Poverty Class 12 Economics

Introduction

According to economists, the identification of the poor is based on their occupation and asset ownership. They assert that the rural poor primarily consist of landless agricultural laborers, cultivators with small landholdings, laborers without land who work in non-agricultural jobs, and tenant cultivators with small land holdings. Similarly, the urban poor mainly comprise those who migrated from rural areas in search of alternative employment and livelihoods, laborers engaged in casual jobs, and self-employed individuals who sell various items on roadsides and engage in various activities.

How are Poor People Identified? 

• In order to combat poverty in India, it is crucial to develop effective and sustainable strategies to address its root causes and create programs to assist those in need.
• However, in order to implement such programs, it is essential for the government to accurately identify who falls under the category of "poor". This requires the creation of a poverty measurement scale, and careful selection of criteria to be used in this mechanism.
• The concept of a poverty line was first discussed by Dadabhai Naoroji in pre-independent India.
• Naoroji arrived at his estimate of the poverty line by using the cost of a prisoner's food and adjusting it according to prevailing prices.
• However, since a society also includes children, Naoroji made the necessary adjustments to his calculation to include them in the estimate.
• He assumed that one-third of the population consisted of children, and that half of them consumed little, while the other half consumed half the amount of an adult's diet.
• By taking the weighted average of the consumption of these three segments, Naoroji arrived at the average poverty line, which was three-fourths of the adult jail cost of living.
• In post-independent India, numerous attempts have been made to create a mechanism for identifying the number of poor in the country.
• For instance, the Planning Commission formed a Study Group in 1962, followed by the creation of the "Task Force on Projections of Minimum Needs and Effective Consumption Demand" in 1979.
• Expert Groups were also established in 1989 and 2005 for this same purpose.
• In addition to the Planning Commission, many individual economists have attempted to create such a mechanism.

For the purpose of defining poverty we divide people into two categories; 

• To define poverty, individuals are categorized into two groups:
  • those who are poor
  • those who are non-poor
  • The poverty line distinguishes between the two groups.
• However, poverty can be further classified into different types such as absolute poverty, extreme poverty, and general poverty.
• Similarly, non-poor individuals can be classified into various categories such as the middle class, upper middle class, rich, very rich, and extremely rich. Visualize this as a continuum from the very poor to the extremely rich, with the poverty line acting as a divider between the poor and non-poor.

Categorizing Poverty

• Poverty can be categorized in various ways, and one method is to group together those who are always poor and those who are usually poor but may occasionally have slightly more income. These individuals are known as the chronic poor.
• Another category is the churning poor who frequently move in and out of poverty.
• The transient poor, who are affluent for the majority of the time but may experience a temporary period of financial hardship, make up another group.
• Finally, there are those who have never experienced poverty, and they are referred to as the non-poor.

The Poverty Line 

• Poverty can be measured in various ways, including through per capita expenditure on the minimum calorie intake. For example, a rural person is estimated to require 2,400 calories while an urban person needs 2,100 calories.
• In 2009-10, the poverty line was set at Rs 673 per person per month for rural areas and Rs 860 for urban areas based on this measure.
• Economists argue that this approach fails to distinguish between the most impoverished individuals and others living in poverty.
• Additionally, as this approach only considers expenditure on food and a few other items as a proxy for income, its validity is questioned.
• While this mechanism is useful in identifying the poor as a group to be targeted by the government, it does not enable identification of those most in need of assistance.
• To develop a poverty line, factors beyond income and assets, such as access to basic education, healthcare, water, and sanitation, should also be taken into account.
• The existing approach to determining the poverty line overlooks social factors that contribute to and perpetuate poverty, including illiteracy, poor health, limited access to resources, discrimination, and a lack of civil and political freedoms.
• Poverty alleviation schemes should aim to improve people's lives by enabling them to be healthy, well-nourished, knowledgeable, and involved in their communities.
• This perspective suggests that development involves removing obstacles that prevent people from achieving their goals, such as illiteracy, poor health, lack of resources, or limited civil and political freedoms.
• Although the government claims that economic growth, increased agricultural production, job creation in rural areas, and economic reform packages have reduced poverty levels, economists have doubts about these assertions.
• They note that the data collection methods, items included in the consumption basket, methodology used to determine the poverty line, and the number of poor are manipulated to reduce reported poverty figures in India.
• Due to the limitations of official poverty estimates, scholars have sought alternative approaches.
• One example is the Sen Index, developed by Nobel Laureate Amartya Sen, while other tools include the Poverty Gap Index and Squared Poverty Gap.

