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Poverty in India - Part 1
1.0 Introduction
Poverty can be defined as a social phenomenon in which a section of the society is unable to fulfill even its basic necessities of life. When a substantial segment of a society is deprived of the minimum level of living and continues at a bare subsistence level, that society is said to be plagued with mass poverty. Many countries of the third world exhibit invariably the existence of mass poverty, although pockets of poverty exist even in the developed countries of Europe and America. The LDCs (least developed countries) exhibit strong trends of poverty.
Attempts have been made in all societies to define poverty, but all of them are conditioned by the vision of minimum or good life obtaining in society. For instance, the concept of poverty in the U.S.A. would be significantly different from that in India because the average person is able to afford a much higher level of living in the United States. There is an effort in all definitions of poverty to approach the average level of living in a society and as such these definitions reflect the existence of inequalities in a society and the extent to which different societies are prepared to tolerate them.
2.0 Basic concepts
2.1 Definitions of poverty
Two types of standards are common in economic literature to define poverty: the absolute and the relative.
In the absolute standard, minimum physical quantities of cereals, pulses, milk, butter, etc. are determined for a subsistence level and then the price quotations convert into monetary terms the physical quantities. Aggregating all the quantities included, a figure expressing per capita consumer expenditure is determined. The population whose level of income (or expenditure) is below the figure, is considered to be below the poverty line.
According to the relative standard, income distribution of the population in different fractile groups is estimated and a comparison of the levels of living of the top 5 to 10 per cent with the bottom 5 to 10 per cent of the population reflects the relative standards of poverty. The defect of the latter approach is that it indicates the relative position of different segments of the population in the income hierarchy. Even in affluent societies, such pockets of poverty exist. But for underdeveloped countries, it is the existence of mass poverty that is the cause for concern.
Poverty line: The poverty line defines a threshold income. Households earning below this threshold are considered poor. Different countries have different methods of defining the threshold income depending on local socio-economic needs.
Poverty estimates in India: The Planning Commission releases the poverty estimates in India. Poverty is measured based on consumer expenditure surveys of the National Sample Survey Organisation (NSSO). A poor household is defined as the one with an expenditure level below a specific poverty line.
Poverty line in India and other countries: Earlier, India used to define the poverty line based on a method defined by a task force in 1979. It was based on expenditure for buying food worth 2,400 calories in rural areas and 2,100 calories in urban areas. In 2011, the Suresh Tendulkar Committee defined the poverty line on the basis of monthly spending on food, education, health, electricity and transport. According to this estimate, a person who spends Rs. 27.2 in rural areas and Rs. 33.3 in urban areas a day are defined as living below the poverty line.
The Rangarajan Committee, which has retained consumption expenditure as the basis for determining poverty, has pegged the total number of poor in the country at 363 million or 29.6 per cent of the population against 269.8 million (21.9 per cent) by the Suresh Tendulkar committee, as per the recommendations submitted in July 2014.
A family of five that spends less than Rs.4,080 and Rs.5,000 in rural and urban areas respectively is considered below the poverty line. This has been criticised for fixing the poverty line too low. A committee headed by former RBI governor C.Rangarjan (later the Chairman of the PM’s Economic Advisory Council) worked on a new methodology for defining the poverty line. The report came in 2014 and defined the poverty line at Rs. 32 and Rs. 47 for rural and urban, respectively.
Economists set a poverty line to fix a threshold income to get a headcount of poor people in a country. Households earning below the threshold, or the poverty line, are considered poor. Different countries have different methods of defining the threshold income depending on local socio-economic needs.
In most of Europe, a family with a net income of less than 60% of the "median net disposable income" - a broad measure of the national average income net of taxes is counted as poor. This would imply that a family in the United Kingdom would be poor if its current net income is less than £250 (about Rs. 22,500) a week.
A poverty line "relative" to the national average also gives an idea about the state of inequality. A sharp jump in the income of the richest will set the poverty line higher by pulling up the national average income. This could make the poor appear even poorer even though their incomes may have risen.
The USA uses a much simpler method. The poverty line represents the basic cost of food for a family multiplied by three. The threshold level is adjusted for inflation every year. A family is counted as poor if its pre-tax income is below this threshold. In 2011 - the latest year for which data is available - the poverty threshold for a family of four stood at $22,811 (about Rs. 11 lakh then).
There were 46 million such poor families accounting for 15% of the US population. Counting the poor, however, isn't as organised in developing countries such as India, partly because of a bustling cash economy that makes it difficult to capture income data. Instead, policymakers rely on data on family spend on essentials such as food, health and basic utilities like electricity. Economists point out that in least developed and middle income countries in Asia and Africa, consumption expenditure serves as a reliable proxy of income, assuming the poorest of the poor people spend their entire earnings on survival.
A comparison shows that India poverty line is abysmally low. For instance, South Africa had three poverty lines - food, middle and upper - and all three were higher than that of India.
