Issue of Poverty

Issue of Poverty

This article deals with ‘Issue of Poverty.’ This is part of our series on ‘Governance’ which is important pillar of GS-2 syllabus . For more articles , you can click here

About Poverty

Poverty is the worst form of violence – Gandhiji

Definition of Poverty

Poverty is a socially created concept due to unequal distribution of benefits of socio-economic progress.

World Bank definition

Extreme poverty Living on less than $ 1.25 per day
Moderate poverty Living on less than $ 2 per day

Note – poverty is measured in Purchasing Power Parity (PPP) exchange rate & not absolute exchange rate.

Poverty Gap

  • (mean income among poor)- (poverty line)
  • It measures Depth of poverty
  • Also called Foster-Greer-Thorbecke (FGT) Index

Engel’s Law

  • When incomes rise , % age of overall income spent on food items decrease
  • This  is evident from data too
area Average MPCE % food Expenditure
Urban Rs.2399 38.5%
Rural Rs.1278 48.6%

MPCE = Monthly per capita Expenditure

Sustainable Development Goals (SDG) & Poverty

  • SDG 1 :  End poverty in all its forms every-where by 2030
    1. SDG wants to end Global Extreme Poverty by 2030
    2. By 2030 , reduce atleast by half the people living in poverty according to national definitions.
  • India is home to 26% of the global extreme poor. This means that the world’s ability to end extreme poverty by 2030 —  hinges on India’s ability to make strong and sustained inroads in reducing poverty

Constitutional Provisions regarding Poverty

  • Article 39 : Adequate Livelihood
  • Article 21 : Right to life with dignity
  • Article 17 : Untouchability
  • Article 41 : Right to work, public assistance and education
  • Article 47: Nutrition and standard of living
  • Article 46 : Education and Economic interests of SC / STs

Causes of Poverty

1 . Economic Reason

  • Models of growth not conducive for poverty alleviation – India chose capital intensive model in labour intensive country which was a great fault.
  • Widespread reliance on agriculture(more than 60% population dependent on sector  contributing 15% to GDP)
  • Lack of institutional formal credit leading to debt trap
  • Large scale inequality
  • MATTHEW EFFECT :  The phenomenon, widely spread across advanced welfare states that middle class tend to be the main beneficiary of social benefits & services that are targeted to poor (India is trying to rectify this using Targeted Delivery of Subsidy with help of Aadhar) 

2. Demographic

  • Rapid Population growth with inadequate growth of new job opportunities.

3. Social Cause

  • Caste system : subordination of low caste people by the high caste people caused  poverty of the former.
  • Joint family system provides social security to its members. Some people take undue advantage of it. They live upon the income of others. They become idlers. Their normal routine of life consists in eating, sleeping and begetting children.
  • Social Customs : ruralites spend a large percentage of annual earnings on social ceremonies like marriage, death feast etc. As a result, they remain in debt and poverty.

4. Climatic Factors

  • Drought, Floods, Cyclones etc perpetuates poverty

5. Historical factors

  • like colonialism & imperialism which led to exploitation of Indian people and it’s natural resources. India’s wealth was drained to metropole Britain for two centuries.

6. Institutional Factors

  • Withdrawal of Government from Social Security especially after LPG Reforms
  • Anti poverty schemes not successfully implemented due to institutional inadequacies

Poverty Line

What is Poverty Line?

  • It defines a threshold income. Households earning below this threshold are considered poor.
  • Different countries have different methods of defining the threshold income depending on local socio-economic needs.

Different approaches to define poverty line

There are two approaches regarding this

  1. Nutritional Approach : based on certain minimum criteria of nutrition intake
  2. Relative Deprivation Approach : It doesn’t take into account just nutritional deficits but in comparison to the progressive section, person is not that progressed . Eg : Person earning less than 60% of country’s per capita income

Nutritional Approach is generally followed by developing countries . But now time has come that India should move from Nutritional Approach to Relative Deprivation Approach to ensure Sustainable and Equitable Development.

