Faculty of Law, Aligarh Muslim University

Assignment :Mid Term

Subject : Economics
Topic : Poverty and its Causes in India
 Poverty and its Causes in India

Introduction
There are many ways of defining and estimating poverty in a country, such as India. For
example, the Tendulkar Committee in India based its calculations of subsistence level on the
requirement of cereal, pulses, milk, edible oil, non-vegetarian items, vegetables, fresh fruits, dry
fruits, sugar, salt & spices, other food, fuel, clothing, footwear, education, medical
(non-institutional and institutional), entertainment, personal & toilet goods, other goods, other
services and durables. Hence, as per Tendulkar Committee methodology, the national poverty
line (in Rs per capita per month) for the year 2011-12 was calculated at Rs 816 for rural areas
and Rs 1000 for urban areas. Using this methodology, the National Sample Survey Organisation
estimated poverty at 21.9% of the population (269 million) in 2011-12. That means in the
category of poor fell the people whose daily income was less than Rs 27 a day in villages and Rs
33 a day in cities. On the other hand, the subsequent Rangarajan Committee pegged the poverty
line at Rs 32 in rural areas and Rs 47 in urban areas. On this basis, the number of poor living
below the poverty line in India in 2011-2012 was revised to 29.5% of the population (363
million).

In contrast, the international poverty line as updated in October 2015 by the World Bank stands
at US$1.90 per day (2011 PPP). In 2011, 21.2% of the total population in India was estimated to
be living below this poverty line, as per the World Bank data.

Household expenditure is considered for calculating the poverty count in India. In this method,
the purchasing power of people for buying food and some essential non-food items is taken into
account. In the last few years, though the condition in cities continues to be more or less the
same, the government welfare programmes have really helped reduce the incidence of poverty in
rural India. Schemes such as MGNREGS have resulted in a decrease in poverty in rural areas at a
faster pace than their urban counterparts.

But in spite of all the attempts, the overall number of poor in India is still increasing and
becoming a hurdle. Poverty is just like a disease to which many other problems such as crime,
low-paced development, etc are associated. There are a number of people in India who still live
on the streets and beg for the whole day to eat a meal. Underprivileged children are unable to
attend school and, and those have the opportunity to drop out after a year or so. People below the
poverty line live in unhygienic conditions and are so prone to many health problems. With this,
the vicious cycle of poor health, lack of education and more poverty keeps on increasing.
Facts on Poverty in India

Who comes in the category of the poorest class in India?

Tribal people, Dalits and labour class including farmworkers in villages and casual workers in
cities are still very poor and make the poorest class in India.

Where do the majority of poor live in India?

60% of the poor still reside in the states of Bihar, Jharkhand, Odisha, Madhya Pradesh,
Chattisgarh, Uttar Pradesh and Uttarakhand. The reason for these states to be in the category of
the poorest state is because 85% of tribal people live there. Also, most of these regions are either
flood-prone or suffer from calamities. These conditions hamper agriculture to a great extent, on
which the household income of these groups depends.

According to the Global Hunger Index Report 2018 by the International Food Research Institute,
India ranks 103 in the Global Hunger Index (GHI). Though there is no shortage of food
production in India, our nation still has 35.8% of children under five in the underweight category.
India is working hard to become a superpower in 2020, but such statistics are worrisome, as our
nation still lags behind in improving GHI. At the same time, India seems to have achieved
commendable success towards poverty eradication, because it is no longer the country with the
largest number of poor people.

In 2018, for the first time in decades, Nigeria pipped India to the top slot in terms of the total
number of people living in extreme poverty. As per World Poverty Clock, India’s figure of 70.6
million was surpassed by Nigeria’s 87 million people living in extreme poverty.

