POVERTY IN INDIA:

ISSUES AND CHALLENGES

Submitted To: - Mrs. Shalini Bahuguna

Submitted By: - Kuunal Bakshi
A3221511016
2011-2016
BBA LL.B (H)

ACKNOWLEDGEMENT
1

I would like to express my special thanks of gratitude to my teacher Mrs. Shalini Bahuguna
who gave me the golden opportunity to do this wonderful project on the topic POVERTY IN
INDIA: ISSUES AND CHALLENGES, which also helped me in doing a lot of Research
and I came to know about so many new things I am really thankful to them.
Secondly, I would also like to thank my parents and friends who helped me a lot in finalizing
this project within the limited time frame.

INDEX
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S.NO.

CHAPTERS

INTRODUCTION

POVERTY IN INDIA

INCOME INEQUALITY AND POVERTY

IN INDIA

HUMAN POVERTY IN INDIA

ISSUES CAUSESING POVERTY

POVERTY ALLEVIATION PROGRAMMES

CONCLUSION

PAGE NO.

INTRODUCTION
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At the beginning of the new millennium, 260 million people in India did not have income
to access a consumption basket which defines the poverty line. Of these, 75 per cent were
in the rural areas. India is home to 22 per cent of the worlds poor. Such a high incidence
of poverty is a matter of concern in view of the fact that poverty eradication has been one
of the major objectives of the development planning process. Indeed, poverty is a global
issue. Its eradication is considered integral to humanitys quest for sustainable
development. Reduction of poverty in India is, therefore, vital for the attainment of
national and international goals.
The monitor able targets for the Tenth Five-Year Plan included quantitative targets for
reduction in the incidence of poverty, according to which poverty was projected to be
reduced by 5 percentage points by the end of the Tenth Plan period, by that time new
estimates for poverty would be available. Agricultural wage earners, small and marginal
farmers and casual workers engaged in non-agricultural, constitute the bulk of the rural
poor. Small land holdings and their low productivity are the cause of poverty among
households dependent on land-based activities for their livelihood. Poor educational base
and lack of other vocational skills also perpetuate poverty. Due to the poor physical and
social capital base, a large proportion of the people are forced to seek employment in
vocations with extremely low levels of productivity and wages. The creation of
employment opportunities for the unskilled workforce has been a major challenge for
development planners and administrators. Poverty alleviation has been one of the guiding
principles of the planning process in India. Indias anti-poverty strategy for urban and
rural areas has three broad strands; promotion of economic growth; human development
and targeted programmes to address the multidimensional nature of poverty.
The role of economic growth in providing more employment avenues to the population
has been clearly recognised. The growth oriented approach has been reinforced by
focusing on specific sectors which provide greater opportunities to the people to
participate in the growth process. The various dimensions of poverty relating to health,
education and other basic services have been progressively internalised in the planning
process. Central and state governments have considerably enhanced allocations for the
provision of education, health, sanitation and other facilities which promote capacitybuilding and well-being of the poor.
Investments in agriculture, area development programmes and afforestation provide
avenues for employment and income. Special programmes have been taken up for the
welfare of scheduled castes (SCs) and scheduled tribes (STs), the disabled and other
vulnerable groups. Antipoverty programmes that seek to transfer assets and skills to
people for self-employment, coupled with public works programmes that enable people to
cope with transient poverty, are the third strand of the larger anti-poverty strategy. The
targeted public distribution system (TPDS) protects the poor from the adverse effects of
rise in prices and ensures food and nutrition security at affordable prices. Government is
supposed to be the main actor in poverty alleviation both under socialist and communist
regimes. Capitalism works under the assumption that the individual is mainly responsible
for his or her poverty.