The food poverty line in Indian rupees was Rs.1,841 per capita per month in 2010, middle poverty line was of Rs.2,445 and upper poverty line of Rs.3,484. Per capita poverty line of a rural adult Rwandian in Indian terms comes out to be Rs.892 per month, slightly more than Rs.816 for a person in rural India. The poverty line was Rwadan Franc 118,000 and it was based on a national consumption survey done in 2011 at the prices of October 2011. One should not forget that prices of food items in Rwanda are less than in India.
Criticism about the poverty line in India: According to critics, the government has deliberately kept poverty line low. A low poverty line has enabled government to show that millions have moved out of poverty. This, critics say, is factually incorrect as the definition of poverty line is disputed. They also say that the data lacks statistical rigour and has been released to gain political mileage.
3.0 STUDIES OF POVERTY IN INDIA
The history of counting the poor in India can be dated back to the 19th century. The earliest effort to estimate the poor was Dadabhai Naoroji's "Poverty and Un-British Rule in India" in which he estimated a subsistence-based poverty line at 1867-68 prices. Using the diet prescribed to "supply the necessary ingredients for the emigrant coolies during their voyage living in a state of quietude", which includes "rice or flour, dhal, mutton, vegetables, ghee, vegetable oil and salt", he came up with a subsistence cost based poverty line, ranging from Rs.16 to Rs.35 per capita per year in various regions of India.
Planning Commission - measuring consumption: The Planning Commission has been estimating the number of people below the poverty line (BPL) at both the state and national level based on consumer expenditure information collected as part of the National Sample Survey Organization (NSSO) since the Sixth Five Year Plan. The latest available data from such surveys is from NSSO conducted in 2004-05.
Since 1971, the Planning Commission has based its classification on the cost of calorie consumption in rural and urban India. In 1999-2000, the NSSO switched to a method known as the Mixed Reference Period (MRP) measuring consumption of five low-frequency items (clothing, footwear, durables, education and institutional health expenditure) over the previous year, and all other items over the previous 30 days. Until 1993-94, NSSO measured all consumption across a 30-day recall period. This made comparison of poverty estimates across previous exercises irrelevant.
Till the 1990s, consumption expenditure was determined based on the National Accounts Statistics. The National Accounts estimates consumption of a certain good by considering factors such as total production, imports, exports and consumption by specific parties such as government or business. The Planning commission used the National Accounts estimate of consumption as a "control" total. In other words, if the national accounts estimate was greater than the survey estimate of consumption, the Planning commission would multiply the total expenditure of each household by that ratio before calculating the number of poor. This substantially reduced the number of people below poverty line especially when the difference between the two estimates is high.
While the two estimates were comparable in the 1960s, the difference between them has continued to grow over the years. During the 1990s, the national accounts estimate of mean consumption grew much more rapidly than the survey. By 2005, the survey estimate of consumption was around 2/3rds of the national estimate.
Over the years, researchers and practitioners have argued against the 'scaling' of poverty estimates based on the National Accounts, contending that the survey estimates are no less accurate. Specifically, the following challenges were highlighted: The differential definition of consumption between the National Accounts and survey approach, the differences in timing of the two exercises, and the heavy reliance of the national accounting practice on various rates and ratios that link observable but irrelevant quantities to the unobservable and relevant ones. The practice was eventually abandoned by the Planning commission during the 1990s.
The Tendulkar report - counting essential goods and services: The fundamental difference between the Tendulkar Committee's approach and the Planning Commission's approach was that the Tendulkar panel moved on the premise that people didn't just have to spend on food but also other services such as health, education, durable goods, and entertainment. The committee also reduced the calorie intake requirement in 1973-74 from 2100 to 1776 calories in urban areas and 2400 to 1999 calories in rural areas per person per day. The contention was that people in rural areas consumed far less calories for the same income today compared to what they did in the early 70s.
This was one of the key criticisms against the committee's report. FAO reduced the calorie intake norm to 1770 as a Minimum Dietary Energy Requirement (MDER) for a person engaging in "light physical activity." An example of this kind of activity is "a male office worker in urban areas who only occasionally engages in physically demanding activities during or outside working hours".
The Tendulkar report also overlooked inclusion of the aged, destitute, primitive tribal groups, the disabled, single women, widows, and pregnant and lactating women in the category of poor - groups that the Supreme Court has already directed the Government of India to automatically include.
Ministry of Rural Development - the BPL survey: Beginning with the 1992 BPL survey, the Ministry of Rural Development (MoRD) has been organizing a survey/census every 10 years for identifying below poverty line households in rural areas. The census results are used by the MoRD and other departments to target beneficiaries for the various programmes they offer.
The first BPL census (1992) used income as a way of classifying the poor, and guidelines were issued to assess the annual income of the family. This approach was criticized because it was based on the self-reported annual income of rural households: income was not straight forward to explain or to measure, especially for rural households where many are self-employed in agriculture.
