Poverty

Poverty is a state or condition in which a person or community lacks the

financial resources and essentials for a minimum standard of living. Poverty
means that the income level from employment is so low that basic human
needs can't be met.

The UN Human Rights Council has defined poverty as “A human condition

characterized by the sustained or chronic deprivation of the resources,
capabilities, choices, security and power necessary for the enjoyment of an
adequate standard of living and other civil, cultural, economic, political and
social rights”.

According to World Bank, Poverty is pronounced deprivation in well-being,

and comprises many dimensions. It includes low incomes and the inability to
acquire the basic goods and services necessary for survival with dignity.
Poverty also encompasses low levels of health and education, poor access to
clean water and sanitation, inadequate physical security, lack of voice, and
insufficient capacity and opportunity to better one's life.

Types of poor:

There are multiple ways to describe poverty-stricken people.

• Chronic poor: People who are leading constant lives of poverty and who
are normally poor but may have a small amount of money with them
(for example, casual workers) are classified collectively as the chronic
poor.

• Churning poor: The churning poor are the people who go in and out of
poverty (for example, small farmers and seasonal workers).

• Transient poor: The poor who are well off most of the time but may be
subject to bad luck or difficult times at times. They are known as the
transient poor.

Types of Poverty:

• There are two main classifications of poverty:

 Absolute Poverty:
 • A condition where household income is below a necessary level to
maintain basic living standards (food, shelter, housing). This concept is
based on absolute needs of the people and people are defined as poor
when some absolute needs are not sufficiently satisfied.

• This condition makes it possible to compare between different countries

and also over time.

• It was first introduced in 1990, the “dollar a day” poverty line measured
absolute poverty by the standards of the world's poorest countries. In
October 2015, the World Bank reset it to $1.90 a day.

• In India, these basic needs are measured in terms of calorie intake of

2400 in rural areas per person per day and 2100 in urban areas per
person per day.

Measures of Absolute Poverty

• Poverty Line: Poverty line is referred to as that amount of money that is

required by a person to meet their basic needs such as food, shelter and
clothing or it can be defined as the level of income that is required to
sustain a minimum standard of living.

The current poverty line in rural regions is 1,059.42 Indian rupees (62 PPP
USD) per month, while in urban areas it is 1,286 Indian rupees (75 PPP
USD) per month.

Note: Dadabjai Naoroji was the first person who discuss the concept of
poverty line.

• Head Count Ratio: It indicates the percentage of people living below the
poverty line. HCR indicates the incidence of poverty in a nation. Hence, it
is also termed as poverty incidence ratio.

HCR = Total no. of BPL people / Total population x 100

 Relative Poverty:

• It is defined from the social perspective that is living standard

compared to the economic standards of population living in
surroundings.
• Hence it is a measure of income inequality.

• This concept is related to the general standard of living in a society.

Thus, according to this concept, people are poor because they are
deprived of the opportunities, comforts and self-respect regarded as
normal in the community to which they belong.

• In relative poverty, poor are defined as, a person or family whose

incomes are less than the average income of the community.

The concept of relative poverty is used to indicate the level of income inequality in
a nation. It is measured through:
a. Gini co efficient (In mathematical terms).
b. Lorenz Curve (In graphical terms).
Gini Co-efficient or Gini Index

• It is developed by the Italian statistician and sociologist Corrado Gini in

1912.
• The value of Gini Coefficient varies from 0 and 1.
• 0 represents perfect equality i.e. a situation where every resident has the
same income.
• 1 represents perfect inequality i.e. one resident earns all the income and the
others have no income.
• The higher the Gini coefficient, the more is the gap between rich & poor in
a country.

Lorenz Curve

• It is a curve that measures the relationship between the percentage of

income earned and percentage of people who earned that particular
percentage of Income.
• Perfect equality is represented by a straight 45 degree line.
• Curve below the perfect equality line represents the Lorenz curve.
• The closed the Lorenz curve to the perfect equality line, the less is the
level of income inequality and vice versa.
CAUSES OF POVERTY

• Population Explosion: India’s population has steadily increased through

the years. During the past 45 years, it has risen at a rate of 2.2% per
year, which means, on average, about 17 million people are added to
the country’s population each year. This also increases the demand for
consumption goods tremendously.

• Low Agricultural Productivity: A major reason for poverty in the low

productivity in the agriculture sector. The reason for low productivity is
manifold. Chiefly, it is because of fragmented and subdivided land
holdings, lack of capital, illiteracy about new technologies in farming, the
use of traditional methods of cultivation, wastage during storage, etc.

