Poverty and inequality after reforms

1) Examine the impact of economic reforms on poverty and inequality in India. (200 Words

India embarked on big-bang economic reforms 25 years back in 1991. It is well-known that GDP growth
has been much higher in the post-reform period. However, GDP is only one metric. Ultimately, the
success of reforms depends on whether the well-being of people, particularly that of poor, increased over
time. In this context, let’s examine the impact of economic reforms on poverty and inequality.

There are two conclusions on trends in poverty. The first one, shown in a World Bank study by Gaurav
Datt and others, is that poverty declined by 1.36 percentage points per annum after 1991, compared to
that of 0.44 percentage points per annum prior to 1991. Their study shows that among other things,
urban growth is the most important contributor to the rapid reduction in poverty even though rural
areas showed growth in the post-reform period.

The second conclusion is that in the post-reform period, poverty declined faster in the 2000s than in the
1990s. The official estimates based on Tendulkar committee’s poverty lines shows that poverty declined
only 0.74 percentage points per annum during 1993-94 to 2004-05. But poverty declined by 2.2
percentage points per annum during 2004-05 to 2011-12. Around 138 million people were lifted above
the poverty line during this period. This indicates the success of reforms in reducing poverty. The poverty
of Scheduled Castes and Scheduled Tribes also declined faster in the 2000s. The Rangarajan committee
report also showed faster reduction in poverty during 2009-10 to 2011-12. Higher economic growth,
agriculture growth, rural non-farm employment, increase in real wages for rural labourers, employment
in construction and programmes like the Mahatma Gandhi National Rural Employment Guarantee Act
(MGNREGA) contributed to higher poverty reduction in the 2000s compared to the 1990s.

Another issue discussed all over the world, whether it is the Arab Spring or Brexit, is rising inequality.
According to a Credit Suisse report, the richest 1% owns half of all the wealth in the world. What
happened to inequality in post-reform period India? The evidence shows that inequality increased in this
period. The Gini coefficient measured in terms of consumption for rural India increased marginally from
0.29 in 1993-94 to 0.31 in 2011-12. There was a significant rise in the Gini coefficient for urban areas
from 0.34 to 0.39 during the same period. However, consumption-based Gini underestimates inequality.
If we use income data from the National Council of Applied Economic Research’s India Human
Development Survey, the Gini coefficient in income (rural+urban) was 0.52 in 2004-05 and increased to
0.55 in 2011-12. In other words, inequality is much higher in India if we use income rather than
consumption. If we consider non-income indicators like health and education, inequalities between the
poor and rich are much higher.

What is the way forward? The conclusion is that poverty declined faster but inequality increased in the
post-reform period. However, India still has 300 million people below the poverty line. What should be
done to reduce poverty and inequality?

Policymakers must continue to follow the two-fold strategy of achieving high economic growth and
direct measures through social protection programmes. The focus should also be on increase in urban
growth and income as the share of urban poverty will rise with urbanization.

There can be several solutions, but let’s focus here on the two important measures: creating productive
employment and providing quality education for reduction in poverty and inequality. There is a feeling
that we should have some flagship programmes like MGNREGA to reduce poverty. No doubt these
programmes are important for protecting the poor. But equitable growth is much broader than this and
productive inclusion in terms of generating quality employment should be the focus of any inclusive
approach. Employment focus is the major part of equity approach. Studies have shown that agricultural
growth leads to reduction in poverty twice as that of non-agriculture. We need more diversified
agriculture for raising the income of farmers. However, future employment has to be created in
manufacturing and service. In this context, the Make in India initiative, focus on start-ups, Mudra,
financial inclusion, etc., are steps in the right direction. Equally, service sector employment has to be
promoted. Over time, the share of the organized sector has to be raised while simultaneously improving
productivity in the unorganized sector. Youth unemployment is high. This is one reason for unrest and
social tensions. The need for skill development and productive jobs to reap the demographic dividend is
obvious.

For reducing inequality, some advocate measures such as redistribution of assets and wealth in favour of
the poor via higher taxes for the rich. However, these may not be pragmatic solutions. The tax/GDP ratio
has to be raised with a wider tax base. Fiscal instruments like public investment in physical and social
infrastructure can be used to reduce inequality. The new generation wants equality of opportunity rather
than redistributive measures. Everyone irrespective of caste, class and gender should have equal
opportunities in education, health, employment and entrepreneurship. Economic and employment
opportunities improve with education and skills. The new generation wants better quality in schools and
higher education.

