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Add : D-108, Sec-2, Noida (U.P.), Pin - 201 301 Email id : [email protected] Call : 09582948810, 09953007628, 0120-2440265 POVERTY AND ISSUES POVERTY AND ISSUES POVERTY AND ISSUES POVERTY AND ISSUES POVERTY AND ISSUES RELATED TO IT RELATED TO IT RELATED TO IT RELATED TO IT RELATED TO IT

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Page 1: Poverty and Issues Related

Add : D-108, Sec-2, Noida (U.P.), Pin - 201 301Email id : [email protected]

Call : 09582948810, 09953007628, 0120-2440265

POVERTY AND ISSUESPOVERTY AND ISSUESPOVERTY AND ISSUESPOVERTY AND ISSUESPOVERTY AND ISSUESRELATED TO ITRELATED TO ITRELATED TO ITRELATED TO ITRELATED TO IT

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POVERTY AND ISSUES

RELATED TO IT

CHRONICLEIAS ACADEMYA CIVIL SERVICES CHRONICLE INITIATIVE

The ultimate objective of developmentplanning is human development or to increasesocial welfare and well-being of the people.Increased social welfare of the people requires amore equitable distribution of developmentbenefits along with better living environment.Development process therefore needs tocontinuously strive for broad-based improvementin the standard of living and quality of life of thepeople through an inclusive development strategythat focuses on both income and non incomedimensions. The challenge is to formulateinclusive plans to bridge regional, social andeconomic disparities. Poverty and unemploymentare the major hurdles in the goal of inclusivedevelopment.

Poverty is a social phenomenon wherein asection of society is unable to fulfil even its basicnecessities of life. The UN Human Rights Councilhas defined poverty as “a human conditioncharacterized by the sustained or chronicdeprivation of the resources, capabilities, choices,security and power necessary for the enjoymentof an adequate standard of living and other civil,cultural, economic, political and social rights".

Types of Poverty

The poverty has two aspects: (1) Absolutepoverty (2) Relative poverty.

1. Absolute Poverty: It is a situation in whichthe consumption or income level of people isless than some minimum level necessary tomeet basic needs as per the nationalstandards. It is expressed in terms of apoverty line.

2. Relative Poverty: It is expressed in the formof comparisons of the levels of income,nutrition or consumption expenditure of thepoor strata vis-à-vis rich strata of the society.It shows the extent of inequality.

Dimensions of Poverty

Although household expenditure levelsremain the main measure of living standard by

which incidence of poverty is measured, and theHuman Consumption Rate has become the mainindicator of poverty.

But the UN Human Development Index (HDI)captures the multidimensional nature ofdeprivation in living standards. Income shouldbe regarded as a means to improve humanwelfare, not as an end in itself. Further Humanand gender development indicators have beenused successfully for advocacy, for ranking ofgeographical spaces and to captureimprovements in human well-being more reliablythan per capita income. The HDI is a simpleaverage of three dimension indices, whichmeasure average achievements in a country withregard to ‘a long and healthy life’, ‘knowledge’and ‘a decent standard of living’.

Related to this only the Ministry of Womenand Child Development uses the infant mortalityrate (IMR) and life expectancy at age 1 toestimate a long and healthy life; the 7+ literacyrate and mean years of education for the 15+age group to estimate knowledge; and estimatedearned income per capita per year to capture adecent standard of living.

Alkire and Santos in 2010 presented theMultidimensional Poverty Index (MPI), whichreflects the deprivations that a poor person facessimultaneously with respect to education, healthand living standards. This reflects the same threedimensions of welfare as the HDI but theindicators are different in each case and arelinked to the MDGs. The components of MPI are:

1. Education (each indicator is weightedequally at 1/6)

• Years of Schooling: deprived if no householdmember has completed five years of schooling

• Child Enrolment: deprived if any school-aged child is not attending school in years 1to 8

2. Health (each indicator is weighted equallyat 1/6)

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• Child Mortality: deprived if any child hasdied in the family.

• Nutrition: deprived if any adult or child forwhom there is nutritional information, ismalnourished.

3. Standard of Living (each indicator isweighted equally at 1/18).

• Electricity: deprived if the household has noelectricity.

• Drinking water: deprived if the householddoes not have access to clean drinking wateror clean water is more than 30 minutes walkfrom home.

• Sanitation: deprived if they do not have animproved toilet or if their toilet is shared.

• Flooring: deprived if the household has dirt,sand or dung floor.

• Cooking Fuel: deprived if they cook withwood, charcoal or dung.

• Assets: deprived if the household does notown more than one of: radio, TV, telephone,bike, or motorbike, and do not own a car ortractor.

Hence, ‘poverty’ is determined with regardto not only income or expenditure but also accessto a number of other necessities. Based on thismeasure, 55% of India’s population in 2005 wasclassified as poor.

How Poverty Line is Estimated in India?

The history of counting the poor in India canbe dated back to the 19th century. The earliesteffort to estimate the poor was DadabhaiNaoroji’s “Poverty and Un-British Rule in India”in which he estimated a subsistence-based povertyline at 1867-68 prices. Using the diet prescribedto “supply the necessary ingredients for theemigrant coolies during their voyage living in astate of quietude”, which includes “rice or flour,dhal, mutton, vegetables, ghee, vegetable oil andsalt”, he came up with a subsistence cost basedpoverty line, ranging from Rs. 16 to Rs. 35 percapita per year in various regions of India.Whereas after independence the PlanningCommission has been estimating the number ofpeople below the poverty line (BPL) at both thestate and national level based on consumerexpenditure information collected as part of theNational Sample Survey Organization (NSSO)since the Sixth Five Year Plan.

The recommendations of different committeesfor estimation of poverty:

• Lakdawala Committee

The Lakdawala Committee defined thepoverty line based on per capita consumptionexpenditure as the criterion to determine thepersons living below poverty line. The per capitaconsumption norm was fixed at Rs.49.09 permonth in the rural areas and Rs.56.64 per monthin the urban areas at 1973-74 prices at nationallevel, corresponding to a basket of goods andservices anchored in a norm of per capita dailycalorie intake of 2400 kcal in the rural areas and2100 kcal in the urban areas.

• Tendulkar Committee Report to Review theMethodology for Estimation of Poverty

The Planning Commission constituted anExpert Group in December 2005 under theChairmanship of Professor Suresh D. Tendulkarto review the methodology for estimation ofpoverty. The Expert Group submitted its reportin December 2009. While acknowledging themultidimensional nature of poverty, the ExpertGroup recommended moving away fromanchoring poverty lines to the calorie - intakenorm to adopting MRP based estimates ofconsumption expenditure as the basis for futurepoverty lines and MRP equivalent of the urbanpoverty line basket (PLB) corresponding to25.7per cent urban headcount ratio as the newreference PLB for rural areas. On the basis of theabove methodology, the all-India rural povertyheadcount ratio for 2004-05 was estimated at41.8 per cent, urban at 25.7 per cent, and all-India at 37.2 per cent.

