NOTES

ECONOMICS
CHAPTER 3: POVERTY AS CHALLENGE

CONTENT
• Overview
• General Causes of Poverty
• Poverty as seen by social scientists
• Poverty Line
• Poverty Estimates
• Vulnerable Groups
• Inter-State Disparities
• Global Poverty Scenario
• Causes of Poverty in India
• Anti-Poverty Measures
• The Challenges Ahead
OVERVIEW:

This chapter deals with one of the most difficult challenges faced by independent India—poverty. After
discussing this multi-dimensional problem through examples, the chapter discusses the way poverty is
seen in social sciences. Poverty trends in India and the world are illustrated through the concept of the
poverty line. Causes of poverty as well as anti-poverty measures taken by the government are also
discussed. The chapter ends with broadening the official concept of poverty into human poverty.
Helplessness

Illiteracy
Landlessness

Poor health / Malnutrition GENERAL CAUSES Unemployment

OF POVERTY
Child labour Size of families

Poverty seen by
social scientists Economic indicator→ Level of income and consumption
Social indicators like→ illiteracy level, lack of general resistance
due to malnutrition, lack of access to healthcare, lack of job
opportunities, lack of access to safe drinking water, sanitation
etc.
They also make analysis of poverty based on Social exclusion
and Vulnerability
Social Exclusion:
Poverty is seen in terms of poor
Vulnerability to poverty is a measure, which describes the
having to live only in a poor greater probability of certain communities (say, members of
surrounding and excluded from a backward caste) or individuals (such as a widow or a
enjoying social equality of better-off physically handicapped person) of becoming, or remaining,
people. Social exclusion is both a poor in the coming years.
cause as well as a consequence of
poverty.
Vulnerability→ It describes the greater probability of above mentioned people being more
adversely affected than other people when bad time comes for everybody, whether a flood or an
earthquake or simply a fall in the availability of jobs

Vulnerability is determined by the options available to different communities for finding an

alternative living in terms of assets, education, health and job opportunities. Further, it is analysed
on the basis of the greater risks these groups face at the time of natural disasters (earthquakes,
tsunami), terrorism etc. Additional analysis is made of their social and economic ability to handle
these risks.

Poverty Line

A common method used to measure poverty is based on the income or consumption levels. A person
is considered poor if his or her income or consumption level falls below a given “minimum level”
necessary to fulfill basic needs.

Q. Why do different countries use different poverty lines?

Things which are necessary to satisfy basic needs are different at different times and in
different countries. Therefore, poverty line may vary with time and place. Each country uses an
imaginary line that is considered appropriate for its existing level of development and its accepted
minimum social norms. For example, a person not having a car in the United States may be
considered poor. In India, owning of a car is still considered a luxury.

Determining the poverty line in India→

➢ A minimum level of food requirement, clothing,
footwear, fuel and light, educational and medical requirement etc. are
determined for subsistence. These physical quantities are multiplied
by their prices in rupees.
➢ The present formula for food requirement while estimating the
poverty line is based on the desired calorie requirement. (Food items
such as cereals, pulses, vegetable, milk, oil, sugar etc. together provide
these needed calories)
➢ The accepted average calorie requirement in India is 2400 calories
per person per day in rural areas and 2100 calories per person per
day in urban areas.
➢ On the basis of these calculations, for the year 2011-12, the poverty
line for a person was fixed at Rs 816 per month for the rural areas
and Rs 1000 for the urban areas.
Q. Why the poverty line for a person is fixed at Rs 1000 for the urban areas.
Despite less calorie requirement, the higher amount for urban areas has been fixed because of high prices
of many essential products. In this way in the year 2011-12, a family of five members living in rural areas
and earning less than about Rs 4,080 per month will be below the poverty line. A similar family in the
urban areas would need a minimum of Rs 5,000 per month to meet their basic requirements.
 The poverty line is estimated periodically (normally every five years) by conducting sample surveys. These
surveys are carried out by the National Sample Survey Organisation (NSSO).

However, for making comparisons between developing countries, many international organisations like
the World Bank use a uniform standard for the poverty line: minimum availability of the equivalent of US
$1.90 per person per day.

