparity creates different poverty ratios for different states.
For instance, states such as Delhi and Punjab have very low poverty ratios. On the
other hand, 40-50 per cent of the populations in Bihar and Orissa live below the
poverty line.

2.6.2 Social Dimension of Poverty

Poverty in India is not merely an economic phenomenon but also a social one.
Poverty is seen today as an outcome of multiple deprivations.It is disproportionately
high among SCs and STs. Poverty gets disproportionatelyconcentratedamong casual
labourers. The share of STs in poverty had gone up during the 1990s, and that of
SCs remained more or less the same. Tribes are poor and deprived in India. Among
social groups, SCs and STs and backward castes accounted for 8 1 per cent of the
rural poor in 1999-2000.It is seen from the following table that the composition of
the poor is changing. The percentage of poor among STs declined from 50 per cent
in 1993to 44.2 per cent in 2000. Rural poverty is getting mostly concentrated in
agricultural labour and urban poverty in casual labour households.All households
which accounted for 41 per cent of rural poor in 1993 increased to 47 per cent in
2000. Casual labour households constituted 32 per cent of urban poor in 2000
households on casual labour market exposes the poor to market risks and tends to
increase transient poverty, whereby households move in and out of poverty due to
fluctuations in the labour market. The incidence of poverty among SCs is very high
in Bihar, MP and UP in both rural and urban areas. In terms of income poverty and
other indicators of human development such as education and health, STs are at the
bottom. The gender dimension ofpoverty is very important in India. There is gender
discrimination against women in the labour market. Amajority of women are illiterate.
The female members of the poor household suffer the most from all kinds of
deprivation. The standard of living index data reveals that 57 per cent of children
belonging to poor households ofrural areas and 50 per cent of children belonging to
poor households of urban areas are stunted.
Table-4: Social Dimension of Povertv

Very poor
I '

Source: Computed fiom NSS data of 50thand 55'hround on household consumption expenditure.

The NFHS (2005) reveals that 70 per cent of children in age group 6-59 months
are anaemic and anaemia among children is considerablyhigher in rural areas and
particularly among disadvantagedfamilies and familieswith lower income. The survey
also found that anaemia is pervasive among women age 15-49 and 55 per cent of
ever married women are suffering from anaemia. According to NCAER, 50 per
cent of the rural population suffer from "capability poverty". Only 43 per cent of
rural households have domestic lighting and 25 per cent have access to tap water.
It is widely recognised that while income poverty reduction is relatively easy,
elimination ofmultiple deprivation is more difficult to achieve. So poverty reduction
strategy should go beyond income poverty and inadequacy of basic needs and rights
as well as inadequate access to both productive assets and social infrastructure.
Therefore, empowemlent of the poor is considered a critical factor in accelerating
poverty reduction. Empowerment is sought to be achieved by giving a role to the
poor in governance and development decisions.At present NGOs, donor agencies,
and development activists are exerting pressure on policy makers to involve all stake
holders in poverty alleviation projects and activate the panchayats and promote
institutions like self help groups and user groups and mobilize the poor for collective
action. According to SAPAP (2003) poverty is the product of livelihood systems
and the socio-political and economic forces that shape them. SAPAP argues that
multidimensional interventions revolving around land and other property rights,
bargaining power for improved wage, holistic health care, micro finance and
insurance, and physical and social security are needed for accelerating poverty
reduction. The key issue is to weaken the stronghold of the rich in the governanceof
local institutions and facilitate the participation of the poor.
2.7 CAUSES AND REMEDIES OF POVERTY IN

2.7.1 Causes of Poverty in India

All types of poverty and deprivation in India are caused by the following factors.
i. Colonial Exploitation: Colonial rule in India is the main reason of poverty
and backwardness in India. The Mughal era ended about 1800. The Indian
economy was purposely and severely de-industrialized through colonial
privatizations. British rule replaced the wasteful warlord aristocracy by a
bureaucratic-military establishment. However, colonial exploitation caused
backwardness in India. In 1830, India accounted for 17.6 per cent of global
industrial production against Britain's 9.5 per cent, but, by 1900, India's share
was down to 1.7per cent against Britain's 18.5per cent. This view claims that
British policies in India, exacerbated by the weather conditions led to mass
famines,roughly 30 to 60 million deaths from starvation in the Indian colonies.
Communitygrain banks were forcibly disabled, land was converted from food
crops for local consumption to cotton, opium, tea, and grain for export, largely
for animal feed.
ii. Lack of Investment for the Poor : There is lack of investment for the
development of poorer section of the society. Over the past 60 years, India
decided to focus on creating world class educational institutions for the elite,
whilst neglecting basic literacy for the majority. This has denied the illiterate
population - 33 per cent of India - of even the possibility of escaping poverty.
There is no focus on creating permanent income-generatingassets for the poor