• Saxena Committee Report to Review theMethodology for Conducting BPL Censusin Rural Areas

An Expert Group headed by Dr N.C. Saxenawas constituted by the Ministry of RuralDevelopment to recommend a suitablemethodology for identification of BPL families inrural areas. The Expert Group submitted its reportin August 2009 and recommended doing awaywith score-based ranking of rural householdsfollowed for the BPL census 2002. The Committeerecommended automatic exclusion of someprivileged sections and automatic inclusion ofcertain deprived and vulnerable sections ofsociety, and a survey for the remainingpopulation to rank them on a scale of 10.

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Automatic Exclusion

Households that fulfil any of the followingconditions will not be surveyed for BPL census:

1. Families who own double the land of thedistrict average of agricultural land peragricultural household if partially or whollyirrigated (three times if completelyunirrigated).

2. Families that have three or four wheeledmotorized vehicles, such as, jeeps and SUVs.

3. Families that have at least one mechanizedfarm equipment, such as, tractors, powertillers, threshers, and harvesters.

4. Families that have any person who is drawinga salary of over Rs.10,000 per month in anon-government/ private organization or isemployed in government on a regular basiswith pensionary or equivalent benefits.

5. Income tax payers.

Automatic Inclusion

The following would be compulsorily includedin the BPL list:

1. Designated primitive tribal groups.2. Designated most discriminated against SC

groups, called Maha Dalit groups.3. Single women-headed households.4. Households with a disabled person as

breadwinner.5. Households headed by a minor.6. Destitute households which are dependent

predominantly on alms for survival.7. Homeless households.8. Households that have a bonded labourer as

member.

The poor are identified using a yardstick ofexpenditure needed to fulfil the basic needs. Thusthe existing poverty line is defined in terms ofPer Capita Total Consumer Expenditure (PCTCE)at 73-74 prices, adjusted over time for changesin prices keeping the original Poverty Line Basketconstant. Poverty Line Basket (PLB) is a sociallyacceptable minimal basket of inter-dependentbasic human needs that are satisfied through themarket purchases. The all India rural and urbanPLB are derived separately for urban and ruralareas based on per capita calorie norms of 2400(rural) & 2100 (urban). It is specified in terms ofrequired per capita total household consumerexpenditure to achieve this level of calorie intake.

The amount required for this has to bedetermined and those who earn less than thislevel are considered to be living below povertyline. The first stage to identify the poor is to fixthe poverty line. This is an imaginary line.

The usual procedure in India is to decide thepoverty line keeping that as the yardstick. Onthe basis of this, in 2004-2005, it was decidedthat a person earning less than Rs. 356.30 inrural areas and Rs.538.60 in urban areas, in amonth, falls below the poverty line. Poverty ratiocan be found out by dividing the number ofpoor by the total population. Poverty ratioshows the percentage of people living below thepoverty line.

Recent data shows that the Poverty ratio inthe country has declined to 21.9 per cent in 2011-12 from 37.2 per cent in 2004-05 on account ofincrease in per capita consumption. Accordingto the Commission, in 2011-12 for rural areas,the national poverty line by using the Tendulkarmethodology is estimated at Rs.816 per capitaper month in villages and Rs.1,000 per capitaper month in cities. This would mean that thepersons whose consumption of goods and servicesexceed Rs.33.33 in cities and Rs.27.20 per capitaper day in villages are not poor. The Commissionsaid that for a family of five, the all India povertyline in terms of consumption expenditure wouldamount of Rs.4,080 per month in rural areasand Rs.5,000 per month in urban areas. Thepoverty line however will vary from state to state.Thus the percentage of persons below povertyline in 2011-12 has been estimated at 25.7 percent in rural areas, 13.7 per cent in urban areasand 21.9 per cent for the country as a whole.The percentage of persons below poverty line in2004-05 was 41.8 per cent in rural areas, 25.7per cent in cities and 37.2 per cent in the countryas a whole. In actual terms, there were 26.93crore people below poverty line in 2011-12 ascompared to 40.71 crore in 2004-05.

World Bank Approach for CalculatingPoverty

The World Bank uses the “money metric”approach, whereby it converts the “one dollarper day” international poverty line into localcurrencies using “purchasing power parity”conversion factors. It then uses nationalhousehold surveys to identify the number ofpersons whose local income is lower than the

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Ynational poverty lines. Both the dollar a day and$1.25 measures indicate that India has madesteady progress against poverty since the 1980s,with the poverty rate declining at a little underone percentage point per year. This means thatthe number of very poor people who lived belowa dollar a day in 2005 has come down from 296million in 1981 to 267 million in 2005. However,the number of poor people living under $1.25 aday has increased from 421 million in 1981 to456 million in 2005. This indicates that there area large number of people living just above thisline of deprivation (a dollar a day) and theirnumbers are not falling.

There have been many criticisms against theWorld Bank’s approach to measuring poverty.

Firstly, the Bank’s method is unreliablebecause its results are excessively dependent onthe chosen PPP base year. The Bank comparesthe consumption expenditure of a person in onecountry and year with that of another personfrom another country and year, by using nationalCPIs that deflate or inflate the two nationalcurrency amounts into “equivalent” amounts ofa common base year, and then using PPPs forthis base year to compare the resulting national-currency amounts. PPPs of different base yearsand the CPIs of different countries each weighprices of underlying commodities differently, asthey reflect distinct global and nationalconsumption patterns. As a result, comparisonsover space and time together are path dependent:if they are undertaken in different ways theymay lead to different results.

Secondly, consumption patterns vary fromcountry to country for reasons of tastes, as actualconsumption patterns are strongly influenced byprices and by the existing income distribution.

Thirdly, the Bank’s estimates of global povertyinvolve errors due to measurement problems

associated with the data used under the Bank’spreferred approach.

Causes of Poverty in India

All types of poverty and deprivation in Indiaare caused by the following factors.

a) Colonial Exploitation:

Colonial rule in India is the main reason ofpoverty and backwardness in India. The Mughalera ended about 1800. The Indian economy waspurposely and severely de-industrialized throughcolonial privatizations. British rule replaced thewasteful warlord aristocracy by a bureaucratic-military establishment. However, colonialexploitation caused backwardness in India. In1830, India accounted for 17.6 per cent of globalindustrial production against Britain's 9.5 percent, but, by 1900, India's share was down to1.7 per cent against Britain's 18.5 per cent. Thisview claims that British policies in India,exacerbated by the weather conditions led tomass famines, roughly 30 to 60 million deathsfrom starvation in the Indian colonies.Community grain banks were forcibly disabled,land was converted from food crops for localconsumption to cotton, opium, tea, and grainfor export, largely for animal feed.

b) Lack of Investment for the Poor:

There is lack of investment for thedevelopment of poorer section of the society. Overthe past 60 years, India decided to focus oncreating world class educational institutions forthe elite, whilst neglecting basic literacy for themajority. This has denied the illiterate population- 33 per cent of India - of even the possibility ofescaping poverty. There is no focus on creatingpermanent income-generating assets for the poor.Studies on China (2004) also indicated that sinceuniversal and free healthcare was discontinuedin 1981, approximately 45 million (5 per cent ofits 900 million rural population) took onhealthcare-related debts that they could not repayin their lifetimes. Since then, the government hasreintroduced universal health care for thepopulation. Given India's greater reliance onprivate healthcare spending, healthcare costs area significant contributor to poverty in India.

c) Social System in India:

The social system is another cause of povertyin India. The social subsystems are so stronglyinterlocked that the poor are incapable of

Poverty in India - Statistics

- 50% of Indians don’t have proper shelter;

- 70% don’t have access to decent toilets;

- 35% of households don’t have a nearbywater source;

- 85% of villages don’t have a secondaryschool;

- Over 40% of these same villages don’t haveproper roads connecting them.