Moreover, according to a Sustainable Development Goals Report of the United Nations

Development Program released in 2018, India has made significant progress: “Between 2005-06
and 2015-16, the incidence of multidimensional poverty in India was almost halved, climbing
down to 27.5 percent from 54.7 percent as per the 2018 global Multidimensional Poverty Index
report. Within ten years, the number of poor people in India fell by more than 271 million (from
635 million to 364 million). This MPI index measures progress across 3 key dimensions of
health, education and living standards, and uses 10 indicators – nutrition, child mortality, years of
schooling, school attendance, sanitation, cooking fuel, drinking water, electricity, housing and
assets. People who lag behind in at least a third of the MPI’s components are defined as
multidimensionally poor.

Causes of Poverty in India

The high population growth rate is one of the major reasons of poverty in India. This further
leads to a high level of illiteracy, poor health care facilities and lack of access to financial
resources. Also, high population growth affects the per capita income and makes per capita
income even lower. It is expected that the population in India will reach 1.5 billion by 2026 and
then India will be the largest nation in the world. But India’s economy is not growing at the same
pace. This means a shortage of jobs. For this much population, near about 20 million new jobs
would be required. The number of poor will keep on increasing if such a big number of jobs
won’t be created.

The ever-increasing prices of even basic commodities is another reason for poverty. A person
below the poverty line finds it difficult to survive. The caste system and unequal distribution of
income and resources is another reason for poverty in India.

Apart from all these, unskilled workers are paid very low in spite of the hard work they put in
daily. The problem lies with the unorganized sector as owners do not bother with the way their
workers live and the amount they earn. Their area of concern is just cost-cutting and more profit.
Because of the number of workers looking for a job is higher than the jobs available, unskilled
workers have no other option but to work for less money. The government should really find a
way to impose minimum wage standards for these workers. At the same time, the government
should ensure that this is implemented well.
Manifestation of Measurement of Poverty:
The important measurements of poverty are malnutrition (below a limit of 2,100 to 2,400
calories per day), low consumption expenditure (below Rs. 259 per person per month at 1993-94
price level), low income (below Rs. 520 per person per month at 1993-94 price level), chronic
ill­ness or poor health, illiteracy, unemployment and/or underemployment, and unsanitary
housing conditions. Broadly, the poverty of a given soci­ety is expressed in terms of poor
resources, low national income, low per capita income, high disparity in income distribution,
weak defence, and the like.

Some scholars have referred to poverty-linked characteristics of households to point out that
individuals from these households run a greater risk of being poor. The chances increase as the
households exhibit more of these characteristics.

The more important among these charac­teristics are: absence of a full-time wage-earner in the
household, households where men are above 60 years age, households headed by a fe­male,
households with more than six children of less than 18 years of age, households whose heads are
living on daily wages, households whose members have less than primary education, households
with members without work experience, and households having members only with part-time
employment.

Incidence and Magnitude of Poverty in India

India represents a dichotomy in development. It ranks 19th in world industrial production and
twelfth in total gross national production (GNP); yet it has a large population that is extremely
poor. The United Nations Human Development Index based on three indicators, viz., life
expec­tancy, educational attainment and real GDP in purchasing power parity terms, ranks India
134th among 174 countries.

In terms of real GDP per capita, it is ranked 141st, while Pakistan is 100th and China is 123rd
(Out­look, February 14, 1996). Since independence, the country has registered a significant
overall growth rate, and there has been a progressive increase in the per capita income—from Rs.
1,630 in 1980-81 to Rs. 3,269 in 1987- 88, Rs. 4,974 in 1990-91, Rs. 6,234 in 1993-94 and Rs.
15,550 (or $370) in 1998-99. The per capita income at constant prices (1980-81) was estimated
to be Rs. 2,226 in 1992-93, Rs. 2,282 in 1993-94 and Rs. 2,362 in 1994-95 (The Hindustan
Times, August 22, 1995).

If we calculate India’s per capita income (of $ 370) in 1998-99, in terms of purchasing power
parity (PPP) of the nation’s currency, (i.e., with PPP correction) it will be $1,660 per annum.
Even then, the US per capita income would be 18 times more than that of India.

