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Poverty & Unemployment | Indian Economy for UPSC CSE PDF Download


  • Poverty is a social phenomenon in which a certain section of society is unable to fulfill even its basic minimum necessities of life. 
  • In other words, it refers to the inability to secure minimum consumption requirement for life and efficiency.
  • According to M.L. Dantwala poor are those who live below the poverty line which is defined in terms of per capita household expenditure. 
  • In the Indian planning literature, poverty line is determined by the concept of expenditure considered necessary for a minimum level of living or minimum needs.

Poverty Line : 

  • The Planning commission has now adopted an alternative definition of poverty provided by the "Task Force on Projections of Minimum Needs and Effective consumption Demand".
  • According to it the poverty line is defined as the monthly per capita expenditure of class having a daily calorie in-take of 2400 per person in rural areas and 2100 in urban areas. 
  • This expenditure is officially estimated at Rs. 228.9 per capita per month in rural areas and Rs. 264.1 in urban areas at 1993-94 prices.
  • In order to study poverty in India economists have particularly relied on national Sample Survey Organisation (NSS) data on consumption expenditure of urban rural population.
  • There is controversy about the percentage of population below poverty line in India. Different methods have been adopted to estimate poverty line.
  • The Planning Commission, in view of the criticism of its methodology followed for estimation of incidence of poverty, constituted an Expert Group (Lakdawala Committee in 1989) to examine the methodology of estimation of poverty. 
  • The Expert Group retained the concept of poverty line as recommended by task force and used the same methodology for estimating poverty as used by Minhas, Jain and Tendulkar.

Poverty Line



Per capita Expenditure perday (Rs.) perday (Rs.)

Per capita  Average Expenditure (Rs.)

All India Poverty Line (Average Monthly Expenditure per Family of 5)








































New Poverty Line

  • Those spending over ? 32 a day in rural areas and ? 47 in towns and cities should not be considered poor, an expert panel headed by former RBI governor C. Rangarajan said in a report submitted to the BJP government. Based on the Suresh Tendulkar panel’s recommendations in 2011-12, the poverty line had been fixed at Rs. 27 in rural areas and Rs. 33 in urban areas, levels at which getting two meals may be difficult.
  • The panel’s recommendation, however, results in an increase in the below poverty line population, which is estimated at 363 million in 2011-12, compared to the 270 million estimate based on the Tendulkar formula—an increase of almost 35%.
  • This means 29.5% of the India population lives below the poverty line as defined by the Rangarajan committee, as against 21.9% according to Tendulkar
  • For 2009-10, Ranga-rajan has estimated that the share of BPL group in total population was 38.2%, translating into a decline in poverty ratio by 8.7 percentage points over a two-year period.
  • The real change is in urban areas where the BPL number is projected to have nearly doubled to 102.5 million based on Rangarajan’s esti-mates, compared to 53 million based on the Tendulkar committee’s recom-mendations. 
  • So, based on the new measure, in 2011-12, 26.4% of the people living in urban areas were BPL, compared to 351% in 2009-10.
  • Rangarajan panel has suggested to the government that those spend-ing more than Rs. 972 a month in rural areas and Rs. 1,407 a month in urban areas in 2011-12 do not fall under the definition of poverty.
  • Thus, for a family of five, the all-India poverty line in terms of consumption expenditure, as per the Rangarajan committee, would amount to Rs. 4,760 per month in rural areas and Rs. 7,035 per month in urban areas.

Causes of Poverty

  • The most important cause is inequality of income and wealth.
  • Low economic growth rate or under development.
  • Widespread unemployment, underemployment, chronic unemployment etc.
  • Heavy dependence of agriculture sector on the vagaries of monsoon, low productivity level, rising agricultural prices, incomplete land reforms.
  • Population explosion and high fertility rate among poor.
  • Faulty implementation of poverty alleviation programmes (PAP).
  • Not so steep rise in industrial growth and allied activities etc.
  • Failure of automatic trickle down theory of economic growth which has led to widening of income inequalities, emphasis on production of elitist goods rather than wage goods.
  • Low rate of capital formation has resulted in lower saving rate.

Measures To Reduce

The main components of the strategy adopted so far for poverty removal have been:

  1. reliance on overall growth rate through the trickle down mechanism (trickle down hypothesis in the simplest form states that rapid growth of per capita income will be associated with a reduction in poverty);
  2. distribution of land to the landless in rural areas;
  3. investment in human capital through education and training;
  4. creation of additional employment through specific schemes for weaker sections like the IRDP, JRY, EAS, etc; and
  5. direct support to consumption through PDS, midday meal scheme, etc.


Poverty in India

The Planning Commission has updated the poverty lines and poverty ratios for 2011-12 based on the recommendations of the Tendulkar Committee using House-hold Consumer Expenditure Survey 2011-12 data of the National Sample Survey (NSS) 68th round.