The 1997 census changed the criteria from income to consumption. However, some of the criteria for exclusion were very stringent. For instance, possession of a ceiling fan excluded families from being part of the BPL list; so did two hectares of land, which could be very unproductive in a few regions of India.
The 2002 census was based on a Score Based Ranking (SBR) of each household, indicating their quality of life. Families were identified as poor based on 13 criteria. The aggregated score based on these indicators were compared with cut-off scores of the states to identify the poor. The BPL census approach came under severe criticism from all quarters for its inherent complexity and lack of transparency in identifying the poor. There was lack of clarity in the criteria, drawbacks in how the scoring and aggregation was done, and increased probability of wrong selection. For instance, parameters such as availability of clothes were not directly verifiable or observable. In addition, the survey used factors such as provision of toilets, housing and education to identify the poor. It was feared that this will disincentivize the rural families from investing in these needs for the fear of being excluded from the BPL list. The census was not operationalized until 2006 due to a stay order passed by the Supreme Court on a writ petition filed by the People's Union for Civil Liberties (PUCL).
The NC Saxena Committee report: Given the criticism for the 2002 approach, the N C Saxena Committee report proposed an improved method for the next BPL census (SECC 2011), which involved the continuation of the scoring method in a simplified form. Instead of 13 indicators with a scale of 0 to 4 for each, the report proposes just five indicators (essentially focusing on community, land ownership, occupation, education, and old age or illness), with an aggregate score ranging from 0 to 10. The report recommended an automatic inclusion criterion for the most vulnerable sections of society (E.g. homeless people, persons with disability) who would all automatically get BPL cards. The report recommended a cut-off line for determining BPL status as `700 for rural areas and Rs. 1000 in urban areas since the existing basis of Rs. 365 per capita per month in rural area and `539 per capita in urban areas resulted in people consuming "just about 1,820 kcalories (kcal)" of food as against the norm of 2100-2400 kcal (rural-urban).
While the NC Saxena report was commended for proposing an approach that was simpler compared to the confused methodology of the 2002 BPL census, it was criticized for continuing to impose pre-defined "caps" on the BPL coverage for a particular state or area. Implementing caps can result in exclusion errors among the poor who deserve to get the BPL card. Also, given that a particular score can be obtained through various combinations of indicators, the proposed method was unsuitable for participatory implementation or verification.
Planning Commission vs. Ministry of Rural Development: Another recurring pattern has been the wide differences between the MoRD and Planning Commission estimates - the estimates arrived at by the two approaches have always been very varied, sometimes by a factor of 2.
When the NC Saxena report was released by the Ministry of Rural Development, the Planning Commission refused to acknowledge the results of the study, contending that fixing the percentage of BPL is "beyond the scope of the present committee and is being handled by a separate committee" and that fixing the rural poverty level at 50% would have "tremendous financial implications and once granted cannot be reduced." Though the NC Saxena report was released prior to the Tendulkar Committee report, the recommendations of the Saxena committee were unrepresented in the Tendulkar Committee recommendations.
In a Joint statement by the Deputy Chairman, Planning Commission and Ministry of Rural Development on October 3, 2011, it was confirmed that "the present state-wise poverty estimates using the Planning Commission methodology will NOT be used to impose any ceilings on the number of households to be included in different government programmes and schemes." This is a departure from the census of the earlier years (and the NC Saxena report) where the number of poor identified by the state is capped by the Planning Commission estimates.
The World Bank approach: The World Bank uses the "money metric" approach, whereby it converts the "one dollar per day" international poverty line into local currencies using "purchasing power parity" conversion factors. It then uses national household surveys to identify the number of persons whose local income is lower than the national poverty lines. The $1.25 per day measures indicates that India has made steady progress against poverty since the 1980s, with the poverty rate declining at a little under one percentage point per year. This means that the number of very poor people who lived below a dollar a day in 2005 has come down from 296 million in 1981 to 267 million in 2005. However, the number of poor people living under $1.25 a day has increased from 421 million in 1981 to 456 million in 2005. This indicates that there are a large number of people living just above this line of deprivation (a dollar a day) and their numbers are not falling.
There have been many criticisms against the World Bank's approach to measuring poverty. Sanjay G. Reddy and Thomas W. Pogge, in their paper "How NOT to count the poor", outline three reasons why the World Bank's approach to meauring poverty is "neither meaningful nor reliable" :
"The first problem is that the Bank uses an arbitrary international poverty line that is not adequately anchored in any specification of the real requirements of human beings. The second problem is that it employs a concept of purchasing power "equivalence" that is neither well defined nor appropriate for poverty assessment. The third problem is that the Bank extrapolates incorrectly from limited data and thereby creates an appearance of precision that masks the high probable error of its estimates. It is difficult to judge the nature and extent of the errors in global poverty estimates that arise from these three flaws." [G. Reddy and Thomas Pogge]
Firstly, the Bank's method is unreliable because its results are excessively dependent on the chosen PPP base year. The Bank compares the consumption expenditure of a person in one country and year with that of another person from another country and year, by using national CPIs that deflate or inflate the two national currency amounts into "equivalent" amounts of a common base year, and then using PPPs for this base year to compare the resulting national-currency amounts. PPPs of different base years and the CPIs of different countries each weigh prices of underlying commodities differently, as they reflect distinct global and national consumption patterns. As a result, comparisons over space and time together are path dependent: if they are undertaken in different ways they may lead to different results.
