11/28/2024

Sociology 2

Instructor: Akhaya Kumar Nayak

Poverty

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World Bank’s Description of Poverty

• Poverty is hunger. Poverty is lack of shelter. Poverty is being
sick and not being able to see a doctor. Poverty is not having
access to school and not knowing how to read. Poverty is not
having a job, is fear for the future, living one day at a time.
• Poverty has many faces, changing from place to place and
across time, and has been described in many ways. Most
often, poverty is a situation people want to escape. So,
poverty is a call to action -- for the poor and the wealthy
alike -- a call to change the world so that many more may
have enough to eat, adequate shelter, access to education and
health, protection from violence, and a voice in what happens
in their communities.

The Concept
• Poverty gives rise to a feeling of discrepancy between what
one has and what one should have for a flourishing life.
• Feeling of Powerlessness and resource-lessness is common to
all the poor.
• Henry identifies some dimensions of Poverty
• Lack of livelihood strategies
• Inaccessibility to resources (money, land and credit)
• Feelings of insecurity and frustrations
• Inability to maintain and develop social relations with others as a
consequence of lack of resources

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Manifestation of poverty
• Malnutrition
• Low consumption expenditure
• Chronic illness and poor health
• Unsanitary housing condition
• Low per-capita income
• Illiteracy
• Unemployment

Risk group
• Absence of fulltime wage earners
• Having more old people
• Having more kids of below 18 years
• Living on daily wage
• Less than primary educated members
• Members only with part time employment

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Why to Estimate Poverty

• Poverty estimates are vital input to design, monitor and
implement appropriate anti-poverty policies.
• Analysis of poverty profiles by regions, socio-economic groups
• Determinants - factors affecting poverty
• Relative effects of factors affecting poverty
• Allocation of resources to different regions and to various
poverty reduction programs
• Precise estimates of poverty neither easy nor universally
acceptable. Yet, can act as a broad and reasonably policy
guide.

• Poverty is multidimensional
• Deprivation in income, illiteracy, malnutrition, mortality,
morbidity, access to water and sanitation, vulnerability to
economic shocks.
• Income deprivation is linked in many cases to other forms of
deprivation, but do not always move together with others.

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Measurement of Poverty
(Percentage of Poor)

Two basic ingredients in measuring poverty:

(1)Poverty Line: definition of threshold income or consumption
level
(2)Data on size distribution of income or consumption (collected
by a sample survey representative of the population)

Poverty Line
• Absolute PL refers to a threshold income (consumption) level
defined in absolute terms. Persons below a pre-defined
threshold income are called poor.

• Relative PL is defined in relative terms with reference to level

of living of another person; or, in relation to an income
distribution parameter.

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Indian Poverty Line

• A minimum level of living necessary for physical and social
development of a person.
• Estimated as: total consumption expenditure level that meets
energy (calorie) need of an average person.
• PL comprises of both food and non-food components of
consumption.
• Considers non-food expenditure actually incurred
corresponding to this total expenditure.
• Difficult to consider minimum non-food needs entirely on an
objective basis

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Magnitude of Poverty in India

• Originally estimated for 1973-74: Rs 49 and 56 for rural and
urban areas respectively.
• Updated using an appropriate price index.
• Recent Poverty line: In urban areas it is 1,286 Indian rupees,
and in rural areas it is 1059.42 Indian Rupees per month
• 28.3% Rural 25.7% Urban 27.5% Total in 2004-05
• 25.7 % Rural, 13.7 % Urban and 21.92 % Total in 2011-12
• 29.5 in 2011-12 according to Rangarajan Panel
• The most recent conventional estimate says it is 19%
• World Bank one third of India live bellow subsistence level
(1.90 USD a day)

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Share of households by gross annual income across India in financial year 2021
Households by annual income India FY 2021

60%

52%
50%

40%
Share of housholds

30%
30%

20%
15%

10%

3%

0%
Rich (over 3 million INR) Middle class (500,000 - 3 million INR) Aspirers (125,000 - 500,000 INR) Destitutes (less than 125,000 INR)