♦ Accordingly, with the poverty line at all India level at monthly per capita expenditure (MPCE) of Rs. 816 for rural areas and Rs. 1000 for urban areas in 2011-12, the poverty ratio in the country has declined from 37.2 per cent in 2004-05 to 21.9 per cent in 2011-12.

♦  In absolute terms, the number of poor declined from 407.1 million in 2004-05 to 269.3 million in 2011-12 with an average annual decline of 2.2 percentage points during 2004-05 to 2011-12.

♦ The Planning Commission constituted an Expert Group under the Chairmanship of Dr. C. Rangarajan in June 2012 to ‘Review the Methodology for Measurement of Poverty’. The term of the Expert Group was extended up to June 30, 2014.

Number and Percentage of Poor





Poverty ratio (per cent)









Number of poor (million)









Annual average decline 2004-05 to 2011-12 (percentage points per annum)





Source : Planning Commission (Estimated by Tendulkar Method).

Poverty And Five Year Plans

  • The plan strategies of poverty alleviation can be divided into three phases.
  • In the first phase, lasting from the beginning of the 1950s till the end of 1960s, the major emphasis was on growth mainly through improvement in infrastructures and structural reforms such as redistribution of land, improving the plight of poor tenants, other radical land reforms etc. 
  • It was though that the solution to the problem of inequality and poverty would come through 'filtration' rather than a planned direct attack.
  • In the second phase, beginning from the Fifth plan. PAP was started with measures that promised to address directly and exclusively the poor in the rural areas. 
  • A number of special programmes for the rural poor were undertaken in this phase, of which the important ones are: 
  1. Small Farmer’s and agricultural Labourers' Development Agency (MFAL), 
  2. Drought Prone Areas Programme (DPAP), Crash Scheme for Rural Employment (CSRE), 
  3. Food for Work Programmer (FWP), IRDP and NREP. 
  • During this phase the emphasis of PAP was on creating employment opportunities and distributing renewable assets among the poor. 
  • Similarly heavy emphasis was laced on transfer of income to the poor in indirect ways for e.g. through food subsidies and dual pricing of essential commodities.
  • In the third — the latest phase — starting from the beginning of the 1990s emphasis has shifted to measures aimed at accelerating economic growth and on creating an environment for ensuring a 'spread effect'. 
  • In keeping with Indian traditions, lip service is continued to be paid to structural change, as much as to target group oriented programmes, but  the dominant thought is to create more wealth and to enable the poor to benefit from the secondary effects of growth, which it is presumed, will percolate down and reach the poor.


  • Unemployment refers to the segment of workforce which is willing to accept job at prevailing wage rate, but fails to get a job. 
  • Workforce means people in the age group of 15-60 years.
  • Indian problem of unemployment is basically structural and chronic in nature. 
  • Due to high rate of populaiton increase in our country, the number of people coming to labour market in search of jobs has also increased rapidly, whereas employment opportunities have not increased correspondingly due to slow economic growth.
  • Hence the magnitude of unemployment has increased from plan-to-plan. Apart from structural unemployment some cyclical unemployment has also emerged in the urban areas due to industrial recessions.
  • Structural unemployment arises when a large number of persons are unemployed or underemployed because of the other factors of production required to engage them fully are not sufficiently available. There may be a scarcity of land, capital or skill in the economy causing a structural disequilibrium in the labour sector.
  • Cyclical unemployment arises due to the changes occurring the recession phase of the trade cycle.

According to “Annual Employment and Unemployment Survey Report 2013-14” the rates of unemployment on Usual Principal State (UPS) in the country are as follows :

Aggregate Unemployment Rate


Unemployment Rate in rural areas


Unemployment Rate in urban areas


State having maximum unemployed people


State having the least unemployed people


State having maximum unemployment rate


Forms of Unemployment
 Open unemployment

  • Open unemployment is a situation where in a large labour force does not get work opportunities that may yield them regular income. 
  • It is caused as a result of lack of complimentary resources, specially capital or in other words it is caused due to structural disequilibrium in the economy and hence can be identified as ‘structural unemployment’.


Underemployment can be defined in two ways:

  1. a situation in which a person does not get the type of work he is capable of doing due to lack of suitable jobs;
  2. a situation in which a person does not get sufficient work to absorb him for the total length of the identified working hours of a day or the person gets some work during some days, weeks, months of a year, but not regularly throughout the year. 

This is also called seasonal unemployment and is caused largely by natural circumstances (as in agriculture).

Disguised unemployment

  • This term was originally referred to mean the cyclical transfer of men from the more productive to less productive jobs during depression. 
  • This definition of disguised unemployment relates it to a cyclical type of unemployment and is more suited to industrially developed countries which may be hit by cyclical umemployment.
  • In the context of agriculturally under-developed economies, disguised unemployment is to be treated as part of structural umemployment and can be removed only by increasing the productive capacity of the economy that may create enough work. 

