Poverty and Inequality in an Interconnected World | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

What are the Key Highlights?

• The Oxfam report underscores the pivotal role of education in narrowing disparities and highlights the potential of disruptive technologies to mitigate inequality.
• It advocates for a robust welfare state that boosts individual productivity and elevates the poverty threshold.
• The report acknowledges significant advancements in women's education and workforce participation in India.
• Disruptive technologies hold promise in addressing global inequality by bridging gaps and fostering equality.

Classification of Inequality and Poverty

Poverty Classification:

• Absolute Poverty: Prevalent in underdeveloped nations, characterized by extreme deprivation where individuals struggle to meet basic needs.
• Relative Poverty: Arises from income disparities, comparing one's standard of living to prevailing economic norms.
• Situational Poverty: Temporary impoverishment triggered by environmental catastrophes, severe health issues, or job loss.
• Generational Poverty: Complex poverty perpetuated within families across generations.
• Rural Poverty: Primarily observed in rural areas due to limited job opportunities, inadequate services, and substandard education.
• Urban Poverty: Challenges faced by urban dwellers due to restricted access to education, healthcare, and essential services.

Inequality Classification:

• Income Inequality: Unequal distribution of income among a population group, leading to disparities and contributing to poverty.
• Pay Inequality: Discrepancies in compensation within an organization, varying across monthly, hourly, and annual payment structures.

What are the Estimates of Poverty in India?

• The Household Consumption Expenditure Survey (HCES) 2022-23 claimed that India’s rural poverty level had declined to 7.2% in 2022-23 from 25.7% in 2011-12, while urban poverty slipped to 4.6% from 13.7% over the same period.
• Multidimensional Poverty in India since 2005-06: A Discussion Paper: NITI Ayog:
• Multidimensional Poverty in India since 2005-06 declined from 29.17% in 2013-14 to 11.28% in 2022-23.
• As many as 24.82 crore people moved out of multidimensional poverty in nine years to 2022-23, with Uttar Pradesh, Bihar and Madhya Pradesh registering the largest decline.

Multidimensional Poverty Index 2023:

• The Multidimensional Poverty Index 2023 show a near-halving of India’s national MPI value and a decline from 24.85% to 4.96% between 2015-16 and 2019-21.
• This reduction of 9.89 percentage points implies that about 135.5 million people have exited poverty between 2015-16 and 2019-21.
• The intensity of poverty, which measures the average deprivation among the people living in multidimensional poverty, reduced from 47.14% to 44.39%.

What have been the Poverty Line Estimation in India?

• Tendulkar Committee (2009): The poverty line in the Suresh Tendulkar methodology was expenditure of ₹33 a day in urban areas and ₹27 a day in rural areas.
  • Thus, India’s poors as percentage of total population in 2011-12 as per the Tendulkar committee was 21.9%.
• Rangarajan committee(2014): In the Rangarajan methodology, it was Rs. 47 a day in urban areas and Rs. 30 a day in rural areas.
  • Thus, India’s poor population as percentage of the Indian population in 2011-12 was 29.5, as per Rangarajan committee.
• Current poverty line calculation by NITI Aayog: A new approach has evolved by the NITI Aayog to incorporate multiple dimensions and non-income factors in the form of the Multidimensional Poverty Index 2023 based on National Family Health Surveys(NFHS) results.
  • At the core of the MPI is the Alkire-Foster (AF) methodology, a globally accepted general framework for measuring multidimensional poverty, which captures overlapping deprivations in health, education, and living standards.
• International Poverty Line: The World Bank, defines a person as extremely poor if she is living on less than $2.15 per day, which is adjusted for inflation as well as price differences between countries.

Inequality Trends in India:

• Wealth Inequality: India stands as one of the most unequal nations globally, with the wealthiest 10% controlling 77% of the total national wealth. The top 1% possesses a staggering 53% of the country's wealth, leaving the bottom half with a mere 4.1%.
• Income Inequality: India ranks among the world's most unequal countries, with the top 10% and top 1% holding 57% and 22% of the national income respectively, while the bottom 50% share dwindles to 13%.
• Tax Burden Disparity: A significant portion, approximately 64%, of the country's Goods and Services tax (GST) revenue is borne by the bottom 50% of the population, contrasting sharply with the mere 4% contributed by the top 10%.
• Food Security and Nutrition Challenges: A staggering 74% of India's population struggles to afford a healthy diet, with 39% lacking adequate nutrient intake, as highlighted by the State of Food Security and Nutrition in the World, 2023 report. Furthermore, India's Global Hunger Index (GHI) score of 28.7 in 2023 signifies a serious level of hunger, with a particularly alarming child-wasting rate of 18.7.
• Gender Inequality: India's ranking of 127 out of 146 countries in the Global Gender Gap Report, 2023 underscores persistent gender disparities, exacerbated by the issue of "missing women" from the workforce.

Causes of Increasing Inequality Despite High Economic Growth:

• Concentration of Wealth: The accumulation of wealth among a select few perpetuates intergenerational inequality by enabling the transmission of advantages to future generations.
• Inadequate Land Reforms: Incomplete land reforms result in a significant portion of the population lacking land ownership, leaving them vulnerable to poverty and economic instability.
• Crony Capitalism: Corrupt practices and preferential treatment foster wealth accumulation among a privileged minority, exacerbating inequality and promoting Crony Capitalism.
• Skewed Distribution of Economic Gains: Economic growth disproportionately benefits specific sectors or income groups, exacerbating wealth disparities.
• Wage Gaps: Disparities in wages between skilled and unskilled laborers contribute to income inequality, particularly in informal labor markets where wages are lower and benefits are scarce.

Challenges in Addressing Poverty and Inequality:

• Limited Access to Education and Healthcare: Many developing nations struggle to provide adequate education and healthcare services, hindering human capital development and increasing vulnerability to health crises.
• Economic Vulnerability: Dependency on a few industries or commodities makes developing countries susceptible to external shocks and market fluctuations, exacerbating poverty and inequality.
• Corruption and Governance Issues: Weak governance structures and high levels of corruption impede effective poverty alleviation efforts and perpetuate inequality by favoring the wealthy and powerful.
• Social Exclusion and Discrimination: Marginalized groups, including ethnic minorities and women, face discrimination and exclusion from economic opportunities, perpetuating cycles of poverty and inequality.
• Debt Burden: High levels of external debt limit investment in poverty reduction programs and essential infrastructure, further entrenching poverty and inequality.

Way Forward

• Education, Health and Skill Development: Providing quality education , affordable health and skill development programs can empower individuals to break the cycle of poverty and contribute to economic growth, reducing inequality.
• Social Protection Programs and Gender Equality: Establishing social safety nets, such as unemployment benefits, food assistance, and housing support, can provide a buffer against poverty and reduce inequality.
• Addressing Systemic Discrimination: Tackling systemic discrimination based on race, ethnicity, religion, and other factors is crucial in reducing inequality and ensuring equal opportunities for all.
• Progressive Taxation: Implementing progressive taxation in India can help reduce income inequality by ensuring that those who earn more contribute a higher proportion of their income to taxes.
• A 1% wealth tax on Indian billionaires is enough to fund the National Health Mission, India’s largest healthcare scheme.
  • Taxing India’s billionaires at 2% would support the nutrition of India’s malnourished for three years.
• Private Sector Engagement: Encourage corporate social responsibility (CSR) initiatives that focus on inclusive development. Encourage private companies to invest in social sectors and support community development projects.