The Number of Poor in India

The Head Count Ratio refers to the measurement of the number of poor people as a proportion of the population who fall below the poverty line.

What Causes Poverty? 

Institutional and social factors are the underlying causes of poverty, as they affect the lives of the poor. The lack of access to quality education and opportunities to acquire valuable skills often results in lower incomes. Additionally, the poor often face limited access to healthcare services. Discriminatory practices based on caste, religion, and other factors disproportionately affect the poor. Poverty can stem from a range of factors, including social, economic, and political inequalities, social exclusion, unemployment, indebtedness, and unequal distribution of wealth.

Aggregate poverty is just the sum of individual poverty. 

• Poverty can also be attributed to broader economic issues, such as insufficient investment in capital, inadequate infrastructure, low demand, population pressure, and a lack of social welfare programs.
• During the British Raj, more than 70% of Indians were employed in agriculture, making the impact on this sector more significant than anything else on living standards.
• British policies included imposing high taxes on rural areas, which enabled merchants and moneylenders to become large landowners.
• Under British rule, India started exporting food grains, resulting in up to 26 million deaths from famines between 1875 and 1900.
• The British Raj aimed to provide a market for British exports, service India's debt payments to Britain, and provide manpower for British imperial armies.
• The British Raj impoverished millions of people in India, exploiting natural resources and industries for the benefit of the British and exporting food grains, leading to famine and hunger.
• In 1857-58, a rebellion against British rule was sparked by anger over the overthrow of local leaders, high taxes on peasants, and other issues.
• Even today, agriculture is the primary source of income, and land is the primary asset of rural people; owning land is a significant factor in material well-being, and those with land have a better chance of improving their living conditions.
• Since independence, the government has attempted to redistribute land from those with large amounts to those without, but this has had limited success, as many agricultural workers lack the skills or assets to make their land productive, and land holdings are often too small to be viable.
• Additionally, many Indian states have failed to implement land redistribution policies.
• Many small farmers in rural areas are part of the large section of the rural poor in India, relying on subsistence crops and livestock for survival.
• Due to population growth and a lack of alternative employment opportunities, the per-capita availability of land for cultivation has declined, resulting in fragmented land holdings.
• The income from these small land holdings is often insufficient to meet basic needs.
• Many urban poor in India are former rural residents who have migrated to cities in search of employment and a livelihood, but industrialization has not been able to absorb them all, leaving many unemployed or intermittently employed as casual laborers.
• Casual laborers are among the most vulnerable in society, lacking job security, assets, and opportunities to acquire skills, with no surplus to sustain them.
• This has created two distinct groups in society: those with means of production and good incomes, and those with only their labor to trade for survival.
• Over time, the gap between the rich and the poor in India has widened, making poverty a multi-dimensional challenge that requires urgent attention.

Policies and Programmes towards Poverty Alleviation

• The main objective of the government's developmental strategies, as stated in the Indian Constitution and five-year plans, is social justice.
• According to the First Five Year Plan (1951-56), the drive to bring about economic and social change stems from the existence of poverty and inequality in income, wealth, and opportunity.
• The Second Five Year Plan (1956-61) also stressed that the benefits of economic development must be increasingly enjoyed by the relatively less privileged classes of society.
• All policy documents emphasize the need for poverty alleviation and call for the adoption of various strategies by the government.
• The government's approach to poverty reduction has three dimensions.

1. Growth-oriented approach 
A growth-oriented approach refers to the belief that economic growth, as evidenced by a rapid increase in gross domestic product and per capita income, will eventually benefit all sections of society, including the poor. This was the primary emphasis in planning during the 1950s and early 1960s. The strategy involved rapid industrial development and the transformation of agriculture through green revolution in select regions, with the expectation that underdeveloped regions and more backward sections of the community would benefit as well.