Studies on China (2004) also indicated that since universal and free healthcare
was discontinued in 1981, approximately 45 million (5 per cent of its 900
million rural population) took on healthcare-related debts that they could not
repay in their lifetimes. Since then, the government has reintroduced universal
health care for the population.Given India's greater reliance on private healthcare
spending, healthcare costs are a significant contributor to poverty in India.
iii. Social System in India : The social system is another cause of poverty in
India. The social subsystems are so strongly interlocked that the poor are
incapable of overcoming the obstacles. A disproportionally large number of
poor people are lower caste Hindus. According to S. M. Michael, Dalits
constitute the bulk of poor and unemployed. Many see Hinduism and its
structure, called the caste system, as a system of exploitation of poor, low
ranking groups by more prosperous, high ranking groups. In many parts of
India, land is largely held by high ranking property owners of the dominant
castesthat economically exploit low ranking landless labourers and poor artisans,
all the while degrading them with ritual emphases on their so-called,god-given
inferior status. According to William A. Haviland, casteism is widespread in
rural areas, and continues to segregate Dalits. Others, however, have noted the
steady rise and empowerment of the Dalits through social reforms, and the
implementation of reservations in employment and benefits.
iv. India's Economic Policies :In 1947, the average annual income in hdia was
US$439, compared with U S 6 1 9 for China, US$770 for South Korea. But
Basic Issues in South Korea became a developed country by the 2000s. At the same time,
Development
India was left as one of the world's poorest countries. India had the Hindu rate
of growth which stagnated at around 3.5 per cent from the 1950s to the 1980s,
while per capita income averaged 1.3 per cent License Raj prevailed with
elaborate licenses,regulations and accompanying red tape. Cormption flourished
under this system. The labyrinthine bureaucmcy often led to absurd restrictions.
India had started out in the 1950swith: high growth rates, openness to trade
and investment, a promotional state, social expenditure awareness, and macro
stability but we ended the 1980s with: low growth rates (the Hindu rate of
growth), cloaure to trade and investment, a license-obsessed, restrictive state
(LicenseRaj), inability to sustainsocial expendituresandmacroinstability,indeed
crisis. Poverty has decreased significantly since reforms were started in the
1980s.India currently adds 40 million people to its middle class every year. An
estimated 300 million Indians now belong to the middle class; one-third of
them have emerged from poverty in the last ten years. At the current rate of
growth, a majority of Indians will be middle class by 2025. Literacy rates have
risen from 52 per cent to 65 per cent in the same period.
v. Over-reliance on Agriculture : In India there is high level of dependence on
primitive methods of agriculture. There is a surplus of labour in agriculture.
Farmers are a large vote bank and use their votes to resist reallocation of land
for higher-income industrialprojects. While services and industry have grown
at double digit figures, the agriculture growth rate has dropped from 4.8 per
cent to 2 per cent. About 60 per cent of the population depends on agriculture,
whereas the contribution of agriculture to the GDP is about 18 per cent. The
agricultural sector has remained very unproductive. There is no modernization
of agriculture despite some mechanization in some regions of India.
vi. Heavy population pressures :Although demographers generally agree that
high population growth rate is a symptom rather than cause of poverty and add
to poverty. Mohmood Mamdani aptly remarked "people are not poor because
they have large families. Quite the contrary, they have large families because
they are poor". However this is a general argument in developing country that
population growth is a major obstacle to development and cause ofpoverty.
vii. High Illiteracy : Indian literacy rate rose almost tenfold during the British era.
In 1947, India's literacy rate matched China's. However, in 2007, China
reported at 9 1 per cent literacy rate versus 66 per cent for India. Now India
suffers from about 35 per cent illiteracy among the adult population. Literacy
levels among SC, ST and females are very low.
viii. High Unemployment :There is high degree of underutilization of resources.
The whole country suffers from a high degree of unemployment. India is
marching with jobless economic growth. Employment is not growing, neither in
the private sector, nor in the public sector. The IT sector has become elitist,
which does not improve the poverty situation in the country. Disguised
unemploymentand seasonalunemploymentis very high in the agriculturalsector
of India. It is the main cause of rural poverty in India.
ix. Lack of Entrepreneurship: The industrial base of India has remained very
slender. The industrial sickness is very widespread. The whole industrial sector
suffers from capital deficiency and lack of entreprene~uialspirit.
 Poverty
2.7.2 Remedies for Poverty
There are different measures for tackling poverty is discussed below. Let us discuss
these aspects in detail.
i. Increase in Saving :In order to get rid of the supply side vicious circle in
these countries, efforts should be made to increase savings so that investment
in productive channels may be encouraged. To increase saving, expenditure
on marriages, social ceremonies, etc., should be curtailed. In under developed
countries, the possibility of voluntary savings is slim. Thus, in this regard,
government interferenceis necessm. The government can increase saving,by
altering its fiscal policy. The government can impose heavy taxes on luxury
goods. Moreover, it can increase the role of direct taxes. Thus, the government
can curtail consumptionby altering the tax system.