POVERTY ESTIMATE

• It is observed that there is substantial decline in poverty ratios in India from about 45 per cent
in 1993-94 to 37.2 per cent in 2004-05.
• The proportion of people below poverty line further came down to about 21.9 per cent in 2011-
12. If the trend continues, people below poverty line may come down to less than 20 per cent in
the next few years.
• Although the percentage of people living under poverty declined in the earlier two decades
(1973–1993), 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.

Vulnerable Groups:
• Social groups which are most vulnerable to poverty are scheduled caste and scheduled tribe
households.
• Among the economic groups, the most vulnerable groups are the rural agricultural labour
households and the urban casual labour households.
• Women, elderly people and female infants are systematically denied equal access to
resources available to the family. Therefore women, children (especially the girl child) and
old people are poorest of the poor.

CAUSES OF POVERTY IN INDIA:

➢ Low level of economic development under the British colonial administration. This low
rate of growth persisted until the nineteen eighties.
➢ Low growth rate of incomes. This was accompanied by a high growth rate of
population. The failure at both the fronts: promotion of economic growth and
population control perpetuated the cycle of poverty.
➢ Limited affect of the Green Revolution and incapability of industries to absorb all job
seekers.
➢ Huge income inequalities due to unequal distribution of land and other resources.
 ➢ Many of the major policy have not been implemented properly and effectively by most
of the state governments.
➢ Lack of land resources has been one of the major causes of poverty in India.
➢ Many other socio-cultural and economic factors like- marriages, rituals and religious
functions etc, also are responsible for poverty.

Q. With the help of an example explain how high level of indebtedness is one of a major cause of
poverty in India?
In order to fulfill social obligations and observe religious ceremonies, people in India, including
the very poor, spend a lot of money. Small farmers need money to buy agricultural inputs like
seeds, fertilizer, pesticides etc. Since poor people hardly have any savings, they borrow. Unable
to repay because of poverty, they become victims of indebtedness. So the high level of
indebtedness is both the cause and effect of poverty.

Q. With the help of an example explain how the rural phenomenon becomes the feature of the
urban sector? (For the answer refer to page no. 38 of NCERT textbook- column-1, para-2)

ANTI- POVERTY MEASURES

Promotion of economic Targeted anti-poverty

growth programmes

Explain how is promotion of economic growth linked to the poverty reduction?

1. Since the eighties, India’s economic growth has been one of the fastest in the world. The
growth rate jumped from the average of about 3.5 per cent a year in the 1970s to about 6
per cent during the 1980s and 1990s.
2. The higher growth rates have helped significantly in the reduction of poverty.

i. Economic growth widens opportunities and provides the resources

needed to invest in human development.
ii. This also encourages people to send their children, including the girl
child, to schools in the hope of getting better economic returns from
investing in education.
Targeted anti-poverty programmes.

1. Mahatma Gandhi National Rural Employment Guarantee Act, 2005

Features:
➢ Aims to provide 100 days of wage employment to every household to ensure livelihood
security in rural areas.
➢ It also aimed at sustainable development to address the cause of draught, deforestration
and soil erosion.
➢ One-third of the proposed jobs have been reserved for women. The scheme provided
employment to 220 crores person days of employment to 4.78 crore households.
➢ The share of SC, ST, Women person days in the scheme are 23 per cent, 17 per cent and 53
per cent respectively. The average wage has increased from 65 in 2006-07 to 132 in 2013-14.

2. Prime Minister Rozgar Yozana (PMRY)

Features:
➢ This scheme was started in 1993.
➢ The aim of the programme is to create self-employment opportunities for educated
unemployed youth in rural areas and small towns.
➢ They are helped in setting up small business and industries

3. Rural Employment Generation Programme (REGP)

Features:
➢ This scheme was launched in 1995.
➢ The aim of the programme is to create self employment opportunities in rural areas and
small towns.
➢ A target for creating 25 lakh new jobs has been set for the programme under the Tenth Five
Year plan.