Secondly, consumption patterns vary from country to country for reasons of tastes, as actual consumption patterns are strongly influenced by prices and by the existing income distribution.
Existing "broad-gauge" PPPs are inappropriate for use in poverty assessment as they lack appropriate focus in their informational base. The problem is compounded by the fact that the information used is aggregated in a manner that compounds the distortions inherent in the use of inappropriate information.
Thirdly, the Bank's estimates of global poverty involve errors due to measurement problems associated with the data used under the Bank's preferred approach.
4.0 CAUSES OF POVERTY IN INDIA
The basic causes of poverty in India are as follows:
- Colonial Exploitation: During the British administration, the industrial sector of the economy was completely destroyed. The people were bound to depend on agriculture. The man-land ratio declined giving rise to widespread underemployment and disguised unemployment. Further the Britishers compelled the poor farmers to sell their product at a lower price and sold the British industrial product at a higher price in Indian soil, and accordingly exploited the Indians. Gradually the country became pauperized and the extent of poverty increased with the passage of time during colonial administration. Driven by the prevailing mercantilist policies, the British East India Company had only one overrising pursuit - to deplete Indian resources and enrich the colonial masters.
- Underdevelopment: Due to under-development and non-economic utilisation of natural and human resources, people in the country are not able to get a square meal per day.
- Inequality: Inequality in the distribution of wealth and income is another factor responsible for the abject poverty situation in the country. While large sections of the people are poor, wealth and productive assets have been concentrated with a few hands.
- Unemployment: Lack of employment opportunity is one of the basic causes of poverty. Due to unemployment, there is lack of purchasing power and effective demand with the people. This in turn results in low investment, low production and again in low income. So Nukes has rightly said: "A country is poor because it is poor".
- High growth rate of population: Growth of population is another factor responsible for poverty in India. The slow growth of income accompanied by a higher population growth reduces the per capita income and consumption expenditure and thus increases poverty.
- Regional disparity: There are extreme regional disparities leading to a grinding poverty situation against the prosperity of others. States like Punjab, Maharashtra, Gujarat and Haryana are richer in comparison to Bihar, Orissa and Madhya Pradesh.
- Capital deficiency: Due to shortage of capital, better technique of production could not be implemented in the economy. Consequently the productivity and efficiency of labour became less leading to low income and poverty situation.
- Low technology: Due to adoption of a low level of technology, the volume of production and productivity is also equally low, leading to a mass poverty situation.
- Social factors: Due to socio-cultural factors, people in India spend a large portion of their income extravagantly. Expenditure on marriage, religious ceremonies etc. forces them to borrow from non-institutional sources at a higher rate of interest. The early marriage system, joint family system, low level of education also account for mass poverty situation.
- Wealth creation Vs Wealth redistribution: India is poor because it is deficient in capital, not money. India is a vibrant, enduring democracy and the rule of law prevails. We have attained food-sufficiency. But with agriculture as the livelihood for 58.4% of our population, who generate less than half surplus for the rest of the people, have less disposable income than the food budget of others.
Income Generation through Job Creation is aimed at in all employment acts, from NREGA to NRLM. The mindless emphasis on preserving unproductive jobs may have made India a job-fetish.
What is vital is the relentless pursuit of ethical productive gains and not the perpetuation of unproductive jobs which makes them sacrosanct.
As Kanwal Rethi stated, "Our socialist and statist national agenda has proven disastrous and needs to give way to an entrepreneurial agenda, where the state's role is minimal with respect to industry and commerce".
Economic freedom: With elaborate coercive regulations in place and the remnants of licensing raj that put barrier after barrier to trade, people are still expected to innovate and to specialise. It is difficult for street vendors to expand, for an average individual to think of starting up a school or college, budget schools to find recognition and a rickshaw puller to dream. When dreams are crushed at the basic stage, society slowly forgets how to dream.
All the different organizational structures that we see in the market are an effort to sow cooperation and to manifest mutual benefits. A system of individual freedom, rule of law, private property and limited governance allow maximum scope for experimentation in cooperation. To compete to cooperate; to cooperate to compete.
Besides wealth creation through creating, not preserving jobs, respecting profits, moving away from an agrarian society to investment of time and effort in education, technology, sports, entertainment, banking, insurance, travel, tourism and so much more, increasing competition, cultivating entrepreneurship to add dynamism in the society, encouraging foreign investment and trade will also lead to 'conscious capitalism', an amazing vehicle for social cooperation and change.