f ii. Increase in Investment : To LA:-'- ihe vicious circle of poverty, apart from
increasingsavings, investmentof saving in productive channels is also ofimmense
use. The policies of short run and long runinvestment should be coordinated.
By short period investment, people can get the necessary goods at fair rates,
which will have a favourable impact on their skill. Moreover, along with short
period investment, investment in the establishment of multipurpose projects,
like iron and chemical fertilizers should be properly encouraged. In UDCs,
proper monetary and banking policies should be adopted which may provide
facilities and encouragement to small savings.
I
1
iii. Balanced Growth :To resolve the demand side vicious circle inunder developed
countries, the extent of the market should be widened so that people may get
inducement to invest. In this regard, Prof. Nurkse advocated the doctrine of
balanced growth. According to the principle of balanced growth, investment
should be made in every sphere of an economy so that demand of one sector
can be fulfilled by another sector. Thus, an increase in demand will lead to
wider extent of the market, and so, the inducement to invest. On the other
-
*
'
hand, economists like Hirschman, Singer, and Fleming do not consider the
policy ofbalancedgrowth effective. According to them, the policy ofunbalanced
growth would be more useful. In UDCs, there is every possibility of increase
> in demand and there is the need of increase in monetary income. The majority
of UDCs have adopted the policy of planned development. Accordingly, due
to more investment in the public sector, the supply of money increases. Due to
increase in monetary income, sizes of the market widen. These countries
endeavour to widen the size of foreign market by increasing their exports.
iv. Human Capital Formation :In underdeveloped countries,the main obstacle
to economic growth is the backwardness of human capital. Human capital
should no longer be neglected. Many suggestions can be made to increase
skill of manpower. For instance, in these countries, education, technical
knowledge, and vocational training should be enlarged. Health facilities should
be enhanced, which may increase the efficiency of the workers. Transportation
and communication should be developed.
v. Industrialisation :Poverty can be eradicated by a self-sustaining process of
industrialization.All industries should have llnkage to build a powerful process
of ancilary industries and occupations. The percolation effect of industries can
Basic Issues in
Development
be linked to agricultural growth.Agro-based industries should grow to provide
employment to village people as they are very much labour intensive.
Industrialisationcan contribute to the growth process and bring improvement
in the standard of living of people.
Other Measures for Poverty Reduction
i More employment opportunities :poverty can be eliminated by creating more
employment opportunities, so that people may be able to meet their basis
needs
ii Minimum needs programmes: providing minimum needs to the poor people
can help to reduce the problem of poverty
...
m Social security programmes: various social security schemes, like worker's t
'
compensation, maternity benefit. provident fund, etc., can make a frontal
attack on poverty
iv. Small scale industries: encouraging and establishing small scale industries can
create jobs in rural areas, which can reduce poverty
v. Spread of education: education can create awareness and build confidence
among people to find methods to overcome poverty
vi Empowerment of poor: poor people are voiceless due to the ruthless system
of development. So, empowerment of poor people will reduce poverty
vii. Land reforms: land belongs to the absentee landlords in India. Therefore, land
reform is needed for giving rights to the actual tiller of the soil
viii Asset creation: productive assets must be created which will ensure regular
income for the poor people
ix. Political will: political will and thrust is needed to face the challenge of poverty. +