4. Swarnajayanti Gram Swarozgar Yojana (SGSY)

Features:
➢ It was launched in 1999.
➢ The programme aims at bringing the assisted poor families above the poverty line by
organising them into self help groups through a mix of bank credit and government
subsidy.

5. Pradhan Mantri Gramodaya Yozana (PMGY)

Features:
➢ It was launched in 200.
➢ Additional central assistance is given to states for basic services such as primary health,
primary education, rural shelter, rural drinking water and rural electrification.
Q. Despite the progress, poverty reduction remains India’s most compelling challenge. Comment.

o Wide disparities in poverty are visible between rural and urban areas and among
different states.
o Certain social and economic groups are more vulnerable to poverty
o The official definition of poverty, however, captures only a limited part of what
poverty really means to people. It is about a “minimum” subsistence level of living
rather than a “reasonable” level of living.

Q. Define Human Poverty.

o Human poverty is a concept that goes beyond the limited view of poverty as lack of
income.
o
It refers to the denial of political, social and economic opportunities to an individual
to maintain a ‘reasonable’ standard of living.
o
Illiteracy, lack of job opportunities, lack of access to proper healthcare and
sanitation, caste and gender discrimination, etc are all components of human
poverty.

Inter- State Disparities

• Poverty in India is also seen with another angle.

• The proportion of poor in India is not same in every state.
• The success rate of reducing poverty varies from state to state.

(The Head Count Ratio (HCR) is the proportion of a population that exists, or lives, below the
poverty line. When the number of poor is estimated as the proportion of people below the
poverty line, it is known as 'head count ratio')

The all India Head Count Ratio (HCR) was 21.9 per cent in 2011-12

States that continue to remain poor

1 Madhya Pradesh (Rural and Urban poverty both)

2 Uttar Pardesh (Rural and Urban poverty both)
3 Bihar (Poorest State with poverty ratio 33.7% &Rural and
Urban poverty both)
4 Odisha (Poorest State with poverty ratio 32.6 % & Rural and
Urban poverty both)
5 Assam (Rural Poverty)
States which have shown decline in poverty
1- Kerala …………………… Has focused more on human resource development.
2- Maharashtra ……………. Help of cooperative societies.
3- Andhra Pradesh…………. Distribution of food grains ( PDS)
4- Tamil Nadu ……………… Distribution of food grains (PDS)
5- Gujarat ………………….. Due to FDI and promotion of small scale industry.
6- West Bengal ………………… land reform measures in reducing poverty.
7- Punjab and Haryana ……….. With the help of high agricultural growth rates.

Vulnerable Groups

1. Social groups -→ Scheduled Caste and Scheduled Tribe households.

2. Economic groups→ The rural agricultural labour households and the urban casual labour
households.
3. Poorest of poor→ Women, children (especially girl child) and old people.
GLOBAL POVERTY SCENARIO:

The proportion of people in different countries living in extreme economic poverty—

defined by the World Bank as living on less than $1.90 per day—has fallen from 36 per
cent in 1990 to 10 per cent in 2015.

1. Poverty declined substantially in China and Southeast Asian countries as a result

of rapid economic growth and massive investments in human resource development.
Number of poor in China has come down from 88.3 per cent in 1981 to 14.7 per cent
in 2008 to 0.7 per cent in 2015.

2. In the countries of South Asia (India, Pakistan, Sri Lanka, Nepal, Bangladesh,
Bhutan) the decline has also been rapid 34 per cent in 2005 to 16.2 per cent in 2013.
With decline in the
percentage of the poor, the number of poor has also declined significantly from
510.4 million in 2005 to 274.5 million in 2013.
3. In Sub-Saharan Africa, poverty in fact declined from 51 per cent in 2005 to 41 per
cent in 2015 (see graph 3.3). In Latin America, the ratio of poverty has also declined
from 10 per cent in 2005 to 4 per cent in 2015.

4. Poverty has also resurfaced in some of the former socialist countries like Russia,
where officially it was non-existent earlier.

5. The proportion of people living under poverty in different countries as defined by

the international poverty line (means population below $1.90 a day). The new
sustainable development goals of the United Nations (UN) propose ending poverty of
all types by 2030.

………x……X……x………