Poverty in India

Poverty is defined as a lack of a specific (variable) amount of material goods or money. Poverty is a complex concept that encompasses social, economic, and political aspects. The complete lack of the means to meet basic personal necessities such as food, clothes, and shelter is referred to as absolute poverty, extreme poverty, or destitution.

Poverty in India

Poverty causes people to be socially alienated and marginalized. Their right to meaningfully engage in public affairs is routinely overlooked, and hence poverty alleviation is more of a human rights issue than a humanitarian one. As a result, the elimination of poverty and hunger is at the heart of all development efforts.

Causes of Poverty in India

  • The heavy pressure on the population: In India, the population has been rapidly increasing. This increase is primarily attributable to a decrease in the mortality rate and an increase in the birth rate. In 1991, India’s population was 84.63 crores, rising to 102.87 crores in 2001 and exceeding 140 crores in 2021. This population pressure is a roadblock to economic development.
  • Unemployment and underemployment: In India, chronic unemployment and underemployment are a result of the country’s continual population growth. There are two types of unemployment: educated and unemployed. Poverty is merely a symptom of unemployment.
  • Capital Deficiency: Capital is needed for setting up industry, transport, and other projects. Shortage of capital creates hurdles in development.
  • Under-developed economy: The Indian economy is underdeveloped due to a low rate of growth. It is the main cause of poverty.
  • Increase in Price: The steep rise in prices has affected the poor badly. They have become poorer.
  • Net National Income: In comparison to the size of the population, the net national income is fairly low. Its poverty is demonstrated by its low per capita income. India is one of the poorest countries in the world, with a per capita income of Rs. 20989 in 2003-04.
  • Rural Economy: The Indian economy is based on agriculture. Agriculture in India lags behind the times. It puts a lot of strain on the population. Agriculture has a low income and has a higher rate of hidden unemployment.
  • Lack of Skilled Labor: In India, unskilled labor is in abundant supply but skilled labor is less due to insufficient industrial education and training.
  • Deficiency of efficient Entrepreneurs: Entrepreneurs who are capable and efficient are required for industrial development. There is a scarcity of effective entrepreneurs in India. Poverty is exacerbated by a lack of industrial development.
  • Lack of proper Industrialization: India is a developing country in terms of industry. The industry employs about 3% of the overall working population. As a result, industrial backwardness is a primary contributor to poverty.
  • Low rate of growth: The economy has grown at a rate of 3.7 percent, while the population has grown at an annual rate of 1.8 percent. Thus, the economy’s per capita growth rate has been quite low when compared to the population. Poverty is primarily due to this factor.
  • Outdated Social institutions: The social structure of our country is full of outdated traditions and customs like the caste system, laws of inheritance, and succession. These hamper the growth of the economy.
  • Improper use of Natural Resources: Iron, coal, manganese, mica, and other natural resources abound throughout India. It has rivers that flow year-round and can create hydroelectricity. Manpower is plenty. However, these resources are not properly utilized.
  • Lack of Infrastructure: Transportation and communication systems haven’t been effectively established. The road system is insufficient, and the railway system is even worse. Agricultural marketing is faulty due to a lack of effective development of road and rail transportation. Power and raw materials are not delivered on time to industries, and completed goods are not adequately marketed.

How are poor people identified?

If India is to alleviate the problem of poverty, it must devise feasible and long-term policies to address the root causes of poverty and devise schemes to assist the poor. However, in order for these programs to be implemented, the government must first be able to identify the impoverished. To do so, a scale to measure poverty must be developed, and the components that make up the criteria for this measurement or mechanism must be carefully selected. Dadabhai Naoroji was the first to raise the concept of a poverty line in pre-independence India.

He calculated the ‘jail cost of living’ by using the menu for a prisoner and applying relevant current pricing. However, only adults are imprisoned, whereas children are also present in a real community. As a result, he modified his cost of living adequately to reach the poverty level. For this modification, he estimated that children made up 1/3 of the population, with half of them eating very little and the other half eating half of the adult diet.

This is how he arrived at the factor of 3/4th (1/6) (nill) + (1/6)(half) + (2/3)(full) = (3/4)(full). The weighted average of consumption of the three segments gives the average poverty line, which comes out to be 3/4th of the adult jail cost of living.

Several attempts have been made in post-independence India to devise a mechanism for determining the number of poor people in the country. In 1962, for example, the planning commission established a study committee. The Task Force on Projections of Minimum Needs and Effective Consumption Demand was established in 1979. An Expert Group was formed for the same purpose in 1989 and 2005. Many individual economists, in addition to the planning commission, have attempted to establish such a method.

We put people into two categories for the purpose of defining poverty: poor and non-poor, and the poverty line separates the two. There are three types of poor: the extremely poor, the extremely poor, and the poor. Similarly, there are several types of non-poor people, such as the middle class, upper-middle-class, rich, extremely rich, and utterly rich. Consider this a lie or a continuum extending from the extremely poor to the very wealthy, with the poverty line separating the impoverished from the non-poor.

Categorizing poverty

Poverty can be classified in a variety of ways. People who are always poor and those who are typically poor but have a little more money on occasion (for example, casual laborers) are classified together as the chronic poor in one method. The churning poor, who move in and out of poverty on a frequent basis (for example, small farmers and seasonal employees), and the sometimes poor, who are wealthy most of the time but periodically suffer from terrible luck, are two more groups. The transient impoverished are referred to as such. There are also some who are never impoverished, known as the non-poor.

Poverty Head Count Ratio

The Poverty HeadCount Ration calculates the percentage of the population whose per capita income/consumption expenditure is less than the official poverty line, or the total number of people living in poverty. From 74.5 million in 1993-94 to 52.8 million in 2011-12, the number of people living in poverty has decreased. The headcount ratio is easy to calculate. It is widely used as a criterion for determining whether or not someone is poor. The poverty level is not reflected in the headcount ratio.

Poverty Gap Ratio

The poverty gap ratio is the amount by which the poorest people’s consumption falls short of the poverty line. It indicates the severity of poverty; the higher the PGR, the worse the poor’s situation. PGR indicates the depth of poverty, whereas the number of poor people indicates the spread of poverty. PGR decreased in both rural and urban areas from 2004-05 to 2011-12. While the rural PGR fell from 9.64 in 2004-05 to 5.05 in 2011-12, the urban PGR rose from 9.64 in 2004-05 to 5.05 in 2011-12. During the same time period, it fell from 6.08 to 2.70.

Between 2004-05 and 2011-12, PGR fell nearly 50% in both rural and urban areas, indicating that poor people’s living conditions have improved in both urban and rural areas. The poverty gap index is defined as the population’s average percentage income shortfall from the poverty line. Poverty is more severe when the poverty gap index is higher. 

Absolute Poverty

Absolute poverty is when we consider every poor person equal. The general definition of poverty which is valid at all times and for all economies is called absolute poverty. The absolute poverty approach considers the poor in India as equal to the poor in the USA. The simplest definition of being poor is being unable to subsistence which is being unable to eat, drink, have shelter, and clothing. 

Relative Poverty

The difficulties involved in the application of the concept of absolute poverty, made some researchers abandon the concept altogether. In place of absolute standards, they have developed the idea of relative standards that is standards that are relative to a particular time and place. In this way, the idea of absolute poverty has been replaced by the idea of relative poverty.