Under capitalism the government may play a role in alleviating poverty only for those
who are considered as destitute. However, under welfare capitalism again government
plays an important role in poverty alleviation. Thus, the task of poverty alleviation as well
as other social welfare measures by and large so far remained in the domain of
government action in the countries which predominantly follow socialist or communist
ideology as well as in the countries under welfare capitalism. Apart from the government,
the non-government organisations (NGOs) also play a role in social welfare inclusive of
poverty alleviation. But their role is always considered as subsidiary to government s
role. Besides the government and the NGOs, private sector is another major player that
shapes our life.
However, till recently private sector was never thought of as an agency for poverty
alleviation or social welfare. Of course, as a part of Corporate Social Responsibility
(CSR) at times private sector played a role in providing social welfare, but it is accused
that CSR is often used by the corporate sector more for getting propaganda mileage than
real welfare of the society. Besides, profit maximization is the main goal of any business
venture. It was thought that profit maximization and poverty alleviation are antithetical to
each other. Thus, the question of poverty alleviation or social welfare by the private sector
does not arise at all except as a part of CSR, with a limited scope.
Thus, before we entered the new millennium the world was happily living with the fact
that private sector will only try to maximize profit and the task of poverty alleviation will
remain primarily governments responsibility (Kalyan, 2008)

POVERTY IN INDIA
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In India the last decade of the twentieth century has seen a visible shift in the focus of
development planning from the mere expansion of production of goods and services, and
the consequent growth of per capita income, to planning for enhancement of human wellbeing. The notion of human well-being itself is more broadly conceived to include not
only consumption of goods and services in general, but more specifically to ensure that
the basic material requirements of all sections of the population, especially those below
the poverty line, are met and that they have access to basic services such as health and
education. This approach has resulted in the reduction in poverty along with overall
improvement in the quality of life. Since India became part of the global economy and
underwent economic reform in 1991, its economy is growing at a faster rate of nearly 10
per cent per annum. In the process, India has become the fourth largest economy in the
world. In the last two decades, a significant proportion of the population across the
country has reaped the benefits of this economic growth. They have become the part of
global economy and market, and their lives have transformed into one of global citizens
with all the comforts and luxury in life. Apart from this burgeoning middle class in the
country, the economic growth seemed to have touched the lives of the poor also.
According to the National Sample Survey results, people living below poverty line have
dramatically come down during the post -economic reform era. People living below
poverty line (BPL) came down from 36 per cent in 1993-1994 (50th Round, NSSO) to 26
per cent in 1999- 2000 (55th Round, NSSO). Many economists question this dramatic
change in poverty level . However, the intention of this paper is not to join the debate on
the level of poverty reduction in the country but to recognize the reduction of poverty in
the country during the post-economic reform era and to undertake a social audit of
poverty alleviation programmes in this era of fast economic growth.

INCOME INEQUALITY AND POVERTY IN INDIA

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The evidence suggests that economic inequalities have increased in India in the postreform period. Most studies have used various rounds of NSS consumption expenditure
survey statistics to calculate per capita income and Gini coefficients. As regards
inequality, it is well known that the NSS surveys, with a relatively low bound for its
highest expenditure range; do not capture upper income group consumption adequately.
With regard to consumption estimates, there is a problem of lack of comparability of NSS
statistics between the quinquennial large-sample consumption survey for 19992000
(55th Round) and the earlier ones. According to Sen and Himanshu (2005), this lowered
the measured rural poverty in India by almost 50 million and also affected inequality
measures. Revised estimates of rural inequality have been calculated by Deaton and
Dreze (2002), Sundaram and Tendulkar (2003a, 2003b) and Sen and Himanshu (2005).
General observations of these studies show that though unadjusted data show inequality
was reduced between rounds 50 and 55, if one uses (comparable) adjusted data, rural
inequality in fact went up in India between 199394 (50th Round) and 19992000 (55th
Round). Striking evidence about increased inequality in India in the post-reform period
comes from Sen and Himanshu (2005). Based on indices of real mean per capita
expenditure (MPCE) on a uniform reference period (URP) basis by fractile groups,
whereas the consumption level of the upper of the population, including the top 20 per
cent of the rural population, has gone up remarkably during the 1990s, the bottom 80 per
cent of the rural population has suffered during this period. This clearly shows that the
income/consumption disparity among the rich and poor and among urban and rural India
has increased during the 1990s. There has been both increased rural-urban inequality in
per capita expenditure at an all India level and greater rural-urban inequalities within
states between 19931994 and 19992000 (Deaton and Dreze 2002, CSO 2007).
Urban per capita NDP in 19992000 was estimated to be around 3 times that in rural
India. The ratio of urban to rural per capita consumption, based on National Sample
Survey data, has been increasing continuously from 1.55 in 1987-88 to 1.63 in 199394,
and further 1.75 in 19992000 to 1.9 in 200405. While this trend is similar to that in
China, what is striking is that, unlike China, the rate of urbanisation appears to have
decelerated in the period of high growth, with cities and towns becoming less welcoming
of rural migrants (Kundu, 2007).
Regional income differences have intensified, with the Gini coefficient for per capita
income across the states of India increasing. Sen and Himanshu (2005) also find that
state-wise rural and urban Gini coefficients, adjusted for changes in estimates, increased
for a majority of states between 199394 and 19992000. For all-India, the rural Gini
increased from 25.8 per cent to 26.3 per cent, and the urban Gini increased from 31.9 to
34.8 per cent. This is generally accepted to be an underestimate because the data cover
consumption expenditure, rather than income, and because the survey is known to
underestimate the tails of the distribution. The lowest decile of the population accounts
for only 3.6 per cent of estimated aggregate consumption, while the top decile accounts
for 31.1 per cent (NSSO, 2006).