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overcoming the obstacles. A disproportionallylarge number of poor people are lower casteHindus. According to S. M. Michael, Dalitsconstitute the bulk of poor and unemployed.Many see Hinduism and its structure, called thecaste system, as a system of exploitation of poor,low ranking groups by more prosperous, highranking groups. In many parts of India, land islargely held by high ranking property owners ofthe dominant castes that economically exploitlow ranking landless labourers and poor artisans,all the while degrading them with ritual emphasison their so-called, God-given inferior status.

d) Over-reliance on Agriculture:

In India there is high level of dependence onprimitive methods of agriculture. There is asurplus of labour in agriculture. Farmers are alarge vote bank and use their votes to resistreallocation of land for higher-income industrialprojects. While services and industry have grownat double digit figures, the agriculture growthrate has dropped from 4.8 per cent to 2 per cent.About 60 per cent of the population depends onagriculture, whereas the contribution ofagriculture to the GDP is about 18 per cent. Theagricultural sector has remained veryunproductive. There is no modernization ofagriculture despite some mechanization in someregions of India.

e) Heavy Population Pressures:

Although demographers generally agree thathigh population growth rate is a symptom ratherthan cause of poverty and add to poverty.Mahmood Mamdani aptly remarked "people arenot poor because they have large families. Quitecontrary, they have large families because theyare poor". However this is a general argument indeveloping countries that population growth isa major obstacle to development and cause ofpoverty.

f) High Unemployment:

There is high degree of underutilization ofresources. The whole country suffers from a highdegree of unemployment. India is marching withjobless economic growth. Employment is notgrowing, neither in the private sector, nor in thepublic sector. The IT sector has become elitist,which does not improve the poverty situation inthe country. Disguised unemployment andseasonal unemployment is very high in theagricultural sector of India. It is the main causeof rural poverty in India.

Issues Related to Poverty

1. Poverty and Health:

Approximately 1.2 billion people in the worldlive in extreme poverty (less than one dollar perday). Poverty creates ill-health because it forcespeople to live in environments that make themsick, without decent shelter, clean water oradequate sanitation. The poorest people in mostsocieties almost always experience highermorbidity levels, die younger (on average) andexperience higher levels of child and maternalmortality.

In health many dimensions are inter-dependent. Maternal malnutrition maycontribute to child malnutrition for example.When malnutrition affects a young girl’sdevelopment this may later lead to subsequentreproductive health problems which may lateraffect her own children. Thus, over timevulnerability is increased. This may beexperienced through reduced income andaccumulation, increased expenditures andindebtedness, reduced child’s education andincreased malnutrition, as well as other long termimpacts on social capital.

2. Poverty, Food Insecurity and Gender:

Poverty and food security are complex andmultidimensional in nature. Food security hasboth economic and physical dimensions; theformer referring to economic access and the latterto physical availability of food grains in sufficientquantities required for an active and healthy lifeand the official definition and measurement ofincome/consumption poverty in India isanchored in a physical norm for food insecurity.

Poverty leads to under nutrition and foodinsecurity by limiting poor people's access to food.About three-fourth of India's population livingin the rural sector is reeling under abject poverty,illiteracy, ill-health, unemployment, low qualityof life and so on. Whereas, food insecurity inturn cause poverty, vulnerability and livelihoodinsecurity.

The basic requirement for survival is sufficientnutrition which not only enables a person to livea healthy life but also enables him/her toparticipate actively in improving his economicand social well being. Chronic diseases due tomalnourishment put a heavy toll on creativeabilities of people. In particular, childhood

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malnutrition hampers proper growth of children,which finally becomes an impediment to theirphysical, intellectual and emotional development.

It is widely accepted that poverty is currentlythe principal root cause of food insecurity at thelevel of households. It is also clear that in severalsocieties, households are not homogenous entities,since within a household, women and girlchildren often tend to be relatively moreundernourished. Gender constitutes the mostprofound differentiating division. A genderedanalysis of poverty reveals not simply its unequalincidence but also that both cause and effect aredeeply gendered. Women face a greater risk ofpoverty than men. The gender disparity is mostvisible among female- headed households, notablylone mothers and single pensioners. Food securityat the level of each individual is hence important.Millennium Development Goals (MDG)recognizes that hunger and food insecurity arethe core afflictions of poor people, and specificallysets out to halve the proportion of extremely poorand hungry people in the world. Amartya Senadded a new dimension to food security andemphasised the “access” to food through whathe called ‘entitlements' – a combination of whatone can produce, exchange in the market alongwith state or other socially provided supplies.

Thus the 1995 World Food Summit declared,“Food security at the individual, household,regional, national and global levels exists whenall people, at all times, have physical andeconomic access to sufficient, safe and nutritiousfood to meet their dietary needs and foodpreferences for an active and healthy life”.

The declaration further recognizes that“poverty eradication is essential to improve accessto food”.

3. Feminisation of Poverty:

In agriculture women become heads of farmsor households due to male migration. Left-behindfemale farm managers are becoming increasinglyprevalent in many parts of the developing worldas labour mobility has increased dramatically,both nationally and internationally due tounequal urbanization and industrialization.Women farmers are poorer because they havesimilar economic burdens compared to men butless access to the productive resources (land,cattle, and labour). Female-headed householdshave lower incomes not because they have more

children or fewer adults but because female headearns less. The lower earning power of womenheads can be due to their lower education, andtheir restricted access to land and credit. Thisinability to acquire resources also results inwomen making inappropriate or inefficientchoices. They may face greater time and mobilityconstraints, which can result in an apparent“preference” for working fewer hours for pay,for “choosing” lower-paying jobs that arenevertheless more compatible with childcare etc.Women also face discrimination in getting accessto jobs or resources due to the existing gendernorms of the society. Female labour forceparticipation is highest among the pooresthouseholds in countries such as India, Pakistan,and Bangladesh, where social norms mainlyconstrain women to very insecure and poorlypaid work in the informal sector. India sufferssevere deprivations in education and health -especially in the Northern states, where caste,class, and gender inequities are particularlystrong. Human development cannot be achievedwithout taking the role of women into account.Poverty often hits women and women-headedhouseholds the hardest, and women have fewereconomic and political opportunities to improvetheir well-being and that of their families.

4. Poverty and Discrimination:

It has been observed that poor people arevulnerable to a number of discrimination.Vulnerability creates impediment in theimplementation of various developmentprogrammes. Some groups may be at risk ofbecoming poor because of inherent vulnerabilities(i.e., different types of discrimination based onclass, gender, caste, ethnicity, or factors such asdisability, region of residence and familyconfiguration). Furthermore, certain combinationsof vulnerability may be strongly correlated withpoverty, such as female-headed households orfamilies living in remote and isolated mountainousregions or some castes from specific occupationalbackground. Such correlations betweenvulnerabilities and poverty make it necessary topay special attention to these segments ofpopulation. Exclusion based on caste, whatevereconomic group a person belongs to, would implysocial exclusion. Because of a vast range ofdeprivations, certain castes have been restrictedto their traditional occupations or to other lowwage unskilled work. For policy makers, it is

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important to go beyond the narrow definition ofpoverty based on income indicators only and takenote of social exclusion too.