2. Employment generation approach

• In search of ways to address poverty, policymakers turned to the employment generation approach, which aimed to increase the incomes and employment opportunities of the poor by creating additional assets and generating work.
• This approach was first introduced in the Third Five Year Plan (1961-66) and has since been expanded through specific poverty alleviation programs.
• One such program, implemented in the 1970s, was Food for Work.
• Most poverty alleviation programs implemented today are based on the Five Year Plan perspective.
• The primary methods for addressing poverty are through expanding self-employment and wage employment programs.
• Previously, self-employment programs provided financial assistance to families or individuals.
• However, since the 1990s, self-help groups have been encouraged to form and save money to lend among themselves.
• The government provides partial financial assistance to these groups through banks, and the groups decide who to loan the money to for self-employment activities.
• An example of such a program is Swarnajayanti Gram Swarozgar Yojana (SGSY).
• The government has a variety of programs aimed at generating wage employment for unskilled individuals in rural areas.
• In 2005, the Parliament passed the Mahatma Gandhi National Rural Employment Guarantee Act, which guarantees wage employment for 100 days in a year to every rural household whose adult member is willing to do unskilled manual work.
• In 2013-14, nearly five crore households were provided employment opportunities under this law.

3. Minimum basic amenities approach:
The Minimum Basic Amenities approach aims to improve the living standards of people in India through public expenditure on social consumption needs such as provision of food grains at subsidized rates, education, health, water supply, and sanitation. This approach was one of the earliest in the world and aims to provide supplementary consumption for the poor, create employment opportunities, and bring about improvements in health and education.

Major Programmes For the Upliftment of the Poor

There are several programs geared towards enhancing the food and nutritional condition of impoverished individuals. These include the Public Distribution System, the Integrated Child Development Scheme and Midday Meal Scheme, the Pradhan Mantri Gram Sadak Yojana, the Pradhan Mantri Gramodaya Yojana, and the Valmiki Ambedkar Awas Yojana, which also aim to improve housing conditions and infrastructure.

• It is important to note that India has made significant strides in various areas.
• The government has implemented a range of social security programs to assist specific groups, such as the National Social Assistance Program launched by the central government. This initiative offers a pension to elderly individuals who lack support and aids destitute and widowed women.
• In addition, the government has launched several schemes to offer health insurance to impoverished individuals. The Pradhan Mantri Jan-Dhan Yojana has been available since 2014 and encourages people in India to open bank accounts.

Poverty Alleviation Programmes A Critical Assessment 

• The progress made in poverty alleviation is evident in some states, where the percentage of absolute poverty is now below the national average for the first time since independence.
• Despite various strategies to address poverty, hunger, malnourishment, illiteracy, and lack of basic amenities remain prevalent in many parts of India.
• Although the policy towards poverty alleviation has progressed gradually over the past five decades, it has not undergone any significant transformation.
• Scholars analyzing these programs have identified three major concerns that hinder their successful implementation. These include the non-poor benefiting from direct poverty alleviation programs due to unequal distribution of land and assets, insufficient resources allocated to these programs compared to the magnitude of poverty, and dependence on government and bank officials for implementation.
• The inefficient use of resources and lack of participation from local level institutions are also issues caused by ill-motivated, inadequately trained, and corruption-prone officials vulnerable to pressure from local elites.
• Government policies have not adequately addressed vulnerable people living on or just above the poverty line.
• It is evident that high economic growth alone cannot reduce poverty. Active participation from the poor is necessary for successful program implementation.
• Poverty can only be eradicated when the poor participate in the growth process and contribute to it.
• Social mobilization can help empower poor people and create employment opportunities, leading to income growth, skill development, better health, and literacy.
• In addition, it is essential to identify poverty-stricken areas and provide infrastructure such as schools, roads, power, telecom, IT services, and training institutions.

Conclusion 

• All policies have aimed to achieve rapid and balanced economic development with a focus on equality and social justice in India. Poverty alleviation has always been considered one of the main challenges by policymakers, regardless of the ruling government. 
• While the number of poor in the country has decreased, with some states having a lower proportion of poor than the national average, critics argue that the goal is still far from being achieved despite the allocation and expenditure of vast resources. 
• While there has been progress towards meeting basic needs and improvements in per capita income and average standard of living, compared to other countries, India's performance has not been impressive. 
• Additionally, not all sections of the population have benefited from development, as some sectors of the economy and regions of the country have experienced significant progress while others remain trapped in poverty.