Finally, economic reforms should focus more on efficient delivery systems of public services. Many reckon
that poor governance is the biggest constraint in achieving the aspirations of a new generation and
reduction in poverty and inequality. A major institutional challenge is the accountability of service
providers, particularly the public sector. Recent literature also focused on eradication of corruption for
reduction in inequalities. Issues like electoral reforms, crony capitalism, election funding and corruption
should be part of the reform agenda to reduce inequalities.

Economic Reforms in India in the Light of Social Justice and Welfare

The idea of social justice is that each person should have equal access to justice, education, health,
well-being, privileges, and opportunity regardless of their political, economic, religious, or caste
conditions. India’s independence brought with its ideals of individual, economic, social, and political
liberty. During 1940-1950, India’s viability as a single nation had been questioned due to extreme
poverty and deep socioeconomic divisions.

Prejudice is a source of social injustice since it is unfair by definition. In India, issues of social inequality
have become more prevalent, particularly in rural areas. As a result, finding effective ways to address
social inequality in India has become critical. The government has worked to alleviate poverty in India’s
marginalized communities, as well as to reduce child labor, exploitation of women and children, gender-
based violence, discrimination in various forms, and more, thereby raising the level of India’s
marginalized areas and backward regions through some of the policies.
The importance and significance of the notion of social justice now are that it is not a blind concept. Its
goal is to ensure that all citizens of the state are treated fairly. A democratic system must guarantee that

social growth is consistent with democratic principles and practices, reflecting social equality,
development possibilities, social security, and welfare. It is true that India has always been a socially
uneven society. Massive disparities exist in our society, posing major challenges to Indian democracy.

The government made different programs for mainly the growth of middle and lower economic classes
of our society to decrease the inequality in our society by giving them various ways to earn money.
Immediately after independence, the five-year plans attempted to focus on poverty so that equality can
be brought into the society through sectoral initiatives.

According to the current data 2020, about 69% of India’s population lives in villages and the incidence of
poverty is much higher in villages – about 53% of the rural population. Rural poverty is so prevalent,
that the majority of the initiatives are aimed at helping people in rural regions. Poverty reduction is also
difficult in rural regions owing to a variety of physical and infrastructure constraints. The aiding
programs are mostly divided into these categories.

1. Wage-earner program.

2. Programs for self-employment.

3. Program for food security.

4. Programs for social security.

5. Programs to alleviate urban poverty.

6. Job-training program in India.

Some of the Govt. Initiatives that Help to Reform Economic Conditions

1. Introduction of Factory act

The Indian Factories Act, of 1948 has three major objectives

 To control factory working conditions

 To regulate health, safety, and yearly leave.

 To make specific provisions for young people, women, and children who work in factories.

2. Jawahar Gram Samridhi Yojana (JSY)

On April 1, 1999, it began. The development of rural regions was the primary goal of this initiative.
Infrastructure such as roads connecting the hamlet to different places, as well as other social,
educational (schools), and infrastructure such as hospitals, made the village more accessible. Its
secondary goal was to provide long-term paid employment. This was exclusively supplied to households
that were BELOW THE POVERTY LINE.

3. National old-age pension scheme (NOAPS)

This plan went into force on August 15, 1995. The program offers pensions to all elderly individuals
above the age of 65 (now 60) who are unable to fund themselves and have no other sources of support.
The central government provides this pension.

4. National family benefit scheme (NFBS)

This program began in August of 1995. The state government is funding this program. After 2002–03, it
was moved to the state sector program. It’s part of the department of community and rural affairs. In
case of the death of the primary breadwinner, this program provides a one-time Rs 10,000/- amount to
that family, irrespective of the cause of death. A breadwinner is a person above the age of 18 who
makes the most money for the family and ensures that the family survives.

5. Annapurna

The government began this program in 1999–2000 to give meals to older persons who are unable to
care for themselves, are not covered by the National Old Age Pension Scheme (NOAPS), and have no
one in their community to look after them. This program will offer qualified older adults 10 kg of free
food grains per month. In the years 2000-2001, a total of 100 crores was set aside for this program. They
primarily target ‘poorest of the poor and ‘indigent elderly people’ groups.

6. Pradhan Mantri Gramin Awaas Yojna

This plan is intended to provide homes to everyone. It all started in 1985. It intended to build 20 lakh
housing units, 13 lakh of which would be in rural regions. This plan will also provide individuals with low-
interest financing to build dwellings. It began in the years 1999–2000. This project received 1438.39
crores in 1999–2000, and roughly 7.98 lakh units were developed. This project had a government
outlay of 1710.00 crores in 2000-01. It enhanced the health, primary education, drinking water, housing,
and road conditions in rural regions.