5. Poverty and Unemployment:

Unemployment leads to poverty and povertyin turn leads to unemployment. An unemployedperson has no means to earn money and cannotfulfil his own and his family’s basic needs. Heand his family cannot avail quality education,medical facilities and has no means to createincome-earning assets. Such circumstances oftencompel indebtedness. Consequently, anunemployed person exaggerates poverty for hisfamily due to indebtedness. This confirms thepositive relationship between unemployment andpoverty. If government wants to alleviate poverty,then it should aim at creating new employmentopportunities. As a result, more people will getemployed and perhaps their income will rise.This rise in income will improve their access toquality education, better healthcare and otherbasic amenities. Further, these newly employedpeople will experience appreciation in their livingstandards and can create income-earning assets.The combined result of all these factors leads toalleviation of poverty. Hence, there exists arelationship between unemployment and poverty.

6. Poverty and Globalization:

1991 was the year when India embracedglobalization and started, like many countries,its market liberalization coupled withprivatization and deregulation while ensuringmacroeconomic stability. Where China has beenone of the few countries that have successfullymanaged their transition to the global market,the picture is more mixed with India, with lotsof ups and downs. The Indian society is sodiverse that the rapid and unequal growth hasbrought overwhelming inequalities.

Globalization has helped raise the standardof living for many people worldwide. It has also,however, driven many deeper into poverty. Smallbusinesses and third world countries are notcapable of updating their technology as often astheir larger, wealthier counterparts. Unable tocompete with multinational firms and wealthynations, small businesses and third worldcountries are forced to do business locally, notgrowing and reaching their full potential.

The economic arguments in favour ofglobalization stress the positive relationships

between increasing international trade andinvestment flows and faster economic growth,higher living standards, accelerated innovation,diffusion of technological and management skills,and new economic opportunities.

But on the flip side globalization increasespoverty because, first, the benefits of globalizationare not equally distributed and tend to beconcentrated among a relatively small numberof countries, particularly the more advanced ones.The poorest countries such as the least developedcountries in Africa have not been able tosufficiently harvest the benefits of globalization.Second, most efforts have been placed infacilitating free trade flows, particularly inproducts which are of importance to thedeveloped countries, as part of the globalizationprocess. Other dimensions of globalization likelabour market standards, the environment,sustainable development and poverty alleviationhave received much less attention. Third,globalization has also led to an increasedvulnerability among many countries tointernational economic conditions

Linkage between Poverty and Development

Economic growth is the most powerfulinstrument for reducing poverty and improvingthe quality of life in developing countries. ThusPoverty is inter-related to problems ofunderdevelopment. In rural and urbancommunities, poverty can be very different. Inurban areas people often have access to healthand education but many of the problems causedby poverty are made worse by things likeovercrowding, unhygienic conditions, pollution,unsafe houses, etc. In rural areas there is oftenpoor access to education, health and many otherservices but people usually live in healthier andsafer environments.

Growth can generate virtuous circles ofprosperity and opportunity. Strong growth andemployment opportunities improve incentives forparents to invest in their children’s education bysending them to school. This may lead to theemergence of a strong and growing group ofentrepreneurs, which should generate pressurefor improved governance. Strong economicgrowth therefore advances human development,which, in turn, promotes economic growth. Atypical estimate from cross-country studies revealthat a 10 per cent increase in a country’s average

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income will reduce the poverty rate by between20 and 30 per cent.

Some examples:1. China alone has lifted over 450 million

people out of poverty since 1979. Evidenceshows that rapid economic growth between1985 and 2001 was crucial to this enormousreduction in poverty.

2. India has seen significant falls in povertysince the 1980s. This has been stronglyrelated to India’s impressive growth recordover this period.

3. Mozambique illustrates the rapid reductionin poverty associated with growth over ashorter period. Between 1996 and 2002, theeconomy grew by 62 per cent and theproportion of people living in povertydeclined from 69 per cent to 54 per cent.

But under different conditions, similar ratesof growth can have very different effects onpoverty, the employment prospects of the poorand broader indicators of human development.The extent to which growth reduces povertydepends on the degree to which the poorparticipate in the growth process and share inits proceeds. Thus, both the pace and pattern ofgrowth matters for reducing poverty.

A successful strategy of poverty reductionmust have at its core measures to promote rapidand sustained economic growth. The challengefor policy is to combine growth promoting policieswith policies that allow the poor to participatefully in the opportunities unleashed and socontribute to that growth. This includes policiesto make labour markets work better, removegender inequalities and increase financialinclusion.

Thus India’s most recent development planhas the main objective of raising economicgrowth and making growth more inclusive.

Sustainable development in the developingcountries should include the following:

� Increases in real income especially for the‘wretched of the earth’. This implies povertyalleviation;

� Improvements in health and nutritionalstatus especially children and young motherswho are vulnerable to most preventablediseases;

� Education achievement;

� Access to resources;

� A fairer equitable distribution of income. Thebasic salary of the least paid worker shouldbe adequate to maintain his nuclear family;

� Increases in basic freedoms and guaranteedsecurity of all citizens; respect and responsiblerelationship with ecosystem.

Poverty Alleviation Measures in India

Since Independence, the government isfollowing a three-pronged strategy for povertyeradication, which comprises:

a) Economic growth and overall development.

b) Human development with emphasis onhealth, education and minimum needs, inclu-ding protection of human rights and raisingthe social status of the weak and poor.

c) Directly-targeted programmes for povertyalleviation through employment generation,training and building up asset endowmentof the poor.

Economic growth enables expansion ofproductive employment and generation ofresources, which are vital to support any formof intervention for eradication of poverty. Since1991 India has undertaken trade reforms,financial sector reforms, and removal of controls,which primarily were introduced with theobjective of improving efficiency and productivityto accelerate growth. The ultimate objective ofsuch reforms was ensuring the expeditiouseradication of poverty. Adequate precautionswere taken to protect the poorer sections of thesociety against the short-term effects of thesechanges. This was done mainly throughincreased allocation of resources for programmesfor poor in the national plan and sharpening thefocus of such programmes on the poor. TheCentral support for human resource and socialdevelopment in the country has progressivelyincreased through the 1990s. The CentralGovernment’s expenditure (plan and non-plan)on education, health, family welfare, nutrition,sanitation, rural development, social welfare, etc.has increased tremendously.

Some programmes are discussed as follows:

1. MGNREGA

Mahatma Gandhi National RuralEmployment Guarantee Act (MGNREGA) waslaunched from Anantpur in Andhra Pradesh on

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February 2, 2006. The Act has been instrumentalin raising the productivity, increasing thepurchasing power, reducing distress migration,creating durable assets while ensuring liveli-hood opportunities for the needy and poor inrural India.

The Act is aimed at enhancing the livelihoodand security of people in rural areas byguaranteeing 100 days of wage-employment ina financial year to a rural household whose adultmembers volunteer to do unskilled manual work.These works include water conservation, droughtproofing, irrigation, land development,rejuvenation of traditional water bodies, floodcontrol and drainage work, rural connectivityand work on the land of SC/ST/BPL/IAYbeneficiaries/land reform beneficiaries/individual small and marginal farmers.