The estimates of the Planning Commission held (before accepting Lakdawala Committee
recommendations in March 1997) that the per­centage of the population living below the poverty
line decreased from 51.5 per cent in 1972-73 to 37.4 per cent in 1983-84, 29.9 per cent in 1987-
88, and 18.1 per cent in 1993-94 (The Hindustan Times, August 22, 1995 and April 5, 1997).
However, according to the Expert Group (National Institute of Public Finance and Policy)
estimates, it was much higher. While in 1977-78, it was 51.8 per cent, in 1983-84 it was 44.8 per
cent, in 1987-88 it was 39.3 per cent, and in 1993-94 it was 33.4 per cent.

According to the UNDP, the number of poor persons in India in 1990 was 410 million (The
Hindustan Times, August 4, 1993). Economists and the World Bank, however, claim the number
of people below the poverty line to be near 400 million. This means that the poor in India to­tal
the population of Pakistan and Bangladesh put together.

The Planning Commission decided in March 1997 to adopt the Lak­dawala methodology in
measuring the present incidence of poverty in the country. Lakdawala Committee was appointed
in September 1989, which submitted its report in July 1993. No action was taken on the report
for more than three years till all of a sudden the Planning Commission in­voked the authority of
this report in 1996.
At one stroke, the Lakdawala method revised upwards the estimate of the people below the
poverty line to 35.97 per cent as against the 1993-94 estimate of 18.1 per cent. This de­cision had
wide ramifications not only for the formulation of the development strategy for the Ninth Five
Year Plan but also for all time to come. Of about 320 million poor persons in India (according to
new esti­mates of the Planning Commission), the absolute destitutes—which are the bottom 10
per cent of the society—are around 50-60 million. These are old, sick and disabled people, to
whom it is not employment and the opportunity of earning of income that has to be provided, but
some kind of social security, involving regular monthly payment.

This leaves some 260 million (according to official figures) to 350 million (according to
economists) people living at various levels of poverty for whom employ­ment opportunities have
to be provided. In the rural areas, these poor include landless agricultural labourers, casual
non-agricultural labourers, marginal farmers, and displaced village artisans, such as blacksmiths,
car­penters and leather-workers; while in the urban areas, these poor people comprise
non-unionised industrial workers, vegetable, fruit and flower vendors, servants in tea-shops,
domestic servants and daily wage earners.

As a result of economic growth over the past few years, the number of people in the upper,
upper-middle and middle-middle income segments have been increasing according to various
surveys. The number of house­holds earning less than Rs. 30,000 a year at today’s (1997-98)
prices is about 50 per cent, with income above Rs. 3 lakh a year (i.e., upper class) is 0.7 per cent,
and with income between Rs. 30,000 and Rs. 3 lakh (i.e., middle class) is 40 per cent of the total
households. In the next ten years, the relative size of these income groups is expected to undergo
a dramatic change.

The number of households earning less than Rs. 30,000 per an­num will constitute only about 14
per cent, the rich with income over Rs. 3 lakh per household will constitute about 3.5 per cent,
while the middle- class people with income between Rs. 30,000 and Rs. 3 lakh will be more than
80 per cent of the total households (The Hindustan Times, August 24, 1998). Unless inequality in
income distribution is reduced, the chances of reducing the number of people below the poverty
line will be low.

While prices in India have soared, incomes have shrunk; and inflation has increased. In the first
week of August 1999, inflation was reported to be 1.7 per cent. While in 1996-97, it was about 7
per cent, it was 2.7 per cent in Britain, 1.8 per cent in Canada, 0.8 per cent in Australia, 2 per
cent in Spain, and 0.2 per cent in Sweden.
Conclusion
Poverty is a multifaceted concept, which also includes social, economic, and political elements.
It is a social condition wherein human beings do not have enough financial means to meet the
most basic standards of life that are acceptable by society. Individuals suffering from poverty do
not have the means to pay for the basic needs of daily life such as food, clothes, and shelter.
Those who suffer from poverty also do not have access to social tools of well-being such as
education and health requirements. The direct effects of poverty are hunger, malnutrition, and
susceptibility to diseases. These have been identified as huge problems across the world. Effects
of poverty in India on individuals in a socio-psychological manner. This condition disables them
from being able to afford simple recreational activities and getting progressively marginalized in
society.