Poverty line in India is decided by

  • Earlier it was used to be determined by erstwhile Planning Commission
  • Now NITI Aayog decide (Commission under Arvind Panagariya made for this & gave report  ) 
  • June 2016- Panagariya has  suggested that
    • Tendulkar Committee’s report should be accepted for poverty line estimation
    • But socio-economic indicators, say, as collected by Socio-Economic Caste Census, should be used to determine entitlement for benefits

Various Committees constituted for Poverty Line Determination

1 . Lakdawala Committee

In books, we frequently come across the Poverty Line defined as 2400 calorie in Rural & 2100 calorie in Urban . This definition of Poverty Line was based on the recommendations of Lakdawala Committee.

Rural 2400
Urban 2100

2. Tendulkar Committee

Tendulkar Committee defined Poverty Line based on per capita monthly expenditure.

Area Monthly Expenditure per person (Rs.)
Rural 816
Urban 1000

While calculating , Tendulkar Committee based it’s recommendation on

  • Food
  • Health
  • Education
  • Clothing

The poverty has declined according to Tendulkar  committee report

Year%age of population below Poverty Line
2004 37.2%
2011 22%

Reduction in poverty is attributed to

  • Increase in employment in non agriculture sector – Construction sector absorbed the landless laborers & daily wage earners from villages
  • Schemes like MGNREGA, National rural livelihood mission reduced the stress during lean season, created employment opportunities during non agricultural seasons also.
  • India’s demographic bulge provided more working population compared to dependents (Children and elders) – More working hands, reduced unemployment
  • Social welfare schemes like PDS, AAY, MGNREGA, NRLM, Pension schemes and others provided safety net to the poor
  • Inward remittances – Large emigration of citizen to  US, EU etc. and to west Asian destinations like UAE, Saudi, Qatar etc. generated huge inward remittances for India, which directly benefited dependents in India
  • Quality jobs in Service sector like BPO, Hospitality, Retail chain, E – commerce supply chain provided heavy wages
  • Rapid growth of the economy during this period except 2008 recession , provided better opportunities to come out of poverty through better employment opportunities, increased demand for services etc.

3. C Rangarajan Committee

C Rangarajan Committee  defined Poverty Line based on Monthly Expenditure of  family of five.

Urban poverty line (Rs) Rs 7035 per family of five, per month
Rural poverty line (Rs) Rs 4860  per family of five, per month

Rangarajan Committee took more things than Tendulkar Committee into it’s calculations

  • Food (both included this)
  • Clothing (both included this )
  • Education (both included this )
  • Health (both included this )
  • Rent (only Rangarajan)
  • Transportation (only Rangarajan)

Rangarajan recommends that at any given point of time,

  • bottom 35% rural junta always be considered poor
  • bottom 25% urban junta always be considered poor.

Rangarajan Committee recommended delinking of the Poverty Estimate lines from the Government Entitlement Benefits . Food Security benefits should be given in accordance with Social and Caste dimensions and not BPL.

Critique of these Poverty Lines

  • Experts argue that Indian way of calculating poverty  is incorrect.  It is simply what some call a “starvation line”. According to critics, the government has deliberately kept poverty line low. A low poverty line has enabled the government to show that millions have moved out of poverty. 
  • India should be using some relative measure as opposed to absolute measure to define Poverty. In most of Europe, a family with a net income of less than 60% of the “median net disposable income”  is counted as poor. A poverty line “relative” to the national average also gives an idea about the state of inequality. 
  • A comparison shows that India’s poverty line is abysmally low than even African Poverty Lines. Even poverty line of Rwanda is higher than that of India . Per capita poverty line of a rural adult Rwandian in Indian terms comes out to be Rs. 900/ month,  more than Rs. 816 for a person in rural India. 
  • Other critique which PL faces is that , once decided the PL remains same for years & don’t take into account inflation.  It needs to be updated every year by applying cost inflation index to keep it realistic.
  • Multidimensional Poverty Index : We define Poverty in  very limited way by just looking to household consumption  . UNDP define Poverty using Multidimensional Poverty Index which takes holistic view and consider indicators like Health , Education and Standard of Living . Need to move toward that

Two other important Committees

Saxena Committee – For recommending Methodology of finding Rural Poor
By Rural Ministry
Hashim Committee (2012) For recommending Methodology to find Urban Poor (BPL)
– By Urban Ministry