Provisions under MGNREGA:

� Adult members of a rural household, willingto do unskilled manual work, are requiredto make registration in writing or orally tothe local Gram Panchayat.

� The Gram Panchayat after due verificationwill issue a Job Card. The Job Card will bearthe photograph of all adult members of thehousehold willing to work under NREGAand is free of cost.

� The Job Card should be issued within 15days of application.

� A Job Card holder may submit a writtenapplication for employment to the GramPanchayat, stating the time and duration forwhich work is sought. The minimum daysof employment have to be at least fourteen.

� The Gram Panchayat will issue a datedreceipt of the written application foremployment, against which the guaranteeof providing employment within 15 daysoperates.

� Employment will be given within 15 days ofapplication for work, if it is not then dailyunemployment allowance as per the Act, hasto be paid, liability of payment ofunemployment allowance is of the States.

� Work should ordinarily be provided within5 km radius of the village. In case work isprovided beyond 5 km, extra wages of 10%are payable to meet additional transportationand living expenses.

� Wages are to be paid according to theMinimum Wages Act, 1948 for agriculturallabourers in the State, unless the Centrenotifies a wage rate which will not be lessthan 60 (US$1.10) per day. Equal wages willbe provided to both men and women.

� Wages are to be paid according to piece rateor daily rate. Disbursement of wages has tobe done on weekly basis and not beyond afortnight in any case.

� At least one-third beneficiaries shall bewomen who have registered and requestedwork under the scheme.

� Work site facilities such as crèche, drinkingwater, shade have to be provided.

� The shelf of project for a village will berecommended by the gram sabha andapproved by the zilla panchayat.

� At least 50% of works will be allotted toGram Panchayats for execution.

� Permissible works predominantly includewater and soil conservation, afforestationand land development works.

� A 60:40 wage and material ratio has to bemaintained. No contractors and machineryis allowed.

� The Central Govt. bears 100 per cent wagecost of unskilled, manual labour and 75 percent of the material cost, including the wagesof skilled and semi skilled workers.

� Social Audit has to be done by the GramSabha.

� Grievance redressal mechanisms have to beput in place for ensuring a responsiveimplementation process.

The MGNREGA achieves twin objectives ofrural development and employment. TheMGNREGA stipulates that works must betargeted towards a set of specific rural develop-ment activities such as: water conservation andharvesting, afforestation, rural connectivity, floodcontrol and protection like construction andrepair of embankments, etc. Digging of newtanks/ponds, percolation tanks and constructionof small check dams are also given importance.The workers are given work such as land leveling,tree plantation, etc.

Recent initiatives under the MGNREGA:

a) The basket of permissible activities has beenexpanded to make it more meaningful.

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b) Electronic fund management system (eFMS)in all states has been initiated in a phasedmanner to reduce delay in payment of wages.

c) Additional employment over and above 100days per household in notified drought-affected talukas/ blocks is now permissible.

d) Provision has been made for seeding inAadhaar into the MGNREGA Workersrecords to prevent leakage.

e) Convergence of the MGNREGA with theTotal Sanitation Campaign (TSC) has beenundertaken.

2. Swarna Jayanti Shahari Rozgar Yojana

With a view to provide gainful employmentto the urban unemployed and underemployedthrough encouraging the setting up of self-employment ventures or provision of wageemployment, a new urban poverty alleviationprogramme, namely, Swarna Jayanti ShahariRozgar Yojana (SJSRY) was launched by theGovernment of India on 01.12.1997.

This scheme subsumed the earlier three urbanpoverty alleviation programmes, namely UrbanBasic Services for the Poor (UBSP), NehruRozgarYojana (NRY) and Prime Minister’sIntegrated Urban Poverty EradicationProgramme (PMIUPEP).

An independent evaluation of SJSRY wascarried out by the Ministry of Housing & UrbanPoverty Alleviation in 2006 to assess the impactof the scheme in improving the conditions of theurban poor. Based on the study findings, lessonslearnt in implementation and feedback receivedfrom State Governments, Urban Local Bodies andother stakeholders, a revision of the Guidelinesof the SJSRY scheme has been made, with effectfrom the year 2009-2010.

The main objectives of the new revamped SJSRYare:

� Addressing urban poverty alleviationthrough gainful employment to the urbanunemployed or underemployed poor byencouraging them to set up self-employmentventures (individual or group), with supportfor their sustainability; or undertake wageemployment;

� Supporting skill development and trainingprogrammes to enable the urban poor haveaccess to employment opportunities openedup by the market or undertake selfemployment; and

� Empowering the community to tackle theissues of urban poverty through suitable selfmanaged community structures likeNeighbourhood Groups (NHGs), Neighbour-hood Committees (NHC), CommunityDevelopment Society (CDS), etc.

SJSRY have five major components, namely:

a) Urban Self Employment Programme (USEP)aims at providing gainful employment tourban youth.

b) Urban Women Self-help Programme (UWSP)aims at providing assistance by way ofsubsidy to urban poor women for setting upgainful group enterprises with SHG-Banklinkage.

c) Skill Training for Employment Promotionamongst Urban Poor (STEP-UP) focus onproviding assistance for skill formation/upgradation of the urban poor to enhancetheir capacity to undertake self-employmentas well as access better salaried employment.

d) Urban Wage Employment Programme(UWEP) aims at providing wage employmentto beneficiaries living below the poverty linewithin the jurisdiction of urban local bodiesby utilising their labour for construction ofsocially and economically useful publicassets.

e) Urban Community Development Network(UCDN) aims at promoting communityorganizations and structures such asNeighbourhood Groups (NHGs), Neighbour-hood Committees (NHCs), and CommunityDevelopment Societies (CDSs) to facilitatesustainable local development.

The following major changes have beenincluded under the revamped scheme:

a) For special category States (8 NER States and3 other hilly States i.e. Arunachal Pradesh,Assam, Manipur, Meghalaya, Mizoram,Nagaland, Sikkim, Tripura, Jammu &Kashmir, Himachal Pradesh andUttarakhand), the funding pattern for theScheme between Centre and the States, hasbeen revised from 75 :25 to 90:10.“

b) For the beneficiary under the Urban SelfEmployment Programme (USEP) componentof the Scheme, the education limit criteria of“not educated beyond 9th standard” hasbeen removed and now no minimum ormaximum educational qualification level has

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been prescribed for the purpose of eligibilityof assistance.“

c) For the self-employment (individualcategory), the project cost ceiling has beenenhanced to Rs. 2.00 Lakhs from the earlierRs. 50000/ - and the subsidy has also beenenhanced to 25% of the project cost (subjectto a maximum of Rs. 50000/-), from theearlier 15% of the project cost (subject to amaximum of Rs. 7500/-).“

d) For the group enterprises set up by urbanpoor women, the subsidy has been made as35% of the project cost or Rs. 300,000/- orRs. 60,000/- per member of the Group,whichever is less. The minimum numberrequired to form a women group has beenreduced from 10 to 5. The revolving fundentitlement per member has also beenenhanced from the existing Rs. 1000/- to Rs.2000/-.

e) Under the Urban Wage EmploymentProgramme (UWEP) component, which isapplicable to the towns having populationless than 5 Lakhs as per 1991 census, the60:40 Material labour ratio for the worksunder UWEP, flexibility of 10% (either side)is now accorded to the States/UTs.

f) The Skill Training of the Urban poorcomponent has been restructured and qualityskill training will be provided to the urbanpoor linking it with certification, impartedpreferably on Public-Private Partnership(PPP) mode, with the involvement of reputedinstitutions like IITs, NITs, Poly-techniques,ITIs, other reputed agencies, etc. The averageexpenditure ceiling per trainee has beenenhanced from Rs.2600/- to Rs.10000/.“

g) 3% of the total Scheme allocation will beretained at the Central level for special/innovative projects to be undertaken toimplement a time-bound targeting to bring aspecific number of BPL families above thepoverty line through self-employment or skilldevelopment.