5.0 SOLUTIONS
Povert alleviation in India requires a two-pronged strategy -
- The expansion of sectors which promise higher labour absorption and
- Empowering the poor with education, skill formation and health so that they can enter sectors which require higher competence and provide better remuneration which enable the poor to cross the poverty line, the following strategy can solve the problem of poverty.
Adopt a strategy of pro-poor growth instead of emphasizing liberalization and GDP growth: Former Prime Minister Atal Bihari Vajpayee in his Independence Day Message (15th August 2001) candidly stated: "The fruits of liberalization have not adequately reached the poor and the people living in rural areas. Inequalities have increased." It would be, therefore, futile to pursue the failed strategy of liberalization which has a focus on only 8 percent of labour force in the organized sector. The need of the hour is to take care of the 92 percent of labour force engaged in the unorganized sector. Liberalization has driven more and more people from the organized sector to the unorganized sector. There is a need to reverse this process and more and more units in the unorganized sector are enabled to graduate and join the ranks of the organized sector". The government should reappraise them and give priority to the removal of unemployment and recognizing the 'Right to work' as a basic human right. For this, a new model of development reconciling GDP growth and employment should be developed.
In this model, emphasis should be laid on development of irrigation and watershed development with people's participation. Similarly, degraded and wastelands should be developed through participatory efforts of panchayats. Agricultural co-operatives should be strengthened to undertake food processing industries and KVJC should assigned the task of marketing. SSI sector should be helped on the lines suggested by SP Gupta Study Group. Greater emphasis should be given on housing for the poor and economically weaker sections. Rural infrastructure in the form of roads, provision of power in rural areas should be strengthened and a programme of social infrastructure should be undertaken.
Besides, there is a need for promoting informal sector which is major source self-employment and absorption of casual labour.
Stimulating agricultural growth: Agriculture is expected to grow at 3.1 per cent in 2015-16. Agriculture production of food grains this year is expected to be close to the 2011-12 record of 259 million tonnes (MT). More importantly, agricultural profitability has increased over the last decade with record increases in MSPs (minimum support prices for agricultural produce) for all covered crops. MSP increase in the past 10 years, between 2004-05 to 2014-15, vary from about 125 per cent for foodgrains such as wheat and paddy to over 200 per cent for pulses like moong dal.
Spice exports from India are expected to reach US$ 3 billion by 2016-17, on the back of creative marketing strategies, innovative packaging, strength in quality and a strong distribution network. The Indian spices market is pegged at Rs 40,000 crore (US$ 6.61 billion) annually, of which the branded segment accounts for 15 per cent.
Indian basmati rice processing and marketing companies such as KRBL Ltd and LT Foods Ltd have seen their profits grow. Basmati exports to countries such as South Africa, Egypt, Azerbaijan, Tanzania, Poland and Ukraine, among others, have more than tripled in the past three years.
Increasing the productivity and job quality of the unorganized sector: The NDA government appointed 'Special Group on Targeting Ten Million Employment Opportunities", under the chairmanship of Dr. S P Gupta, the then member of the Planning Commission which submitted its report in 2002. The Special Group emphasized a shift in the strategy of development by emphasizing the growth of unorganized sector as the surest method to reduce unemployment and poverty.
To quote: 'The only answer to this situation is to increase productivity and job quality of the unorganized sector. It means that all attempts should be made to implement those policies which will release the basic growth constraints and by ensuring a level playing field for this sector.... In the attempt to increase the labour productivity, more emphasis should be on the growth of this sector rather than for substituting labour by capital. Further, to improve the job quality and its security, major changes in legislation will be needed regarding basic social security measures, working conditions, minimum wages and protection of labour interests."
There is a need to immediately implement the recommendations of the special group so that reduction in the rate of poverty reduction with higher GDP growth is halted and a reverse trend is generated.
Improving the share of wages in the process of growth to achieve poverty reduction: The saddest finding in the Approach Paper of the Eleventh Plan is: According to Annual Survey of industries, real wages declined even for workers in the organized sector although managerial and technical staff did secure large increase. The wage share in our organized industrial sector has halved after the 1980s and is now among the lowest in the world.
In this connection, the Report of the Secretary General, United Nations for the 2006 Economic and Social Council of the United Nations highlighted the centrality of employment to sustainable growth and poverty reduction. Accelerating employment growth is crucial for reducing poverty, as the Report pointed out, labour income constitutes the main source of income for the poor.
In fact, the entire policy of liberalization was based on 'survival of the fittest', the law of the jungle, whereas a civilized society should follow the law of 'survival of the unftttest' as the hallmark of its policy of inclusive growth. The policy permitted unlimited growth of profits, while denying labour 'decent work' as the ILO intended to achieve by assuring an equitable share of wages. In this, the government as a matter of policy should try to enter into a compact with industrial lobbies regarding sharing of high growth and productivity gains with labour.