1 . Saxena Committee on Rural Poverty (2009)

  • When Tendulkar Committee Report came, Ministry of Rural development  , hurriedly set up a committee known as the SAXENA COMMITTEE , in 2009 to review the methodology for inclusion of person in BPL Category to include them in government schemes
  • Recommendation of the Committee
    • Gave famous Automatic Inclusion and Automatic Exclusion principle
    • Automatic  inclusion criterion for the most vulnerable sections of society (E.g. homeless people, persons with disability)
    • Automatic Exclusion : Those having motor bike etc
    • Percentage of people entitled to Below Poverty Line (BPL) status should be revised upwards to at least 50%.
    • Apart from Automatically included, find other using scores of various deprivations .

2. Hashim Committee on Urban Poverty (2012)

  • To suggest methodology for inclusion of person in BPL category in Urban Areas to include them in government schemes .
  • Recommendations of Hashim Committee
    • Automatic Exclusion
    • Automatic Inclusion
    • Scoring Index:  remaining households will be assigned scores from 0 to 12 based on various indicators . They should be considered eligible for inclusion in the BPL List in the increasing order higher scores 

Multidimensional Poverty Index

  • In India , we calculate poverty using Tendulkar Method based on household consumption
  • But UNDP takes holistic view of poverty and measures it differently
  • Released since 2010 .
  • In Multidimensional Poverty, they look into following components to measure poverty (HES)
    • Health with Components like child mortality
    • Education with components like years of schooling
    • Standard of Living with components like Electricity, water etc

Impact of Poverty

Several issues like hunger, illness and thirst are both causes and effects of poverty. Hence , term known as poverty trap is usually used for this ie bad cycle is created not allowing people to come out of poverty.

Poverty Trap
On Society Poverty => homeless => social unrest => crime

Poverty results in  inequalities which can culminate into violent upheavals like Arab Spring .  Various Revolutions in Arab Spring started because of the lack of jobs and high poverty levels. 
On Children – This leads children to build an antisocial behavior . Discrimination and social exclusion often push them to more aggressiveness and less self-control   
Terrorism Most of the time terrorists do come from poorer countries with high unemployment
Diseases Diseases are very common in people living in poverty because they lack the resources to maintain a healthy living environment. 
Education – Many people living in poverty are unable to attend school from a very early age.
– Obtaining a basic education could bring 171 million people out of poverty. A bad cycle is created; poverty prevents people from gaining a good education, and not obtaining an education prevents people from escaping poverty.

How can India  reduce poverty

Eventhough India has grown rapidly, its growth has been less effective at reducing poverty than in some of India’s middle-income peers such as China, Vietnam, Brazil and Turkey. Following can be done in this respect

In Agricultural sector With 4 out of every 5 of India’s poor living in rural areas, progress will need to focus on the rural poor. Using Agricultural Sector, Poverty can be removed through following initiatives
1. Value addition through food processing
2. Organic farming 
3. Cooperation farming, milk cooperatives and farmer produces organization 
In Manufacturing sector Create Jobs in India via
1. Skill development
2. Make in India  
In Service sector 1. Creation of quality jobs in BPO, IT, ITES for youth 
2. Promotion of tourism
3. Promotion of higher job creation in E commerce, supply chain, Hospitality and construction sector  
In Governance 1. Effective implementation of JAM trinity for targeting beneficiaries and ensuring Subsidies reach the poor
2. Universal health insurance to reduce out of pocket expenditure to health care  

Value Addition : Capability Approach to Poverty by Amartya Sen

  • Capability approach  is an economic theory conceived in the 1980s as an approach to welfare economics.
  • Traditionally
    • Poverty has been defined by an individual’s level of income.
    • Eg : Extreme Poverty is defined as those  who live on $1.25 per day or less.
    • As a result, following this approach governments center their Poverty Removal Policies on  job creation, GDP growth and other economic policies
  • Capability Approach
    • In richer countries, all are fortunate enough that they can earn good income. Does that mean , they are not poor
    • Amartya Sen’s Capability approach defines Poverty in Holistic Way.  A better approach is to see poverty  as deprivation of a person’s capabilities to live the life they value

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