Implementation & Monitoring

� At the National level the Ministry of Housing& Urban Poverty Alleviation shall be thenodal Ministry for implementation of SJSRY.

� At the Central level, a Steering Committeeheaded by Secretary (HUPA) and havingmembers from the States/UTs, Ministry of

Finance, RBI, and other stakeholders willmonitor the Scheme. This Committee will bemeeting at least once in every three months.

� At the State level also, a State LevelMonitoring Committee having members fromthe Banks, Micro Finance Institutions, CivilSociety, and other stakeholders will be setup to effectively monitor the Scheme. ThisCommittee will be meeting at least once inevery three months.

� At the Urban Local Body level an UrbanPoverty Alleviation & LivelihoodDevelopment Cell will coordinate andimplement the scheme with a suitablemonitoring system put in place.

3. Slum Development Programmes

According to the 2001 Census, there are 40.6million persons living in slums in 607 towns/cities, accounting for 22.8 per cent of thepopulation of these cities. Absence of masterplans, multiplicity of agencies working withoutcoordination, insufficient availability of land forhousing needs of the urban poor, failure toprovide facilities for street vendors and hawkers,are some of the reasons for the persistence ofurban slums.

Various Schemes: National SlumDevelopment Programme (NSDP), Night Shelters,Two Million Housing Scheme, Accelerated UrbanWater Supply Programme (AUWSP), and Low-Cost Sanitation — provide for a wide range ofservices to the urban poor, includingslumdwellers. They include identification of theurban poor, formation of community groups,involvement of NGOs, self-help/thrift and creditactivities, training for livelihood, credit andsubsidy for economic activities, housing andsanitation, environmental improvement,community assets, wage employment andconvergence of services.

Valmiki-Ambedkar Awas Yojana(VAMBAY) was introduced in 2001-02 to providea shelter or upgrading the existing shelter to BPLpeople in urban slums. Twenty per cent of thetotal allocation under VAMBAY is provided forsanitation and community toilets to be built forthe urban poor and slum dwellers

4. National Social Assistance Programme

The National Social Assistance Programme(NSAP) was launched as a Centrally sponsoredscheme (CSS) in 1995, with the aim of providing

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social assistance benefit to poor households inthe case of old age, death of primary breadwinnerand maternity. The programme supplements theefforts of the state governments with the objectiveof ensuring minimum national levels of well-beingand the Central assistance is an addition to thebenefit that the states are already providing onsocial protection schemes. NSAP has thefollowing components:

Indira Gandhi National Widow PensionScheme’ (IGNAPS): A pension of Rs. 300 permonth to be granted to widows aged 40–59 livingbelow poverty-line conditions. Pradhan of Grampanchayat shall review the list of widows andreport in case of any re-marriage

Indira Gandhi National Disability PensionScheme (IGNDPS): A pension of Rs. 300 permonth to be granted to physically/mentallyhandicapped individuals aged 18–59, living belowpoverty-line conditions. The central govt hasplanned to increase the amount from Rs.300 toRs.1000 and reduce the disability percentage from80% to 40%.

Indira Gandhi National Old Age PensionScheme (IGNOAPS): It provides for old agepension of Rs. 200/- per month to persons abovethe age of 60 years and for persons above theage of 80 years the amount of pension has beenraised to Rs. 500/- per month.

National Family Benefit Scheme: In case ofthe death of the "primary breadwinner" of ahousehold living below poverty line conditions,a lump sum grant of Rs. 20,000 (from fiscal 2012-13) is provided to the household. The primarybreadwinner as specified in the scheme, whethermale or female, had to be a member of thehousehold whose earning contributed substan-tially to the total household income. The deathof such a primary breadwinner occurring whilsthe or she was in the age group of 18 to 64 yearsi.e., more than 18 years of age and less than 65years of age, makes the family eligible to receivegrants under the scheme.'

Annapurna Scheme: The scheme providesfood security in the form of 10 kg of foodgrainsper month free of cost to destitute senior citizenswith little or no regular means of subsistencefrom his/ her own source of income or throughfinancial support from family members or othersources.

5. Indira Awaas Yojana

Housing is one of the components consideredto be vital for human survival and, therefore,essential for socio-economic development. As partof the efforts to meet the housing needs of therural poor, the scheme of Indira Awaas Yojana(IAY) is being implemented in the country.

According to salient features of Indira AwaasYojana (IAY) the funding of IAY is sharedbetween the Centre and States in the ratio of75:25. In case of North-East States, the fundingratio between the centre and the States is 90:10respectively. For Union Territories (UTs), entirefunds of IAY are provided by the Centre.

A rural Below Poverty Line(BPL) family isgiven grant of Rs. 45000/- in plain areas andRs.48,500/- in hilly/difficult areas forconstruction of a house. The IAY houses havealso been included under the differential rate ofinterest (DRI) scheme for lending byNationalized Banks upto Rs.20,000/- per unit atan interest rate of 4% in addition to financialassistance provided under IAY.

The criteria for allocation funds to the States& UTs involve assigning 75% weightage tohousing shortage and 25% to poverty ratio. Theallocation amongst districts is based on75% weightage to housing shortage and25%weightage to SC/ST component. Further,60% of the IAY allocation is meant for benefitingSC/ST families, 3% for physically handicappedand 15% for minorities.

The dwelling units are invariably allotted inthe name of a female member of the beneficiaryhousehold. Alternatively, it can be allotted in thename of both husband and wife. In case there isno eligible female member in the family, a housecan be allotted to a male member of thefamily.

6. Jawahar Gram Samridhi Yojana (JGSY)

The Jawahar Rozgar Yojana (JRY) has beenrecast as the Jawahar Gram Samridhi Yojana(JGSY) with effect from 1.4.1999 to impart athrust to creation of rural infrastructure. Whilethe JRY resulted in creation of durable assets,the overriding priority of the programme wasthe creation of wage employment. It was feltthat a stage had come when rural infrastructureneeded to be taken up in a planned manner andgiven priority. The Gram Panchayats can

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effectively determine their infrastructure needsand the responsibility of implementing theprogramme has been entrusted to the GramPanchayats. The funds are directly released tothe Gram Panchayats by the DRDAs/ZillaParishads. The JGSY is implemented as a CSSwith funding in the ratio of 75:25 between theCentre and the States. The primary objective ofJGSY is creation of demand driven communityvillage infrastructure including durable assets atthe village level and assets to enable the ruralpoor to increase the opportunities for sustainedemployment. The secondary objective isgeneration of supplementary employment for theunemployed poor in the rural areas. The wageemployment under the programme is given toBelow Poverty Lines (BPL) families.