HUMAN POVERTY IN INDIA

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Human poverty measures suggest even worse outcomes than for income poverty in India.
India has never been a good performer in human development terms, despite the much
better indicators in some states, particularly Kerala. Overall, both health and education
indicators have lagged well below those in other countries at similar levels of
development and with similar per capita income. But food poverty has been of particular
concern. Recent studies have shown alarming levels of hunger, especially in certain states
of India. Studies by IFPRI and ISHI quoted in Banerjee (2008) suggest that most states in
India rank somewhere among the poor SubSaharan countries: Punjab, Kerala, Andhra
Pradesh and Assam have a serious level of hunger; Madhya Pradesh fares worst in the
extremely alarming cohort of hunger. All the other states record an alarming level of
hunger, which is also the general ranking for the whole country. More appallingly, the
situation appears to have worsened in the recent period of rapid economic growth.
National Sample Surveys shows declining per capita calorie consumption, not only
among the entire population, but also among the bottom quartiles, for which consumption
was already very inadequate by international standards, as shown in Table -1. Other
indicators of both nutrition and health are also extreme. The latest National Family Health
Survey for 200506 shows that the proportion of underweight children below the age of
five years was 45.6 per cent in rural India and 32.7 per cent in urban India, indicating
hardly change from the previous survey undertaken eight years previously. More than
one-third of the rural population was also underweight. Anaemia often a good indicator of
nutritional deprivation was also widespread: 79.2 per cent of children aged 1223 months
and 56.2 per cent of ever married women between 15 and 59 years were found to be
anaemic.
TABLE 1
CALORIE INSUFFICIENCY IN INDIA
(PER CENT OF POPULATION)

2400 kcal per day

2200 kcal per day
2100 kcal per day

RURAL
1999-2000
2005
74.4
58.5
-

URBAN
2004- 1999-2000
05
87
69.5
20

200425

Source: (2007) based on NSSO data

ISSUES CAUSESING POVERTY

Rapidly Rising Population:
The population during the last 45 years has increased at the rate of 2.2% per annum. On
average 17 million people are added every year to its population which raises the demand for
consumption goods considerably.
Low Productivity in Agriculture:
The level of productivity in agriculture is low due to subdivided and fragmented holdings,
lack of capital, use of traditional methods of cultivation, illiteracy etc. This is the main cause
of poverty in the country.
Under Utilized Resources:
The existence of under employment and disguised unemployment of human resources and
underutilization of resources has resulted in low production in agricultural sector. This
brought a down fall in their standard of living.

Low Rate of Economic Development:

The rate of economic development in India has been below the required level. Therefore,
there persists a gap between level of availability and requirements of goods and services. The
net result is poverty.

Price Rise:
The continuous and steep price rise has added to the miseries of poor. It has benefited a few
people in the society and the persons in lower income group find it difficult to get their
minimum needs.
Unemployment:
The continuously expanding army of unemployed is another cause of poverty. The job seeker
is increasing in number at a higher rate than the expansion in employment opportunities.

