Poverty in India: Reasons, Responses, COVID Update

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Pew Research Center, using World Bank data, has estimated that the number of poor in India (with income of $2 per day or less in purchasing power parity) has more than doubled from 60 million to 134 million in just a year because of the pandemic-induced recession. This means India is returned to a situation where it is called a “country of mass poverty” after 45 years.

poverty in india mindmap

What is Poverty?

  • Prior to the 1990s when India was a closed economy, the public distribution system provided necessary resources to all the citizens. However, due to the financial constraints and policy changes after the commencement of Globalisation in India, the government provided necessary resources to the target population i.e., those who deserve governmental assistance.
  • This lead to the Government’s adoption of the Targeted Public Distribution System. That is, the Government provided subsidised food to those who come under Below Poverty Line.
  • It is difficult to give the exact definition of poverty as it has numerous causes and characteristics. It differs from nation-nation, urban-rural, etc. in other words, the definitions of poverty are based on perspectives.
  • However, the general idea is that when an individual has lesser accessibility and affordability to certain essentials like food, clothes, a place to live, healthcare, education, etc., then he is said to be living in poverty.
  • The UN and the World Bank calculate poverty through Purchasing Power Parity and nominal relative basis.
  • Therefore the poverty estimation differs during varying perceptions.
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How was poverty estimated in India?

Estimation of poverty in British India:

  • In India, the first-ever Poverty estimation was done by Dadabhai Naoroji in 1901 which was published in his book “Poverty and Un-British Rule in India”
  • The National Planning Committee of 1936 has estimated poverty in India during the Colonial rule. It calculated poverty linking nutrition, clothing, and housing. This method was used in Independent India also. The poverty estimation by the National Planning Committee showed a grim picture of British India’s Economy

Estimation of poverty in Independent India:

  • A working group was set up in 1962 to estimate the poverty line of the country.
  • This estimation was based on the minimum calories required to survive and the cost estimates of the minimum calories in Rural India. According to this, the average poverty line is Rs.20 per month. Based on 1960-61 prices.
  • Alagh Committee: Until 1979, poverty was calculated based on the income of the citizens. In 1979, based on the recommendation by a committee headed by Y K Alagh, poverty was estimated based on the calories consumed by the population. According to the committee, poverty estimation differs in rural and urban areas. In the rural area, if a resident consumes less than 2400 calories per day, then he/ she belongs BPL population. In an urban area, if a resident consumes less than 2100 calories per day then he/she suffers from poverty. This is an assumption that the urban population needs lesser calories as they are not involved in physical works like that of the rural population. The Alagh committee was the first in India to define the poverty line.
  • Lakdawala Formula: This was proposed by Lakdawala Committee that was headed by D.T.Lakdawala. This is also based on household per capita expenditure. Lakdawala committee used the same method used by the Alagh committee. However, it included certain criteria that were missing in the latter. Health and education were considered during the estimation. This committee used CPI-IL (Consumer price index for Industrial Labourers) and CPI-AL (Consumer price index for Agricultural labourers to determine the poverty line. In this method, the average of the minimum necessary per capita household expenditure is calculated to estimate the poor. The obtained value is the base for the poverty line and anyone who lives in a household with per capita expenditure lesser than the obtained average belongs to the BPL. Through this method, it was estimated that 36% of the population were BPL in 2004-2005 and 22% of the population under BPL in 2011. Poverty in India was estimated using this method until 2011.
  • Suresh Tendulkar Committee: This committee was set up by the Planning commission in 2005. The methods recommended by this committee are used in the current times. It urged the shift from a calorie-based model and inclusion of monthly expenditure on education, health, electricity, and transport. It introduced the new term “Poverty Line Basket” to determine and estimate poverty. It called for the uniformity of the poverty line basket for both urban and rural areas. If a person does not have access to any of the goods mentioned under the poverty basket then he/she is suffering from poverty. This method uses the cost of living as the basis for identifying poverty. However, the resulted estimation was very low and resulting in public outcry. This lead to the formation of the Rangarajan Committee.
  • Rangarajan Committee: Formed in the year 2012, this committee was chaired by Rangarajan. This too adopted calorie-based calculation of the poverty level. This had limitations as it calculated only the absolute minimum necessities. This did not include comfortable living standards as a necessity.
  • Current status of poverty line estimation: The above cases show the complexity and difficulty in the determination of the poverty line. Currently, the Indian government still hasn’t found a solid solution to estimate the poverty level of the country. The task was given a 14 member task force headed by NITI Aayog vice-chairman, Aravind Panagaria. They too have failed and have recommended setting up of a new specialised panel to debate the issue.