Why Poverty Alleviation Programmes haveFailed in India?

The Govt. of India has many schemes for thepoor and for their welfare. Overall assessment ofthe CAG and other governing bodies has found,the scheme that has been implemented by theIndian Government has many loopholes wherethe executives and operatives take the benefit.

Governments, international agencies anddonors have spent billions of dollars to addresspoverty. For example, in rural India, thegovernment spends significant funds on subsidies(for electricity, fertilizer, fuels, etc.), food rations,price supports, land allocation/distribution, jobtraining and financial assistance for initiatives inagriculture and small businesses. Loans from theWorld Bank and other international agencies andbilateral aid supplement domestic governmentresources. But who has benefited from all theseprogrammes and assistance? The beneficiaries areusually corrupt officials who manage anddistribute funds, and landlords and powerbrokerswho directly or indirectly extract benefits forthemselves. In India, over 90% of the agriculturalland is owned and partly cultivated by less than10% of the rural population who are termedfarmers; others are mostly labourers.Governments allocate land to the poor, but theyare unable to utilize it because of limited waterresources, bad soil conditions, and/or the inabilityto secure credit. Larger subsidies benefit biggerfarmers, but the poor do not gain much directlyfrom any government programs.““Thepresumption that with more money, corrupt andinefficient governments and bureaucratic

institutions will utilize funds efficiently andimprove the deplorable conditions of the poor isan illusion. There are too many impediments topoverty reduction: bribery, political influence inthe allocation of land and/or credit, diffusedfocus and priorities, poor execution, a shortageof rural infrastructure, and social inequality,among other factors.

Corruption and misallocation of developmentfunds are ultimately the result of failedgovernance.

Thus the major reasons for failure of povertyalleviation programmes are:

I. Planning process is faulty:

� Identifying the ‘poor’

� Defining ‘poor’

� Processing of the identification involves toomany stages.

� Lack of technology upgradation.

� Ideally the programme should be broadbased. (benefitting the large number ofpeople)

� Disjointed programmes- not integrated.

II. Implementation of programmes:

� Corrupt officials/ staffs.

� Lack of involvement of people.

� Local politics. (selection of beneficiaries)

� Improper follow up of programmes/ reviewor revision.

III. Lack of support from the credit andmarketing system:

� Role of local money lenders and banks.

� Inability to sustain income generated fromthe asset credited.

What Should be Done to Improve PovertyAlleviation Programmes?

Poverty alleviation programmes have beendesigned to address different facets of ruralpoverty. Micro credit-linked programmes providea package of services, including credit andsubsidy to set up micro enterprises. Wageemployment programmes address the issue oftransient poverty. Besides, schemes for infra-structure development and provision of basicservices contribute to the well being of therural people.

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Thus successful implementation of theseprogrammes requires appropriate policyframework, adequate funds, and effectivedelivery mechanism. The success of theseprogrammes ultimately depends on the capabilityof the delivery system to absorb and utilise thefunds in a cost-effective manner. An effectiveand responsive district level field machinery witha high degree of commitment, motivation,professional competence and, above all, integrityhas been recognized as one of the prerequisitesfor successful implementation of an anti povertystrategy.

An effective governance system has to ensurepeople’s participation at various stages offormulation and implementation of theprogrammes, transparency in the operation ofthe schemes and adequate monitoring.

International experience shows that greaterfunctional and financial devolution to localgovernments results in higher allocation ofresources for social sectors which areaccompanied by efficiency gains in resource use.Such trends in social spending have beenwitnessed in many Indian States as well.

Panchayati Raj Institutions (PRIs) have beengiven a constitutional role in the governance ofthe country. Functional responsibilities for subjectsthat are central to the well being of thecommunities have been devolved on the PRIs bythe Constitution. Truly empowered PRIs can playan important role in improving the efficiency andeffectiveness of the schemes and reducingleakages.

The Non Governmental Organisations(NGOs) and Community Based Organizations(CBOs) have been playing an active role inbuilding up people’s awareness and providingsupport to the governmental agencies and thePanchayati Raj Institutions in executing projectsfor development in rural areas. The NGOs canplay an important role in capacity building,access to information, organisation of rural poorin self help groups and increasing theirawareness and capabilities. All these initiativeshave good governance as their ultimate goal. Itis expected that through the acceleratingconvergence of all these favourable factors it willbe possible for the country to achieve the goalsof inclusive growth as envisaged in XIIth FYP.

Comparison Between India and China onPoverty Reduction

China and India are making immense stridesin development. While growth in both countrieshas been impressive, there is now much concernabout whether this growth is yielding sufficientpoverty reduction. This can be compared by usingthe poverty data in both the nations.

In September 2011, the Indian PlanningCommission presented new estimates for thecountry’s poverty lines in urban and rural areas,setting these thresholds at 965 and 781 rupeesper capita per month (or about 32 and 26 rupeesper capita per day), respectively.

Since the early 1990s, India’s official povertyestimates have been made on the basis of themethodology recommended by the LakdawalaCommittee, established in 1993. These povertylines are based on per capita consumption levelsassociated with a commodity bundle that yieldeda specified level of caloric intake believed in 1973-74 to be appropriate: 2,400 and 2,100 kilocaloriesper capita per day for rural and urban areas,respectively.

In December 2005, the Planning Commissionappointed a committee to review the Lakdawalapoverty lines. In 2009, the Tendulkar Committee(chaired by Suresh Tendulkar) concluded thatsome changes were necessary, and recommendedlocating the poverty line in the consumption levelsobserved in the 2004-05 National Sample Survey,after correcting for the rural–urban pricedifferential.

The new estimates increased the povertyheadcount ratio for rural areas from 28 per centusing the 1993 methodology to nearly 42 percent using the Tendulkar methodology, which isvery close to figures reported using the WorldBank’s US$1.25 per day poverty line. By the newestimates, more than 327 million Indians in ruralareas are living in poverty, an increase of 105million people in absolute terms.

But the Tendulkar Committee reported anobserved calorie intake of 1,999 and 1,776kilocalories per day for those near the newpoverty line in rural and urban areas,respectively. These levels of calorie intake areregarded as low relative to the minimum dietaryenergy requirement recommended in the report ofa joint Food and Agricultural Organization/

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United Nations University/World HealthOrganization Expert Consultation.

However, China has been very successful inreducing extreme deprivation. In the early 1980s,94 percent of China’s rural population and 44.5percent of its urban population lived on less thanUS$1.25 a day. By 2005, the percentage of peoplein poverty had fallen to 26 percent in rural areas,and to just 1.7 percent in urban areas. Thisrepresents a fall of 627 million people, from 835million in 1981 to 207.7 million in 2005.Remarkably, the fall in the number of China’spoor exceeds the number still living in poverty insub-Saharan Africa (about 388 million people)and Latin America (47.6 million people). But italso suffers from serious drawbacks as - China’sofficial poverty lines have been derived based ona bundle of items dominated by food grains thathave not been updated adequately to reflectchanges in consumption patterns nor adjustedto take into account inflationary trends in bothfood and non-food items. The result was one ofthe lowest rural poverty lines in the developingworld. In December 2011, the Chinesegovernment announced it would lift the country’srural poverty line from 1,274 yuan per year in2010 to 2,300 yuan, an increase of over 80percent. This, once adjusted by the purchasingpower parity of 2005, is equivalent toapproximately US$1.80 per day, a threshold wellabove the US$1.25 used by the World Bank forinternational poverty comparisons.