Shortage of Capital and Able Entrepreneurship:

Capital and able entrepreneurship have important role in accelerating the growth. But these
are in short supply making it difficult to increase production significantly.

Social Factors:
The social set up is still backward and is not conducive to faster development. Laws of
inheritance, caste system, traditions and customs are putting hindrances in the way of faster
development and have aggravate" the problem of poverty.
Political Factors:
The Britishers started lopsided development in India and reduced Indian economy to a
colonial state. They exploited the natural resources to suit their interests and weaken the
industrial base of Indian economy.
In independent India, the development plans have been guided by political interests. Hence,
the planning a failure to tackle the problems of poverty and unemployment.

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POVERTY ALLEVIATION PROGRAMMES

The poverty alleviation programme have been broadly classified into self-employment
programmes, wage employment programmes, food safety programme and social security
programmes. The focus is on the central government schemes only. It is not possible to map
the special programmes of all the states. It must be noted here that some of the progressive
states have added additional components or given further subsidy to enhance the benefits of
the central schemes. For example, in the highly subsidized public distribution system of
Andhra Pradesh, the BPL card holders were provided rice at Rs. 2 per kg.
Self-employment programmes: This programme was started in 1970s in rural areas of the
country in the name of Integrated Rural Development Programme (IRDP) to increase the
source of income of small farmers and landless labourers. The beneficiaries were given
subsidized credit, training, and infrastructure, so that they could find new sources of earning.
In this scheme, agricultural labourers and small farmers received new skills to involve in
vocations other than cultivating land. They included fishery, animal husbandry, and forestry.
In the 1980s, this scheme was extended to schedule castes and tribes, women and rural
artisans.
Wage employment programmes: The main purpose of the wage employment programmes is
to provide a livelihood during the lean agricultural season as well as during drought and
floods. Under these programmes, villagers worked to improve the village infrastructure such
as deepening the village ponds, constructing village schools and improving the rural roads.
Thus the programmes not only provided employment to the villagers but also improved
village infrastructure and created village public assets. A positive fall out of this programme
is that it created higher demand for village labour, thereby pushing up the wage of the
labourer in the villages.
Food security programme: Meeting the very basic need of access to food is a major challenge
to the government in the post-economic reform era. Those who are below poverty line are
faced with the problem of meeting this very basic need. Starvation and hunger have been
reported in different parts of the country, even in economically advanced states like
Maharashtra. There is malnutrition in all age groups, especially among children. Problem of
low birth weight due to under nutrition of mother during pregnancy and underweight of
children are rampant in the country. The purchasing power of certain section of the society is
so low that they cannot access food at the market price. They need the safety net of food
subsidy. In this context, public distribution system or PDS assumes importance. Social
security programmes: Social security programmes are meant for those who are at the bottom
of the BPL facing destitution and desertion.
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The central government has launched the National Social Assistance Programme or NSAP in
August 1995. Under NSAP, there are three schemes. The first one is the National Old Age
Pension Scheme or NOAPS. A pension amount of Rs. 75 per month is given to those who are
above the age of 65 years and are destitute without any regular source of income or support
from any family members or relatives. Though it is a very useful scheme for the elderly
destitute, the coverage of the programme was not satisfactory. The scheme could reach out to
only 5 million beneficiaries. It was found that the benefits really reached the poor and the
leakage rate was found to be low.

CONCLUSION

Debate on poverty in India has remained mostly in the domain of economists. Poverty is
defined in terms of income, expenditure and nutritional value (calorie intake). Social
dimension of poverty is a neglected area of study.
Poverty is more of social marginalization of an individual, household or group in the
community/society rather than inadequacy of income to fulfil the basic needs. Indeed,
inadequate income is therefore one of the factors of marginalization but not the sole factor.
The goal of poverty alleviation programme should aim merely increasing the income level of
individual, household or group but mainstreaming marginalized in the development process
of the country.
The country cannot claim economic growth when a section of the people is marginalized to
the periphery of the society. The rapid economic growth process should accelerate the access
to services like education and health services for all, especially the marginalized citizens.

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