Note(s): India; FY 2021

Further information regarding this statistic can be found on page 8.
2 Source(s): PRICE; Times of India; ID 482584

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Poverty in USA

37.2 million out of 332 million are poor in 2020

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• Incidence of poverty affected by two factors:

• (1)Growth in average income
• (2)Distribution.
• Poverty reduction is faster when average income rises and
inequality falls.
• Fluctuations in poverty incidence till early 1970s primarily
due to slow per capita income growth.
• Incidence of poverty started to fall after mid-1970s when
there was marked acceleration in per capita GDP growth
rate to above 3 per cent, but inequality is also growing.

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Income
inequality in
India is
growing

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Causes of Poverty

Visual Aid
1. Ardhasatya 2: https://www.youtube.com/watch?v=SJHsuLufRs0
2. Ardhasatya 1: https://www.youtube.com/watch?v=WvRcgke_inY
3. Ardhasatya 3: https://www.youtube.com/watch?v=q0Z4GjEGr0k
4. NDTV Special Reports on Untouchability
5. Satyameva Jayate Dr. Kaushal

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David Elesh
• Individual
• Max Weber’s Protestant ethics
• Success through individual hard work, virtue and honest work
• Spencer’s struggle for existence and Survival of the fittest
• Culture or subculture of Poverty by Oscar Lewis
• Life-style or way of life transmitted from generation to
generation is the cause of poverty
• Social Structure
• Miserable and unjust social conditions
• Change in socio-economic structure is not brought about
because of vested interests
• Herbert Gans’ three functional gain
• Economic, Social and Political

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Ram Ahuja
• Economic Causes
• Inadequate development
• 1901-1946 growth rate 1.2% for National Income, 0.3 % for
agricultural production & 2% for industrial production
• 1951-1997 growth rate was nearly 3.5 %
• After 2005 there is a steady increase but there is also
increasing inequality
• In spit of having planning commission (Set up in March 1950)
and national development Council (Set up in 1952), the plans
does not seem to be effective
• Inflationary pressures
• In 1991 inflation was at the peak and gradually came down but
not sufficiently
• Lack of capital
• Growth in export of major products such as gems, jewellery,
leather products, tea, and carpets is not substantial
• Human capital deficiencies
• Lack skills and freedom
• High rate of unemployment

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India’s
GDP
Growth
from
1960 to
2023

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Ram Ahuja
• Demographic Causes
• Population growth
• Increased family size
• More number of children and old people
• Morbidity
• http://www.youtube.com/watch?v=UF7oU_YSbBQ
• Level of education and training

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Ram Ahuja
• Social Causes
• Colonial legacy
• Casteism, regional imbalance, prejudices,
corruption,
• Ndtv classics : The untouchables;
• http://www.ndtv.com/video/player/special-report/special-
report-the-untouchables-aired-september-2006/291132
• Threat of war and consequent high expenditure in
defense
• 21.1 % in 1988-89
• 13 % in 1994-95
• 1.9% in 2024 (There is a demand to make it 3% in 2025)

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Poor Economics
by

Trap or No-Trap Abhijit Banerjee

Esther Duflo

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Experiment on Students
• Students donate more for a specific case of poor girl suffering
than to eradicate poverty in many countries when given a
general description
• Impact of Magnitude of Problem

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Jeffrey Sachs “The End of Poverty”

• Poor countries are poor because they are infertile, land locked, malaria
infected etc.
• To be free from poverty they need some initial investment which they
can not do because they are poor which is called “Poverty trap”
• The poor are poor because they are poor
• So foreign grant assistance is needed to kick start a virtuous cycle of
helping them in investment and increasing the production
• If developed countries would have committed 195 billion USD per annum,
within 2005-2025 poverty could have been entirely eliminated

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Easterly’s “Dead Aid”