Empowerment of the poor through education and skill formation: As a consequence of sustained growth in expenditure on education, there has been a remarkable growth in educational institutions at all levels - Primary, secondary and tertiary. The country was able to achieve a Gross Enrolment Ratio of 96% at the primary level, though the drop-out rate for class I to VE was 51 percent which is quite high. At the secondary and higher secondary level, total enrolment for the age-group 14-18 years was about 40 percent, though the drop-out rate for class I to X was as high as about 62 percent.
Gross enrolment ratio (GER) in higher education reached a level of about 11 percent in 2004-05. In 2013-14 this had increased to 20% which is still behind the world average of 23.2%. The country has huge infrastructure in education with 378 universiteis and 18,064 colleges. The country was able to establish institutions of excellence in the field of engineering, medicine, management and also create national level research institutions in agriculture and science. As a consequence, the country produces second largest educated and skilled manpower in the world, only next to China.
The development of a huge educational structure of 378 universities and 18,064 colleges, 1.52 lakh secondary and higher schools, and 10.43 lakhs of primary and upper primary schools is a matter of legitimate pride.
Empowerment through provision of better health: The strong link between poverty and health needs to be recognized. Long-term illness and expensive illness can drive even the non-poor, into poverty. To improve health care, a comprehensive approach is needed which comprises individual health, public health, sanitation, clean drinking water and knowledge of hygiene and bringing up of children. Although India has achieved significant improvement in various health indicators like life expectancy, infant and maternal mortality rate, yet countries in similar stage of development as China, Indonesia and Sri Lanka performed much better. 42.6 million persons lived in slums in urban areas, accounting for 15% of urban population. Lack of sanitation and poor quality of drinking water lead to high incidence of diseases among slum dwellers.
Empowering the poor through provision of housing: There is a need to remove the shortage of permanent houses in the rural as well as urban areas. Not only that, an effort has to be made to provide the basic amenities of life such as drinking water, toilets and electricity. The country must launch a massive programme to provide housing and basic civic amenities.
The situation is much worse in rural areas than in urban areas. Government should subsidize housing for the poor and weaker sections of the society and recover the cost as part of rent and installments over a period of 20 years.
Since rural areas are not offering enough employment opportunities, there is a push factor working and as a consequence, the urban population is increasing. In the urban areas, housing property has become so costly that it is beyond the reach of the majority of population. Most important is the price of land whose price has been skyrocketing. The way out is that the government acquires land and does not add it as a charge from the poor and lower middle classes and starts a massive programme of housing.
Empowerment through skill formation for our expanding IT sector: In view of the increasing use of computers and Information Technology in all walks of life, the demand for skilled labour is on the increase. Since this requires access to higher education and vocational training, only those who can afford costly education and vocational training, are able to benefit from the expanding opportunities of employment. Consequently, the poor are being priced out because they cannot afford expensive higher education and vocational training. Thus, the State should:
- Provide subsidized higher education and vocational training for the poor
- Institute a iarge number of merit-cum-means scholarships for the poor, and
- Help such institutions, both financially and otherwise, which provide education to the poor.
Such measures, if taken on an emergency basis as a national priority, can help the poor to rise in life.
Providing employment through National Rural Employment Guarantee Scheme (NREGS): NREGS was started by the UPA Government as a national programme to provide 100 days of employment to begin with, through asset-creating public works every year at minimum wages to one-able bodied person in every rural poor class household. The Modi government has attempted to rationalise it.
6.0 POVERTY ALLEVIATION PROGRAMS IN INDIA
The development strategy in India, as has already been mentioned, is tuned to poverty alleviation in such a way that reduction in poverty is supposed to be the outcome of increase in income accruing to the poor from the general growth process and from the direct income generation programmes complementing the general growth process. However, India's attempts to reduce income poverty have yielded mixed results as causes of poverty have not always been related to "lack of adequate income" but also to factors outside income or purchasing power.
The present policy frame is based on three-pronged action to alleviate and reduce poverty in the country which constitutes:
- acceleration of economic growth
- direct attack on poverty through employment and income-generating programmes and assets-building for the poor, and
- human and social development policies for the poor and the disadvantaged. The strategy of accelerating economic growth is derived through the solution of a family of mathematical models.
The existing major programmes for the poor in India that are in operation could be classified into the following broad categories:
- Public distribution system (PDS) and nutrition programmes
- Self employment programmes
- Wage employment programmes
- Social security programmes
The BPL census conducted for identification of poor families in the Tenth Plan (2002-2007) tried to incorporate the element of accessibility to basic essential needs in addition to other indicators like assets and endowment. This census is based on thirteen indicators of well-being. The indicators are: (a) Land Holding; (b) Shelter; (c) Clothing; (d) Food Security; (e) Sanitation; (f) Ownership of Consumer Durables; (g) Education; (h) Labour Characteristics; (i) Occupation category; (j) Children's status;
(k) Indebtedness; (l) Migration and (m) Preference towards State Assistance.