What are the causes of poverty (Indian perspective)?

  • Colonial exploitation: India under the colonial hegemony was forced to de-industrialize resulting in increased raw material production and a decrease in the export of value-added goods like traditional handicrafts and textiles. The natives were forced to buy British goods, thus discouraging them from manufacturing indigenously. This led to massive unemployment. The droughts, diseases, and others increased the plight of the Indians during that time.
  • Increase in the population: the rapid increase in the population due to a decrease in the mortality rate and an increase in the birth rate can be an asset for the Indian economy. However, in the present scenario, this is turning out to be a liability due to massive unemployment and an increase in the dependence on those working populations. The massive population must be converted to human capital to promote the growth of the economy.
  • Natural Calamities: In India, the maximum of the population who belong to BPL is from states of Bihar, Jharkhand, Odisha, Madhya Pradesh, Chattisgarh, Uttar Pradesh, and Uttarakhand. The reason behind this is that these states are prone to natural disasters and also most of the population in these states are from SC/STs thus making them unrepresented. The natural calamities in these states hamper the agricultural progress and economic development of these states.
  • The rise of unorganised sectors: many sectors in the Indian economy are unorganised. This brings in the problem of labour exploitation. The increase in demand for work also causes job insecurities.
  • Failing Agricultural sector: the agricultural sector is one of the most vulnerable sectors of the Indian economy. Farmer suicides and protests are on the rise due to the increasing debt and decrease in production. This, in the long run, would result in them suffering from poverty. This sector employs a maximum of the Indian population but provides little profit.
  • Lack of investment: The investment provides more job opportunities. For this, the Indian economy must be favourable for foreign investment. However, some parts of India remain unfavourable due to corruption, political instability, militancy etc.
  • Social factors: Illiteracy, unrepresented minorities, social norms, caste systems are still prevalent in certain parts of India.
  • Lack of skilled labour: the population can be an asset to the economy if it is utilized efficiently. This can be done through human capitalization. Measures to improve the literacy of the population are very slow. Some, due to the lack of sufficient skills are not accepted in the workforce. This results in unemployment and poverty.
  • Corruption: Many measures have been taken by the government to eliminate poverty. However, there is still a lack of political will. The corruption by those in power also contributes to poverty.
  • Inefficient use of resources: India is a country that has abundant natural resources which, if utilized efficiently, without wastage, can be turned into an asset.
  • Lack of entrepreneurship: There are many activities in India that can be of asset to the economy. For example, some tribes have rich art and culture which can be utilized for the tribes’ growth and development through proper entrepreneurship. However, due to a lack of leadership and entrepreneurial skills, they go to waste. The tribes remain one of the most vulnerable sections of Indian society.
  • Lack of infrastructure: Many parts of India still remain isolated despite the rapid economic growth. There are several villages in India that still don’t have access to basic commodities like electricity, thus resulting in poor standards of living. They don’t even have proper roads or railways. Their contribution to the economy goes to waste due to inaccessibility.
  • Recession induced by coronavirus pandemic.





What is the current status?

  • The 2019 Global Multidimensional Poverty Index published by the UN Development Program has estimated that multidimensional poverty in India has fallen by 27.5% between 2005-06 and 2015-16. Multidimensional poverty means the estimation of poor not only based on income but also several factors such as poor health, poor working conditions, etc.
  • According to World Poverty Clock, close to 44 Indians are escaping from extreme poverty each minute.
  • As of 2011, 21.9% of the Indian population belongs below the poverty line.
  • The unemployment rate as of April 2021 is 7.1%. This is a huge problem as unemployment is the direct cause of poverty in the country. The recent years saw a rapid increase in infrastructural developments like roads and housing projects for the alleviation of the poor. This might help boost investments in the country increasing job opportunities.

Update: Covid induced poverty according to Pew report

  • Poor people:
    • The poverty rate in India likely increases to 9.7% in 2020, up sharply from the January 2020 forecast of 4.3%.
    • From 2011 to 2019, the number of poor in India was estimated to have decreased to 78 million from 340 million.
    • In 2020, the number increased by 75 million.
      • Poor: People with incomes of USD 2 or less a day.
      • Increase in India accounts for nearly 60% of the global increase in poverty.
    • Record increase in Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) participants as proof that the poor were struggling to find work.
  • Middle Class:
    • The middle class in India is estimated to have shrunk by 3.2 crores in 2020.
      • Middle Class: people with incomes of around Rs. 700-1,500 or USD 10-20 per day.
    • The middle-income group is likely to have decreased from almost 10 crores to just 6.6 crores.
  • Low Income Group:
    • The huge majority of India’s population falls into the low-income group.
    • This group shrank from 119.7 crores to 116.2 crores per day, with about 3.5 crores dropping below the poverty line.
      • Low Income Group: people earning about Rs.150 to 700 per day.
  • Rich Population:
    • The richer population also fell almost 30% to 1.8 crore people.
      • Rich: Includes the people who earn more than Rs.1,500 a day.
  • Reasons:
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What are the measures taken by the government to alleviate poverty?