• Inefficient Resource utilisation: There is underemployment and

disguised unemployment in the country, particularly in the farming
sector. This has resulted in low agricultural output and also led to a dip
in the standard of living.

• Low Rate of Economic Development: Economic development has been

low in India especially in the first 40 years of independence before the
LPG reforms in 1991.

• Price Rise: Price rise has been steady in the country and this has added
to the burden the poor carry. Although a few people have benefited
 from this, the lower income groups have suffered because of it, and are
not even able to satisfy their basic minimum wants.

• Unemployment: Unemployment is another factor causing poverty in

India. The ever-increasing population has led to a higher number of job-
seekers. However, there is not enough expansion in opportunities to
match this demand for jobs.

• Lack of Capital and Entrepreneurship: The shortage of capital and

entrepreneurship results in low level of investment and job creation in
the economy.

• Colonial Exploitation: The British colonization and rule over India for
about two centuries de-industrialised india by ruining its traditional
handicrafts and textile industries. Colonial Policies transformed india to
a mere raw-material producer for european industries.

• Climatic Factors: Most of india’s poor belong to the states of Bihar, UP,
MP, Chhattisgarh, odisha, Jharkhand, etc. Natural calamities such as
frequent floods, disasters, earthquake and cyclone cause heavy damage
to agriculture in these states

Poverty Estimation in India

• Poverty estimation in India is carried out by NITI Aayog’s task force

through the calculation of poverty line based on the data captured by
the National Sample Survey Office under the Ministry of Statistics and
Programme Implementation (MOSPI).
• Poverty line estimation in India is based on the consumption
expenditure and not on the income levels.

• Alagh Committee (1979) determined a poverty line based on a minimum

daily requirement of 2400 and 2100 calories for an adult in Rural and
Urban area respectively.

• Subsequently different committees; Lakdawala Committee (1993),

Tendulkar Committee (2009), Rangarajan committee (2012) did the
poverty estimation.

• As per the Rangarajan committee report (2014), the poverty line is

estimated as Monthly Per Capita Expenditure of Rs. 1407 in urban
areas and Rs. 972 in rural areas

Poverty Alleviation Programs in India

• Integrated Rural Development Programme (IRDP):

• It was introduced in 1978-79 and universalized from 2nd October, 1980,

aimed at providing assistance to the rural poor in the form of subsidy
and bank credit for productive employment opportunities through
successive plan periods.

• Jawahar Rozgar Yojana/Jawahar Gram Samridhi Yojana: The JRY was

meant to generate meaningful employment opportunities for the
unemployed and underemployed in rural areas through the creation of
economic infrastructure and community and social assets.

• Rural Housing – Indira Awaas Yojana: The Indira Awaas Yojana (LAY)
programme aims at providing free housing to Below Poverty Line (BPL)
families in rural areas and main targets would be the households of
SC/STs.

• Food for Work Programme: It aims at enhancing food security through

wage employment. Food grains are supplied to states free of cost,
however, the supply of food grains from the Food Corporation of India
(FCI) godowns has been slow.
• Annapurna Scheme: This scheme was started by the government in
1999– 2000 to provide food to senior citizens who cannot take care of
themselves and are not under the National Old Age Pension Scheme
(NOAPS), and who have no one to take care of them in their village. This
scheme would provide 10 kg of free food grains a month for the eligible
senior citizens. They mostly target groups of ‘poorest of the poor’ and
‘indigent senior citizens’.

• Sampoorna Gramin Rozgar Yojana (SGRY): The main objective of the

scheme continues to be the generation of wage employment, creation
of durable economic infrastructure in rural areas and provision of food
and nutrition security for the poor.

• Mahatma Gandhi National Rural Employment Guarantee Act

(MGNREGA) 2005: The Act provides 100 days assured employment
every year to every rural household. One-third of the proposed jobs
would be reserved for women. The central government will also
establish National Employment Guarantee Funds. Similarly, state
governments will establish State Employment Guarantee Funds for
implementation of the scheme. Under the programme, if an applicant is
not provided employment within 15 days s/he will be entitled to a daily
unemployment allowance.

• National Rural Livelihood Mission: Aajeevika (2011): It evolves out the

need to diversify the needs of the rural poor and provide them jobs with
regular income on a monthly basis. Self Help groups are formed at the
village level to help the needy.

• Pradhan Mantri Kaushal Vikas Yojana: It will focus on fresh entrant to

the labour market, especially labour market and class X and XII dropouts.
Unemployment
• Disguised Unemployment:

 It is a phenomenon wherein more people are employed than actually

needed.

 It is primarily traced in the agricultural and the unorganized sectors of

India.