• Aid does more bad than good in form of corruption, creates a
self-perpetuating lobby for foreign assistance, prevents people
from searching for their own solutions
• No such things like poverty trap
• When market is free and incentives are right, people can find
their ways to solve their problems

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The case of Kennedy: The young

farmer
• Sach’s argument when Kennedy was given a free provision of fertilizers
his yield increased by 10 fold by which he will be able sustain him
through out his life
• He was in Poverty trap and that free gift of fertilizer freed him from the
poverty trap
• Singer would say if use of fertilizer is so beneficial why could not
Kennedy buy a little amount and apply in the best part of the land and
then with increased income buy more fertilizer and apply it in other
parts so that to increase his yield gradually and become reach
• The problem may be small quantity of fertilizer is not available in
market or may be anything else
• So most important here is to understand why was he not able to do that

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Case of Rwanda
• Rwanda after getting external financial aid could come out of poverty
trap and gradually requested the funding countries not to provide
further aids
• Easterly: In general Countries getting aid are doing badly in terms of
economic growth in comparison to the countries not receiving aid

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Debate
• Poverty trap Vs. No Poverty Traps
• What should be done?
• Big generalized answers vs. Small answers
• Experiments in ground level
• In 2003 Poverty action lab to encourage scholars to experiment
on poverty

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The debate
• More important than the question whether aid is good or bad
are the questions
• Not from where the money comes but where it goes
• Choosing the right kind of project to fund- food, health, pension for
elderly or sanitation
• Then figuring how best to run it
• It needs systematic study of society in question and figuring out
which dimension exactly has to be targeted (For example:
Morbidity or Nutrition)

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Government approaches
• Holistic Approaches
• Meant for the all the poor
• Community Development Programme
• Panchayati Raj
• Co-operative movement
• Adhocist approaches
• Meant for particular sections and for a period of time
• All government programmes

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Group Approach
• Self-help Group approach
• Combination of Top-down and Bottom-up approach
• Based on co-operative principles
• Democratic management
• Credit plus approach
• Other MF approaches
• Grameen Bank Groups (GBG)
• Microfinance Institutions/Organizations (MFI/MFO)

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Multidimensional
Poverty Index

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Multi-dimensional Poverty Index

• The Multidimensional Poverty Index (MPI) was developed in 2010 by
Oxford Poverty & Human Development Initiative and the United Nations
Development Programme and uses different factors to determine poverty
beyond income-based lists
• Dimensions and Indicators
• Health
• Child Mortality
• Nutrition
• Education
• Years of school
• Children enrolled
• Living Standards
• Cooking fuel
• Toilet
• Water
• Electricity
• Floor
• Assets

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MPI
• Computation of the index
• Formula
• The MPI is calculated as follows:
• MPI= H×A
• H: Percentage of people who are MPI poor (incidence of poverty)
• A: Average intensity of MPI poverty across the poor (%)

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Sl. No. of Household → 1 2 3 4 5

Size of the Household → 5 7 4 2 6
Dimensions↓ Indicators↓
Education No one has Completed five years education 0 0 0 1 0

At least one school-age child not enrolled in school up 0 0 0 1 1

to 8th
Health At least one member is malnourished 1 0 0 0 1

One or more children have died 0 0 0 0 1

Living Standard No electricity 1 0 0 0 1

No access to clean drinking water 0 1 0 0 0

No access to adequate sanitation 0 0 1 1 1

House has dirt floor 0 0 0 1 0

Household uses dung, firewood or charcoal 1 0 0 1 1

Household assets 1 1 1 1 1
Deprivation
Scores
Censured
Deprivation
Scores

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Computation of MPI
• H= Q/N
• A= Sum of weighted Censored deprivation scores/Q

• Q= Number of people who are having more than equal to 33 %

of deprivation
• N= Total number of people

• MPI INDIA 2021

• https://www.niti.gov.in/sites/default/files/2021-
11/National_MPI_India-11242021.pdf

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Indian
Formula to
calculate MPI

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MPI in India

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