  • Swarnajayanti Gram Swarozgar Yojana :
  1. It was launched on April 1, 1999.
  2. This program merged Integrated Rural Development Program, Training of Rural Youth for Self Employment (TRYSEM), Development of Women and Children in Rural Areas (DWCRA), Million Wells Scheme (MWS), Supply of Improved Toolkits to Rural Artisans (SITRA) and Ganga Kalyan Yojana.
  3. Its objective is to alleviate the beneficiaries from BPL.
  4. It helps promote the self-employment of the rural poor.
  5. The fund sharing between the Centre and the State is at the ratio of 75:25.
  6. This scheme aims at working in clusters to provide inclusive and effective aid to the rural poor.
  7. The rural poor are organized into SHGs to provide training, capacity building and providing assets to generate income.
  8. This scheme was renamed as National Rural Livelihood Mission in 2011.
  9. This was finally merged to Deen Dayal Upadhyaya Antyodyaya Yojana to provide skills training for the poor. This scheme also provides subsidies and shelters for the homeless. The vendor markets are developed to promote job in the rural areas.
  • Jawahar Gram Samriddhi Yojana:
  1. This scheme replaced the erstwhile Jawahar Rozgar Scheme.
  2. It was launched in April 1999 to generate employment in rural areas through infrastructure development.
  • Pradhan Mantri Awaas Yojana:
  1. It has two components: Pradhan Mantri Awaas Yojana (Grameen) and Pradhan Mantri Awaas Yojana (Urban)
  2. It was launched in 2015.
  3. It unites schemes like Ujjwala yojana (provides LPG to BPL), access to toilets, water, drinking water facilities and Saubhagya Yojana (electricity).
  4. Read more
  • Mahatma Gandhi National Rural Employment Guarantee Act,2005:
  1. Launched on February 2, 2005
  2. It provides 100 days of guaranteed employment to rural households.
  3. 1/3rd of the jobs reserved for women.
  4. If the jobs are not available for the applicants, and they were without jobs within 15 days, then they will be given unemployment allowance.
  5. This guarantees employment opportunities to the rural population and accountability of the government.
  6. Under this, National Food for Work, which was launched in 2004 was subsumed in 2006.
  7. The National Food for Work provided additional resources and assistance that are absent under Sampoorna Grameen Rozgar Yojana. Under this program, 150 districts were identified as backward by the Planning Commission. They were the beneficiaries of this program. Food security, employment through need-based social, economic, and community assets
  8. Read more
  • Pradhan Mantri Kaushal Vikas Yojana:
  1. Launched by the Ministry of Skills Development and Entrepreneurship in 2015.
  2. It is a scheme aimed at the enhancement of skills based on the demand of the economy.
  3. This scheme is implemented through Nation Skill Development Corporation (NSBC).
  4. Training and assessment fees are paid by the government.
  5. The training provided under this scheme is based on National Skill Qualification Framework and industry-level standards.
  6. The beneficiaries include college graduates and school/ college dropouts.

Way Forward:

  • The government must provide transparency and accountability to various organizations that are responsible for the implementation of the Welfare Schemes.
  • Infrastructure development and skills development must be made a top priority.
  • More govt expenditure in health, nutrition, and education.
  • The problem of the inability to determine the poverty line must be resolved to help the target population.
  • Direct income transfer to the needy is an immediate solution. Universal Basic Income should also be considered.
  • Investment in Agriculture by the government is necessary to decrease rural poverty. Subsidies address only short-term issues. Also, there is a need to develop technologies, with the help of which farmers can practice all-weather agriculture.
  • Employment-oriented growth: create jobs in modern sectors and promote labour-intensive industries.
  • Reduce corruption for efficient service delivery.
  • Resilience for poor households to withstand major shocks: through holistic, multi-faceted intervention designed to help people lift themselves from extreme poverty by providing them with the tools, skills, and resources required to deal with the challenges that keep them trapped in a state of destitution. In addition to providing assets such as livestock, the government should also provide livelihood and financial skills training to make these assets productive; personal coaching to instill confidence and hope; basic health care for families, and more.

Related category for big-picture learning: Issues relating to poverty, hunger & development






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