7. Mahatma Gandhi National Rural Employment (MNREGA)

On September 7, 2005, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)
was notified. The MGNREGA has resulted in the world’s largest employment program. It is unlike any
previously paid employment program in terms of scope, architecture, and focus. It has a unique and
unparalleled bottom-up, people-centered, demand-driven, self-selecting, rights-based design.

The MGNREGA guarantees paid work as a legal right. It is a demand-driven program in which the
provision of employment is prompted by wage seekers’ demand for work. Both in situations of inability
to deliver work on demand and delays in payment of remuneration for labor completed, there are legal
provisions for allowances and compensation. It is the largest social assistance program in the world.
The initiative has cost 3.14 lakh crores in the previous ten years. A total of 1980 million person-days of
employment were created. Several lakhs of villagers have undoubtedly been lifted out of rural poverty
as a result of the initiative.

8. for the uplift of Small and Medium Scale Industries

The pre-liberalization period (1948 to 1991) and the post-liberalization period (1992 to present) may be
generally separated in terms of state intervention in the growth of small-scale industry following
independence (1991 onwards).
Since 1991, the Indian economy has steadily shifted from a centrally planned policy of encouraging
privatization, liberalization, and globalization through a series of economic changes. In that context, the
small-scale sector has been provided with several possibilities to expand and develop itself in order to
achieve competitive efficiency and coexist with larger enterprises. . There has been a paradigm shift
here, with the protection strategy being replaced by the development of the SSI sector, which now
includes medium-sized businesses. Small-scale enterprises are essential since they contribute to India’s
economic development and job creation, resulting in more savings, which leads to increased
investment, and new sectors will emerge as a result of this investment. It lowers the unemployment
rate.

Conclusion:

“Justice in terms of the distribution of income, opportunities, and advantages within a society” is how
social justice is described. This is frequently accomplished through institutions or services that aim to
ensure that everyone has equal access to the advantages of social cooperation while also preventing
socioeconomic inequality.

A government is made up of a collection of persons that are in charge of governing a state. As a result,
each country’s government should act wisely in the interests of the community’s growth. Social welfare
is a policy that focuses on the overall well-being of society. The government implements several
programs as a result of these changes in order to provide social welfare and economic equality.

Economic Reforms in India in the Light of Social Justice

Economic reforms in India have been instrumental in transforming the country's economy and bringing
about significant changes in various sectors. When examining these reforms, it is crucial to consider
their impact on social justice. Social justice refers to the fair distribution of resources, opportunities, and
benefits within a society, aiming to reduce inequality and ensure equal rights for all individuals. Here, we
will discuss the economic reforms in India and their implications for social justice. Poverty Alleviation -
The economic reforms in India have focused on poverty alleviation as a key component of social justice.
- Various poverty alleviation programs, such as the Mahatma Gandhi National Rural Employment
Guarantee Act (MGNREGA) and the National Food Security Act (NFSA), have been implemented. - These
programs aim to provide employment opportunities, social security, and food subsidies to marginalized
sections of society, thereby reducing poverty and ensuring social justice. Financial Inclusion - Economic
reforms have also emphasized financial inclusion, ensuring access to financial services for all individuals,
including those from marginalized communities. - Initiatives such as the Pradhan Mantri Jan Dhan
Yojana (PMJDY) have aimed to provide banking facilities to the unbanked population. - This has enabled
marginalized individuals to save, access credit, and participate in formal financial systems, promoting
social justice. Education and Skill Development - Economic reforms have recognized the importance of
education and skill development in promoting social justice. - Initiatives like the Right to Education Act
and the Skill India Mission have been introduced to ensure access to quality education and skill training
for all. - These reforms aim to bridge the educational and skill gap, empowering marginalized individuals
and promoting social justice. Gender Equality - Economic reforms have also addressed gender
inequality, a key aspect of social justice. - Initiatives such as the Beti Bachao Beti Padhao (Save the Girl
Child, Educate the Girl Child) campaign and the Maternity Benefit Program have been implemented. -
These reforms aim to empower women by promoting their education, healthcare, and economic
participation, thereby fostering social justice. Conclusion Economic reforms in India have been driven by
the objective of promoting social justice. These reforms have focused on poverty alleviation, financial
inclusion, education and skill development, and gender equality. By addressing these key areas,
economic reforms have sought to reduce inequality, provide equal opportunities, and ensure the fair
distribution of resources within society. The implementation of these reforms has had a positive impact
on marginalized sections of society, contributing to the overall goal of social justice in India.

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