Thus above data clearly shows that thougheconomic growth is important for enhancingliving conditions, its reach and impact dependgreatly on what we do with the increased income.The relation between economic growth and theadvancement of living standards depends onmany factors, including economic and socialinequality and, what the government does withthe public revenue that is generated by economicgrowth. Some statistics about China and India,drawn mainly from the World Bank and theUnited Nations, show that: Life expectancy atbirth in China is 73.5 years; in India it is 64.4

years. The infant mortality rate is fifty perthousand in India, compared with just seventeenin China; the mortality rate for children underfive is sixty-six per thousand for Indians andnineteen for the Chinese; and the maternalmortality rate is 230 per 100,000 live births inIndia and thirty-eight in China. The mean yearsof schooling in India were estimated to be 4.4years, compared with 7.5 years in China. China’sadult literacy rate is 94 per cent, compared withIndia’s 74 per cent according to the preliminarytables of the 2011 census. As a result of India’seffort to improve the schooling of girls, its literacyrate for women between the ages of fifteen andtwenty-four has clearly risen; but that rate is stillnot much above 80 per cent, whereas in Chinait is 99 per cent. One of the serious failures ofIndia is that a very substantial proportion ofIndian children are, to varying degrees,undernourished (depending on the criteria used,the proportion can come close to half of allchildren), compared with a very small proportionin China. Only 66 per cent of Indian children areimmunized with triple vaccine (diphtheria/pertussis/tetanus), as opposed to 97 per cent in China.

The data also shows that Higher GNP hascertainly helped China to reduce variousindicators of poverty and deprivation, and toexpand different features of the quality of life.Thus there is a need to encourage sustainableeconomic growth in India in order to improveliving standards today and in the future(including taking care of the environment inwhich we live).

But most importantly there is a need toredefine the poverty lines both in China and Indiabecause:

� First, it signals a policy shift from “trickledown” economics that emphasizes growth,pure and simple, towards the notionof inclusive or pro-poor growth.

� Second, by lifting the official poverty lines,the two countries have increased, inprinciple, the number of people that are

% 1993 Methodology based Tendulkar Methodology World Bank Poverty Lineson calorie norm (PPP of 2005)

rural urban combined rural urban combined US $1.25 US $2

1993-94 37.3 32.4 36 50.1 31.8 45.3 49.4 81.7

2004-05 28.3 25.7 27.5 41.8 25.7 37.2 41.6 75.6

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eligible to receive support from socialprotection policies.

If social protection programmes in the twocountries prove to be effective in facilitatingpoverty exit, this could lead to a significantreduction in global poverty, even if less progressis made in sub-Saharan Africa, Latin America,and the rest of East and South Asia. However,the two giants face important challenges in thatprocess.

The challenges are:

� India and, especially, China have enjoyedrapid economic growth, with a mediangrowth rate of 6 percent and 10 percent inthe 1980-2010 period, respectively. This hascatapulted the growth in per capita grossnational income (GNI) in the two countries.A significant part of the domestic investmentin China, about 20 per cent of GDP, hasgone to infrastructure projects, which isnearly 10 times more than in India. That hasfacilitated the accelerated rate at which theChinese economy has transited fromagricultural to manufacturing production. InIndia, the transition has been towards theinformation technology (IT) off-shore serviceindustry, with as much as 60 per cent of thelabour force remaining engaged in traditionalfarming activities. Thus economic growth isa necessary condition to rising per capitaincome, but it is nonetheless insufficient toguarantee a steady trend towards povertyreduction. In China, for instance, therelationship between economic growth andpoverty reduction is far from being linear,with episodes of high economic performancein the 1990s accompanied with increases inthe poverty rates. In India, since the late 1990sthe country has experienced the fastesteconomic growth, and yet the speed at whichpoverty is being reduced has decelerated.This highlights the importance of publicinterventions in making growth moreinclusive. Indeed, it is now well understoodthat policies designed to maximize growthcan only trickle down to the poor if they areaccompanied by wealth redistribution,employment opportunities, investments inhuman capital and the provision of socialprotection for the most vulnerable groups insociety.

� Spatial inequalities are particularly increasingacross China, with western and interior ruralcommunities experiencing much weakereffects from economic growth than theeastern coastal provinces. The national Ginicoefficients are higher than both the ruraland urban Ginis, indicates that the rural–urban divide is driving the growing levels ofinequity in the country. This can beunderstood by analyzing the fiscal policiesin both the nations. Tax rates in China andIndia are low, with most revenues comingfrom indirect taxes. This also reflects the lowshare of government revenues as percentageof GDP, which oscillates around 20 per cent.This is in contrast with the average of 50 percent observed in OECD countries. Taxsystems in both countries remain limited tomaximizing redistributive policies — and toa large extent they will also limit the capacityof these countries to tackle extremedeprivation in the coming years.

� China and India also face significantchallenges in terms of employmentgeneration. Rising unemployment is a drivingfactor in the incidence of poverty in urbanareas in China, which has been exacerbatedby market-oriented structural reforms andlarge migration flows of unskilled workersfrom rural areas to the cities. Migrantworkers face exclusion from formalemployment arrangements and state benefitssuch as housing, health and school subsidies,as well as income support from socialprotection schemes. But India is facing servicesector growth which is not able to providesustained growth, as large unskilled labourforce remains poor and disconnected fromthe booming economy.

� Social protection in the two countries remainshighly fragmented. In China, the MinimumLiving Subsidy Scheme (also known as DiBao) was introduced in 1997 to support theurban unemployed poor who had beenaffected by the market-based structuralreforms. The programme remains limited, asit excludes those not registered with the civilaffairs department office, these are mainlymigrant rural workers who move to the cityin search of livelihoods. In the mid 2000s,the Di Bao was gradually extended to ruralareas to cover nearly 42 million rural people,but the size of the transfers are unlikely to

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reduce the incentives to migrate to the cities.The rural Di Bao, together with the urbanDi Bao, cover nearly 150 million people,which represents the second-largest socialprotection programme worldwide in termsof scale and coverage, just behind India’sNational Rural Employment GuaranteeScheme (NREGS).

The MGNREGA provides a guarantee of 100days of waged employment per year tounemployed unskilled workers, currentlycovering nearly 48 million households, or about240 million people. In fact, India’s socialprotection system is complex but incomplete. Itspans from categorical and means-tested age and

disability pensions, and income transfers forschooling and healthcare accessibility, tounemployment schemes such as the NREGS thatrely on self-selection for the identification ofbeneficiaries — and therefore exclude those whoare unable to participate in the scheme due todisability, illness or age. The programmes alsoare unevenly distributed across the country, withmany states and communities yet to be covered.More co-ordination and institution building areclearly needed, but at the same time, socialprotection will only provide a sustained processof poverty reduction if it is supported by growth,redistributive policies, improvements in publicservice provision and employment opportunities.

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