For each of these thirteen indicators, the households are awarded a score in a five point scale as 0, 1, 2, 3 and 4; the scores being inversely related to the poverty and deprivation of a household. A low score implies a higher level of poverty and deprivation and vice-versa. Hence, the lower the score of a household, the higher is the probability of its selection as a beneficiary.
For each household, the scores assigned on the basis of these 13 indicators are added up to get an aggregate score for a household, which lies between zero (minimum possible aggregate score when a household is assigned a zero score for all indicators) and 52 (maximum possible aggregate score when a household is assigned the highest score i.e. '4' for all the 13 indicators). The household with the least score is selected for assistance first. Then the household with next lowest score is selected. Following this pattern, the household with the highest score will be the last to be covered. Thus, in this method, the rural households are ranked in terms of their inaccessibility to some basic essential needs, which are crucial to live a life with dignity.
THE IDEA OF POVERTY
First, many factors converge to make poverty a complex, multidimensional phenomenon. Second, as expected, poverty is routinely defined as the lack of what is necessary for material well-being — especially food but also housing, land, and other assets. Poverty is the lack of multiple resources leading to physical deprivation. Third, poor people’s definitions reveal important psychological aspects of poverty. Poor people are acutely aware of their lack of voice, power, and independence, which subject them to exploitation. Their poverty also leaves them vulnerable to rudeness, humiliation, and inhumane treatment by both private and public agents of the state from whom they seek help. Poor people also speak about the pain brought about by their unavoidable violation of social norms and their inability to maintain cultural identity through participating in traditions, festivals, and rituals. Their inability to fully participate in community life leads to a breakdown of social relations. Fourth, the absence of basic infrastructure — particularly roads, transport, water, and health facilities — emerged as critical. While literacy is viewed as important, schooling is occasionally highly valued but often notably irrelevant in the lives of poor people. Finally, poor people focus on assets rather than income and link their lack of physical, human, social, and environmental assets to their vulnerability and exposure to risk. Thus, poverty is a stifling, multidimensional social phenomenon.
6.1 Poverty and the 12th plan
The incontrovertibly clear landmark contribution made by the UPA-II government was that for the first time in the last 20 years, the poverty line has been delinked from entitlements of the people of India. Indeed, with the 12th Plan, this government took the first steps in acknowledging that poverty is a multi-dimensional concept that cannot be reduced to consumption expenditure alone. To illustrate, till now if you were to be regarded as a beneficiary of the Indira Awaas Yojana (IAY) or the Total Sanitation Campaign, you needed to possess a BPL card. The distribution of these cards was plagued by humungous errors of inclusion and exclusion, such that many of the really poor would not be included but those with muscle power at the local level managed to hustle BPL cards even if they were not poor.
During the 12th Plan, all this is poised to change with the enshrining of the principle - "programme-specific indicators for programme-specific entitlements." This is a clear recognition that poverty has many dimensions, each of which is to be tackled by different programmes and the benefits of each programme will either be universal (as in MGNREGA, health, primary education, sanitation, mid-day meals, etc.) or be based on data on specific deprivations such as homelessness.
The Socio-Economic and Caste Census (SECC) conducted by the Government of India, in partnership with all State Governments, was a landmark. The SECC data will be presented in gram and ward sabhas across the country and this will enable a kind of social audit of this data and foster citizen awareness and participation in the process. The SECC contains invaluable information on homelessness, manual scavenging, disability and a host of other deprivations, all of which are major constituents of poverty. These will be used to identify the people entitled to specific benefits. Thus, the homeless will be the beneficiaries of IAY and the disabled will get disability pensions, irrespective of whether or not they have a BPL card. The food security legislation covers 67 per cent Indians, which is more than three times the number of people living below the consumption poverty line (22 per cent).
Of course, whether the consumption poverty line should remain as low as $1.25 is a relevant question. This is the internationally accepted definition of absolute poverty. There is also a notion of moderate poverty pegged at two U.S. dollars. But counter-questions are: even if we were to raise the poverty line to two U.S. dollars, would it be right to exclude people from benefits of government programmes such as PDS, based on such a line? And should a uniform line, at whatever level, be at all used, in an indiscriminate manner, across programmes? As has been done for decades now? The World Bank revised the international poverty line to $1.90 per day from Oct. 2015.
In fact, the 12th Plan clearly acknowledges that even if the figure of people below the consumption poverty line were to fall to zero, removing poverty in India will remain a challenge till every Indian has access to safe drinking water, sanitation, housing, nutrition, health and education. That is the challenge we need to focus on, rather than splitting hairs over the singular estimation of poverty.
7.0 Empowerment Line
A new benchmark called the Empowerment Line, developed by the McKinsey Global Institute, aims to create a new and more holistic policy framework for poverty reduction. It calculates the cost for an Indian household to attain the basics and then compares these benchmarks to actual consumption data to measure needs that are going unmet. The results debunk a number of misconceptions about the nature of poverty in India.
