Poverty in India

Date: December 13, 2014

                                              Poverty               

 

Poverty can be defined as a social phenomenon in which a section of the society is unable to fulfil 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.

            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. The deprivation of a significant section of the society of minimum basic needs in the face of a luxurious life for the elite classes, makes poverty more glaring.

            Two types of standards are common in economic literature : 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 quotation covert 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 percent with the bottom 5 to 10 percent 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 existence of mass poverty that is the cause for concern.

Studies of Poverty in India – Several economic and organization have conducted studies on the extent of poverty in India. It would be worthwhile to study some of the important estimates.

Ojha’s Estimate of Poverty – Mr. P. D. Ojha estimated the number of persons below the poverty line on the basis of an average calorie intake of 2,250 per capita per day. This entailed monthly per capita consumption expenditure of Rs. 15-18 (1960-61 prices) in urban areas and of Rs. 8-11 in rural areas. On this basis, Ojha estimated that 184 million persons in the rural areas (51.8 percent of total rural population) and 6 million persons in the urban areas (7.6 percent of urban population) lived below the poverty line. For the country as a whole, 190 million persons (44 percent of total population) could be classed as poor in 1960-61.

            For 1967-68, Ojha estimated that 289 million persons (70 percent of the rural population) lived below poverty line. Ojha, therefore, concluded : “Compared to 1960-61, the nutritional deficiency in rural areas widened considerably in 1967-68. As compared to only 52 percent of the rural population in 1960-61, 70 percent of the population in 1967-68 was found to be below the poverty line.

Dandekar and Rath’s study of Poverty in India – Dr. V. M. Dandekar and Mr. Nilkantha Rath estimated the value of the diet with 2,250 calories as the desired minimum level of nutrition. They suggested that whereas the Planning Commission accepts Rs. 20 per capita per month (or Rs. 240 per annum) as the minimum desirable standard, it would not be fair to use this figure for both the urban and the rural areas. Dandekar and Rath, suggested somewhat lower minimum for rural population, i.e. Rs. 180 per capita per annum and a somewhat higher minimum Rs. 270 per capita per annum for the urban population at 1960-61 prices. However, at 1968-69 prices, the corresponding figures for the rural and urban population work out to be Rs. 324 and Rs. 486 per capita per annum respectively. Interpolating at this basis Dandekar and Rath estimated that in 1968-69 about 40 percent of the rural population (i.e. 166 million) and a little more than 50 percent of the urban population (i.e. 49 million) lived below the poverty line. The total number of persons living below the poverty line showed an increase from 177 million in 1960-61 to 216 million in 1968-69, but there was no change in the percentage of rural and urban poor to the population in the two years – it stood at 41 percent.

Minhas’ Study of Rural Poor – Another estimate made by B.S. Minhas on t he basis of NSS data revealed that if one regards the level of per capita annual consumption expenditure of Rs. 240 as the bare minimum, then 50.6 percent of the population lived below the poverty line in 1967-68. During the period 1956-57 and 1967-68, the proportion below the poverty line among the rural poor seems to have fallen in good harvest years but shot up again in bad harvest years. However, there has been a steady decline in the proportion of people below the poverty line, i.e. from 65 percent in 1956-57 to 50.6 percent in 1967-68. In other words, we had around 210 million poor people in rural areas in 1967-68, and the corresponding number in the earlier years varied between 206 and 221 million.

Bardhan’s Study of Rural Poor – Dr. P. K. Bardhan questioned the validity of the GNP deflator used by Dr. B. S. Minhas in his study. Bardhan suggested the use of agricultural labour price index as a more suitable deflator. His main argument was that the national income deflator covers both the agricultural and manufactured commodities and as such it is very likely to understate the rise in prices paid by the rural poor because the budget of the poor in the rural areas includes a much smaller proportion of the manufactures than the national average. Bardhan considered Rs. 15 at 1960-61 prices to be the national minimum as it was a conservative approximation to the minimum standard fixed by the Planning Commission’s Study. Bardhan’s study brought out the conclusion the percentage of rural people below the poverty line as defined above has gone up from 38 percent in 1960-61 to 54 percent in 1968-69.

Montek Ahluwalia’s study of Rural Poverty (1977) – Montek Ahluwalia studied the trends in incidence of rural poverty in India for the period 1956-57 to 1973-74. He used the same concept of poverty line i.e., an expenditure level of Rs. 15 in 1960-61 prices for rural areas and Rs. 20 per persons for urban areas. He mentioned : “this line has a well-established pedigree in the Indian literature…… However, it is important to emphasise that attempts to interpret this line as guaranteeing nutritional minimum could be seriously misleading. Suffice to say that this level of expenditure represents an extremely low level of living and one that has been widely accepted as ‘minimum level’ in the policy debate.”

            The most important feature of Montek Ahluwalia’s study is the marked fluctuation over time in the extent or incidence of rural poverty. The proportion of rural poverty declined initially from over 50 percent in the mid-fifties to around 40 percent in 1960-61, rose sharply through the mid-sixties, reaching a peak in 1967-68, and then declined again.

Prof. Amartya Sen study of Rural PovertyIn 1973 Prof. Amartya Sen gave the concept to measure the intensity of poverty & give the concept of poverty index. According to this method all people living below defined poverty level are considered as poor for ex. if poverty line of any nation is decided at Rs. 250 per month then the whole population with lower income than Rs. 250 per month to considered as poor. Peoples are arranged in a hierarchal way if they earn between any amount lower than Rs. 250. He gave the concept of poverty index to calculate it.

 

Reasons of Poverty – In India the reasons of poverty is divided into two categories – Economic and Social.

  1. Population rise with high acceleration
  2. Inclusion in lower level economic activity
  3. Unequal distribution of income and wealth
  4. Mass level of low productivity
  5. Low level of wage payment
  6. Mass unemployment and under employment
  7. Low education level
  8. Social and religion hippocrasy
  9. Traditional importance to primary sector
  10. The attitude of self sufficiency and compromising in Indians

 

 

Number and Percentage of Population below Poverty Line (Modified Expert Group Methodology)

 

Rural Number of Person (lakh)

%

Urban No. of persons (lakh)

%

Combined no. of persons (lakh)

%

All India

1973-74

2,613

56.4

600

49.0

3,213

54.9

1977-78

2,642

53.1

647

45.2

3,289

51.3

1983

2,520

45.7

709

40.8

3,229

44.5

1987-88

2,319

39.1

752

38.2

3,071

38.9

1993-94

2,440

37.3

763

32.4

3,203

36.0

Source : Planning Commission, Ninth Five Year Plan (1997-2002)

 

 

Number and Percentage of Population below Poverty line (2004-05) based on URP Consumption

 

 

Rural

Urban

Combined

S.No.

State

% of persons

No. of persons (in lakhs)

% of persons

No. of persons (in lakhs

% of persons

No. of persons (in lakhs)

1.

All India

28.3

2209.3

25.7

808.0

27.5

3017.2

2.

Uttar Pradesh

33.4

473.0

30.6

117.0

32.8

590.0

3.

Jharkhand

46.3

103.2

20.2

13.2

40.3

116.4

4.

Chattisgarh

40.8

71.5

41.2

19.5

40.9

91.0

5.

Bihar

42.1

336.7

34.6

32.4

41.4

369.2

6.

Orissa

46.8

151.8

44.3

26.7

46.4

178.5

Note :              States have been arranged in the ascending order on the basis of combined poverty ration in 2004-05.

Poverty Line : Rs. 356.0 in rural areas and Rs. 538.6 in urban areas (Per capita monthly expenditure)

Source  :          Planning Commission, Press Release, March 2007

 


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