Governmentpolicy should be designed with determination for having apoverty-

fiee country
x Social change: social strata and traditional values should be fiee fiom dogmas. '
The caste system should not discrimhate any people for anythmg. Socialreforms
are also needed to remove poverty among the lower caste and women.
You have read about the vicious circle of poverty, dimensions of poverty, causes
and remedies of poverty. Now, you should be able to answer the following questions
in order to check your progress.
Check Your Progress 1

I
Note: a) Write your answer in about 50 words.
b) Check your progress with possible answers given at the end of the unit.

1) What is the vicious circle ofpoverty?

...................................................................................................................
.
 Poverty

...................................................................................................................
2) What are the regional dimension of poverty in India?

2.8 PLANNED EFFORTS FOR ALLEVIATION OF

POVERTY IN INDIA-
Since the early 1950s, the government of India has initiated, sustained, and refmed
various planning schemes to help the poor attain self sufficiency in acquisition of
food and overcome hunger and poverty. Probably the most important initiative has
been the supply ofbasic commodities,particularly food at controlledprices, available
throughout the country as the poor spend about 80 per cent of their income on food.
During different Five Year Plans, the Government of India has adopted several
strategies and devised several schemes to remove poverty in India. The following
are some steps.
IRDP: the Integrated Rural Development Programme was initiated in 1976 in
20 selected districts of India. Then, it was extended to all blocks in 1980.The
objective of this program was to enable the selected families to cross the
poverty line by creating productive assets for the poor people.
NREP: the National Rural Employment Programme was launched in 1980in
order to generate gainful employment in rural areas.
RLEGP: the Rural Landless Employment GuaranteeProgrammewas launched
in August 1983to generateadditional employment opportunities for the landless
people in the villages.
JRY: Jawahar Rojgar Yojana was introduced in 1989 to create 837 million
man-days in the country.
TRYSEM:Training of Rural Youth for Self Employment was launched in 1979
with the aim of generating self employment opportunities for unemployed
educated rural youth.
DWC: Development of Women and Children was launched during the Sixth
Plan on a pilot basis in 50 districts, and continued in 71hplan.
DPAP: the Drought Prone Area Programme was started in 1970 for drought
areas with a view to createjobs through labour intensive schemes.
DDP: the Desert Development Programme was started in 1977 to control the
expansion of deserts and raise local productivity of desert areas.
MNP: the MinimumNeeds Programme was introduced in the Fifth Plan, in
order to achieve growth with justice.
Basic Issues in PMRY the Prime Ministers Rozgar Yojana was implemented in 1993to give
Development
employment to more than 10 lakh people by settingup 7 lakh micro enterprises.
SGSY Swarna Jayanti Gram Swarozgar Yojana, created in 1999, is a
combination of many previous poverty eradication programmes, like IRDP,
TRYSEM, Minimum Wells Programme, and DWCRA.
a PMIUPEP: the Prime Ministers Integrated Urban Poverty Eradication
Programme was implementedin 1995to reduce urban poverty.
EGS: the Employment Guarantee Scheme was launched in many states to
provide employment for poor people.
SJRY: Swama .Tyanti Rozgar Yojana was launched in 1997 for the urban poor.
JGSY Jawahar Gram Samridhi Yojana is the new name of Jawahar Rozgar
Yojana with effect fi-om 1999.
PMGY Pradhan Mantri Grarnodaya Yojana.
PMGSY Pradhan Mantri Grama Sadak Yojana.
AAY Antyodaya Anna Yojma.
JPRGY: Jai Prakash Rozgar GuaranteeYojana.
VAMBAY Valmiki AmbedkarAwas Yojana.
DWCRA: Development of Women and Children in Rural Areas.
MGNREGA: This was implemented since 2002 for providing 100 days
employmentin a calendaryear to a family member interested for doing unskilled
manual work.