Marginal Productivity of Labor=0.

• Seasonal Unemployment:

 It is an unemployment that occurs during certain seasons of the year.

 Agricultural labourers in India rarely have work throughout the year.

• Structural Unemployment:

 It is a category of unemployment arising from the mismatch between

the jobs available in the market and the skills of the available workers in
the market- Insufficient skill

 Many people in India do not get job due to lack of requisite skills and
due to poor education level, it becomes difficult to train them.

• Cyclical Unemployment:

 It is result of the business cycle, where unemployment rises during

recessions and declines with economic growth (with Boom and Bust).

 Cyclical unemployment figures in India are negligible. It is a

phenomenon that is mostly found in capitalist economies.

• Technological Unemployment:

 Man/ Woman replaced by machines

 It is loss of jobs due to changes in technology.

 In 2016, World Bank data predicted that the proportion of jobs

threatened by automation in India is 69% year-on-year.
  (Acc. To World Economic Forum, by 2025 75 million jobs will be lost but
133 million jobs will be created also)

• Frictional Unemployment:

 The Frictional Unemployment also called as Search Unemployment,

refers to the time lag between the jobs when an individual is searching
for a new job or is switching between the jobs (transitional time).

 In other words, an employee requires time for searching a new job or

shifting from the existing to a new job, this inevitable time delay causes
the frictional unemployment. It is often considered as a voluntary
unemployment because it is not caused due to the shortage of job, but
in fact, the workers themselves quit their jobs in search of better
opportunities.

• Under Unemployment:

 Underemployment is a measure of employment and labor utilization in

the economy that looks at how well the labor force is being used in
terms of skills, experience, and availability to work. It refers to a
situation in which individuals are forced to work in low-paying or low-
skill jobs.

• According to NSSO, a person is either employed or unemployed based

on whether he/she belongs to the Labour Force or not. This depends on
the activity status of the individual.

• According to NSSO, the Activity Status is classified into two broad

categories:

 Employed i.e., working during the time when the survey was conducted.

 Unemployed i.e., available to work but is not recruited by any of the

sectors within the economy.

 Neither seeking nor is available for work.

 All those individuals belonging to the employed and unemployed

categories of the Activity status belong to the labour force.
  Labor Force Participation Rate (LFPR)= (Labor Force/ Total
Population)*100

 The unemployment rate is the percentage of people who are unable to

find work.

 Unemployment rate =

(Number of people unemployed/total labour force) x 100.

 According to the Periodic Labour Force Survey (PLFS) of NSSO, the

unemployment rate was at 5.3% in rural India and 7.8% in Urban India.

 The unemployment rate as of April 2019 has risen by 7.6%. This is the
highest in two years. This is based on the data provided by the State of
India’s Environment (SOE) in Figures released by Delhi based non-profit
organization – Centre for Science and Environment.

 Work force participation age 15-60 years.

Types of Workers in India

According to NSO:

 Self employed- Own self

 Regular/ Salaried employed- under some organization regularly.

 Casual Workers- very short time period on daily or monthly basis.

According to Census 2011:

 Main Worker- workers employed more than 183 days

 Marginal Worker- workers employed less than 6 months.

Measurement of Unemployment in India

• National Sample Survey Office (NSSO), measures unemployment in India

on following approaches:
 • Usual Status Approach: This approach estimates only those persons as
unemployed who had no gainful work for a major time during the 365
days preceding the date of survey.

• Weekly Status Approach: This approach records only those persons as

unemployed who did not have gainful work even for an hour on any
day of the week preceding the date of survey.

• Daily Status Approach: Under this approach, unemployment status of a

person is measured for each day in a reference week. A person having
no gainful work even for 1 hour in a day is described as unemployed for
that day.

Causes of Unemployment

• Large population.

• Low or no educational levels and vocational skills of working population.

• Inadequate state support, legal complexities and low infrastructural,

financial and market linkages to small/ cottage industries or small
businesses, making such enterprises unviable with cost and compliance
overruns.

• Huge workforce associated with informal sector due to lack of required

education/ skills, which is not captured in any employment data. For ex:
domestic helpers, construction workers etc.

• The syllabus taught in schools and colleges, being not as per the
current requirements of the industries. This is the main cause of
structural unemployment.

• Inadequate growth of infrastructure and low investments in

manufacturing sector, hence restricting employment potential of
secondary sector.

• Low productivity in agriculture sector combined with lack of

alternative opportunities for agricultural worker which makes
transition from primary to secondary and tertiary sectors difficult.

• Regressive social norms that deter women from taking/continuing

employment.