Myth #1: Just 22 percent of Indians are poor. This is India's official poverty rate, but it counts only those in the most abject circumstances -- and even a cursory scan of India's human development indicators suggests more widespread deprivation. The Empowerment Line reveals that 56 percent of Indians, some 680 million, lack the means to meet their basic needs. Just above the official poverty line, some 413 million are "vulnerable." They have only a tenuous grip on a better standard of living, and shocks such as illness or a lost job can easily push them back into desperate circumstances.
Myth #2: Food is the biggest unmet need of India's poor. Hunger remains a daily fact of life for the poorest of the poor. But health care, drinking water, and sanitation constitute 40 percent of the population's unmet needs by value. India's national debate on poverty tends to focus on calorie sufficiency rather than these critical services. On average, Indians lack access to over half the health care infrastructure and services they need.
Myth #3: Rising incomes are the key to a better quality of life. This observation is true -- but only up to a point. With higher incomes and purchasing power, people can afford better housing, sanitation, drinking water, and fuel for cooking and lighting. But the ability to spend is only one side of the equation. The poor also depend on community-level infrastructure such as schools and health-care networks. On average, Indians lack access to 46 percent of basic services, and that number soars up to 59 percent for the most deprived districts of Uttar Pradesh and Bihar.
Myth #4: Rising welfare budgets were the most important factor in past poverty reduction. India has been committing more resources to social welfare. Public spending for basic services rose by some 11 percent per year in real terms from 2005 to 2012, eventually reaching $118 billion. But about half of this spending did not translate into real benefits for the poor due to waste, corruption, or simple ineffectiveness. Rising government spending did drive about one-fourth of poverty reduction from 2005 to 2012, but jobs and rising incomes accounted for most of the progress that was achieved.
Myth #5: More subsidies and social transfers can eradicate poverty in the future. The additional consumption required to raise 680 million Indians to the standards of the Empowerment Line is equivalent to about 4 percent of GDP. India lacks the fiscal resources to support a spending increase of this magnitude and even if it found the money, its track record of leakage and ineffective spending would limit the gains to the poor. Yet it is feasible to lift some 580 million people over the Empowerment Line in the next decade. Some 90 percent of this impact depends on non-farm job creation, faster agricultural productivity growth, and more effective delivery of services. Policymakers can set this process in motion by focusing on infrastructure delivery, easing the regulatory burden facing businesses, tax and product market reforms, land market reform, labor market flexibility, and workforce skills. These changes can set off a virtuous cycle of growth that generates more revenue, enabling India to meet its fiscal targets even as it ploughs additional funding back into social services.
8.0 INDIAN DEFINITION DEBATED
India's definition of "poor" has been hotly debated by development economists and activists, with several finding the official poverty line too low and leaving out a number of people who might still need government assistance. In 2014, a report by the Indian government Planning Commission estimated that 363 million Indians, making up 29.5% of the total population, were living below the poverty line in 2011-12. The report, by the Rangarajan Expert Group, also estimates that the India poverty ratio fell from 38.2% to 29.5% between 2009-10 and 2011-12, lifting 91.6 million individuals out of poverty.
Living on double the Indian Planning Commission poverty line of $2.40 per day would still mean not meeting nutritional and other needs at developed economy levels. Many poor people "lifted out of poverty" are still living at levels closer to $2.40 than $10 per day. The Pew report estimates that at the proposed Rangarajan poverty line, food consumption alone would take up 57% of a rural family's budget and 47% of an urban family's budget.
India has traditionally been setting poverty lines (and welfare payments) based on consumption data, while the SECC presents a much more detailed household level data. The Rangarajan expert group recommends that the SECC data and population census be used for determining entitlements, and poverty ratios be merely used for determining allocations between states.
The nature and design of India's welfare state is undergoing a shift under the National Democratic Alliance government. The new government, in its central budget presented earlier this year, cut back funding for welfare schemes. The states have a larger share from the tax pool and are now expected to use their own funds to maintain welfare at current levels, and the central government has no say on allocation. While this grants more autonomy to the states, there are concerns that maintaining welfare schemes at current levels might prove difficult for state governments that now need to make changes in their budgets. Poorer states that rely more on central funding for welfare payments may also find it challenging to maintain allocations.
At the same time, the center is embarking on new welfare programs. Perhaps the most ambitious and with the most political capital riding on it, is the prime minister's Jan Dhan Yojana initiative, that aims to bring access to financial services to all households.
In January 2015, 115 million accounts were opened under the scheme, mobilizing INR 91.8 billion ($1.4 billion), the number of new accounts in the short time frame setting a Guinness record. In May 2015, Prime Minister Narendra Modi launched one pension and two insurance schemes, with the goal to create a uniform social security system for all Indians. The hope is that with financial services, mobile phones and unique identification numbers in place for all Indians, it will be easy to make direct welfare payments to the poor. SECC data shows that 71% of the rural India population owns a mobile phone. That, at least, is some reason to cheer.
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