2.9 LET US SUM UP

i
In this unit we dealt with the definition, features and measurement of poverty. We
examined the incidence of poverty in India We analysed the problems of poverty
across the states. We analysed the vicious circle of poverty as well as the regional
and social dimensions of poverty. Identified various causes of poverty in India. We
analysedthe falling trends ofbothrural and uhan poverty. We dealt with governmental
efforts for alleviation of poverty. We examined global income inequality.

2.10 REFERENCES AND SELECTED READINGS .

Agrawal, AN (2004), Indian Economy, Biswa Pakashan, New Delhi.

Chossudovsky Michel(1997), The Globalisation ofpoverty, Madhyam Books,
New Delhi.
Dutta, R and KPM Sundarama (2007), Indian Economy, S. Chand & Sons, New
Delhi.
Haq, Mahbub U1(1976), The Poverty Curtain, Oxford University Press, New
Delhi.
Mamdani, Mahmood (1973) The Myth of Population Control: Family, Caste,
and cl~.,,-zin(IMndian fillage, Monthly Review Press, London.
 Milanovic, B. (1999), "True World Income Distribution, 1988 and 1993: First Poverty
Calculation Based on Household Surveys Alone, World Bank.
Planning Commission (2007), Poverty Estimates for 2004-05, March 2007,
Planning Commission,Governmentof India, New Delhi.
Sen,Amartya (I 999), Development as Freedom, Oxford University Press, London
Sen, Amartya (1976), "Poverty: An Ordinal Approach to Measurement",
Econometrica, 48, 2 19 - 23 1.
The World Bank (2004), and Census and Statistics Department (2002) Fact Sheet:
Gini CoefJicient (PDF), Legislative Council Secretariat Hong Kong, (httpll
www.legco.gov.hk~~4-05/en~lisWsec/li.
World Bank (2000), Attacking Poverty, World Development Report 2000,
? Washington.

2.11 CHECK YOUR PROGRESS: POSSIBLE

ANSWERS
Check Your Progress-1
1) What is poverty? Examine its features and manifestation.
Answer: Poverty has many faces. Poverty is the syndrome of assetlessness,
landlessness,joblessness, deprivation and helplessness. It is not a pure economic
phenomenon. It has social, cultural,political, historical and geographicaldimensions.
It is lack of livelihood security and food security. It is hunger, starvation and
vulnerability. Poverty is lack of shelter and lack of education and lack of access to
- - able to see a doctor. Povertv is not
health care. Povertv is being; sick and not being;
being able to go to school and not knowing how to read. Poverty is not having ajob,
is fear for the future, living one day at a time. Poverty is losing a child to illness
brought about by unclean water. Poverty is powerlessness, lack of representation
r
and fieedom.

I
2) How do we measure poverty?
,
Answer: Poverty has been measured by several economists and non economists.
There are three commonly used measures ofpoverty. They are:
( I . Headcount Ratio (HCR): H = M/N
I
) 2. Poverty Gap Ratio (PGR): R = 1- i Iz
I
1 3. Amartya Sen's Index (ASI): S = H [R+ (1 "R) GI
Where: H is the proportion of households who are poor; N is total number of
I
households, M is number ofpoor householdshaving incomes at or klow the poverty
line z. i is the mean income of the poor; and R is the mean income shortfall ofthe
poor expressed as a proportion ofthe poverty line. G is the Gini coefficier?tcomputed
over the vector of poor incomes.The 'Sen index7,S satisfies the relative deprivation
property.

45
Basic Issues in What are the reasons of reducing global poverty?
Development
3)
Answer: There are two contrasting and complementaryreasons for reducing global
poverty. First reason is ethical. It springs from religious teaching. This finds secular
expression"everyone has the right to a standard of living adequate for the health and
well-being." The second reason lies in self-interest.In a globalized world, countries
large and small are interdependent.Poverty anywhere is a threat to prosperity every
where. Extreme poverty is the engine of international labour migration which the
richer countries are notoriously reluctant to accommodate. Poverty is one of the
main causes of terrorism in the world.
Check Your Progress2
1) What is the vicious circle ofpoverty?
Answer: The vicious circle of poverty refers to the interconnectedness of different
factors that reinforce demand and supply each other in terms of low income, low .
saving, low investment and low production.

2) What is the regional dimension ofpoverty in India?

Answer: Poverty in India has a regional dimension. The poverty profile differs in
rural and urban areas. It also differs widely across states and regions of India. It is
primarily due to the wide regional disparity.

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