Types of Unemployment in India

  • For analytical convenience unemployment in India can be classified into
  1. rural unemployment and
  2. urban unemployment.
  • Rural unemployment in India is largely characterised  by existence of open unemployment, seasonal unemployment and disguised unemployment. Whereas urban unemployment is characterised by the existence of both open unemployment, which in turn is an offshoot of rural unemployment. 
  • One of the special feature of urban unemployment in India is that the rate of underemployment is higher among the educated than among the uneducated people.


A few characteristic features of the unemployment in India are :

  1. The incidence of unemployment is much higher in urban than in rural areas.
  2. Unemployment rates for women are higher than those for men.
  3. A larger difference between the 'usual' and 'weekly' status unemployment rates on one hand, and 'daily status' unemployment rates on the other, in the case of women and then of men suggests that underemployment is of much higher proportion among the former than the latter.
  4. Incidence of unemployment among educated is much higher at about 12 percent than the overall usual status unemployment of 3.77 percent.
  5. There has been a shift from the state of widespread underemployment towards greater open unemployment.


  • The three concepts of unemployment developed by  National Sample Survey Organisation (NSSO) are:
  • Usual Status : It refers to usual activity status — employed or unemployed or outside the labour force of those covered by the survey. 
    The activity status is determined with reference to a longer period. The usual status unemployment rate is person rate.
  • Current Weekly Status : It refers to activity status of a person with reference to a period of preceding seven days. 
    If in this period a person seeking employment fails to get work for even an hour on any day, he/she is deemed to be unemployed.  Current weekly status unemployment rate is also a person rate.
  • Current Daily Status : It refers to activity status of a person for each day of the preceding seven days. The current daily status unemployment is a time rate. However, the current daily status unemployment provides the most appropriate measure of unemployment.


G-15 : Facts File

♦ Established in 1989 in NAM Summit at Belgrade.

♦Members : Mexico, Jamaica, Columbia, Venezuela, Brazil, Chile, Argentina, Senegal, Algeria, Nigeria, Zimbabwe, Egypt, Malaysia, India, Indonesia, Kenya and Sri Lanka.

♦ Summits :

I (1990)

 Kuala Lumpur (Malaysia)

II (199I)

 Caracas (Venezuela)

III (1992)

Dakar (Senegal)

IV (J994)

New Delhi (India)

V (1995)

Buenos Aires (Argentina)

VI (1996)

Harare (Zimbabwe)

VII (1997)

Kuala Lumpur (Malaysia)

VIII (1998)

Cairo (Egypt)

IX (1999)


X (2000)

Cairo (Egypt)

XI (2001)

Jakarta (Indonesia)

XII (2004)

Caracus (Venezuela)

XIII (2006)

Hawana (Quba)

XIV (2010)

Tehran (Iran)

XV (2012)

 Colombo (Sri Lanka)

XVI (2016)

 Tokyo (Japan)

Causes Of Unemployment

  1. Slow growth progress
  2. Sharp increase in labour force
  3. Inappropriate technology
  4. Inappropriate education system
  5. Underdeveloped nature of economy
  6. Inadequate employment planning
  7. Failure of trickle down theory
  8. Agricultural backwardness
  9. Stunted plan for broadening the resource base.
The document Poverty & Unemployment | Indian Economy for UPSC CSE is a part of the UPSC Course Indian Economy for UPSC CSE.
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FAQs on Poverty & Unemployment - Indian Economy for UPSC CSE

1. What is the relationship between poverty and unemployment?
Ans. Poverty and unemployment are closely related as unemployment often leads to poverty. When individuals are unable to find stable employment or earn a sufficient income, they may experience financial hardships, increasing their risk of falling below the poverty line.
2. How does unemployment contribute to poverty?
Ans. Unemployment contributes to poverty by depriving individuals of a regular income, making it difficult for them to meet their basic needs. Without a stable job, individuals may struggle to afford housing, food, healthcare, and education, pushing them into poverty.
3. Are there any government programs or initiatives to address poverty and unemployment?
Ans. Yes, governments often implement programs and initiatives to address poverty and unemployment. These may include job creation schemes, vocational training programs, unemployment benefits, social welfare programs, and support for small businesses. These initiatives aim to alleviate poverty by reducing unemployment rates and providing assistance to those in need.
4. Can education and skills development help reduce poverty and unemployment?
Ans. Yes, education and skills development play a crucial role in reducing poverty and unemployment. By equipping individuals with relevant skills and knowledge, they become more employable, increasing their chances of finding stable employment. Additionally, education empowers individuals to pursue higher-paying jobs and create opportunities for economic growth.
5. How does poverty impact employment opportunities?
Ans. Poverty can limit employment opportunities as individuals who are living in poverty may lack access to resources necessary for securing employment. Limited access to education, transportation, and networking opportunities can hinder their ability to find suitable jobs. Additionally, the stress and challenges associated with poverty can negatively impact an individual's mental and physical well-being, further affecting their employability.
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