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Test Paper

Q73- It is imperative that the best of what digital currencies have to offer be integrated into the existing financial paradigm. Explain. (250 words)

  • Paper & Topic: GS I & II à Poverty related issues


  • Model Answer:


  • Introduction:


  • Poverty is defined as a situation in which a person or a family lacks the financial means to maintain a basic level of living.
  • Economists and politicians define "absolute" poverty as the difference between consumption expenditure and a "poverty line" level.
  • Every single minute of every single day, 12 Indian residents are lifted out of extreme poverty, according to the report.


  • Body:


  • Poverty Measurement:


  • The official poverty line is the cost of obtaining the items in a "poverty line basket" (PLB).
  • Poverty can be assessed by the number of persons who live below the poverty line (with the incidence of poverty expressed as the head count ratio).
  • Poverty "depth" refers to how far people are below the poverty level.
  • Expenditure on health and education were not examined until the Tendulkar Committee — which was chastised for placing the poverty criterion in urban India at barely Rs 32 per capita per day (and at Rs 27 in rural India).
  • The Rangarajan Commission was also chastised for picking the food component at random; the focus on food as a source of nutrition ignores the importance of sanitation, healthcare, clean water availability, and the prevalence of pollutants.
  • Policies and programmes can be objectively assessed to see if they suit the requirements of the majority.
  • The definition of poverty set by the NITI Aayog or the erstwhile Planning Commission is used by central schemes like the Antyodaya Anna Yojana (which provides subsidised foodgrains to households living below the poverty line) and the Rashtriya Swasthya Bima Yojana (which provides health insurance to BPL households).
  • The Centre distributes cash for these programmes to states based on the number of underprivileged people in each state.
  • Errors in exclusion might result in a household's eligibility for assistance being revoked.
  • Knowing the numbers and making them public allows the public to rally behind large-scale, urgent financial transfers.
  • If government data accurately reflected the true numbers of the poor, it would be more realistic to expect public debate to focus on the concerns of the true majority and to establish an environment that demands accountability from public officials.
  • India's market capitalization has risen dramatically, as have the fortunes of the country's wealthiest corporations, whose fortunes have multiplied in recent years, even as millions of Indians have fallen into poverty.
  • The "poverty line basket" (PLB) includes commodities and services considered essential to a basic minimum level of living — food, clothing, rent, transportation, and entertainment.
  • The price of the food component can be determined using calorie standards or nutrition targets.
  • Until the 1990s, the calorie norms technique was employed, which was based on the Indian Council of Medical Research's (ICMR) minimum calorie recommendation for a family of five.
  • However, this strategy ignores the various dietary types that are necessary for good health, which is why the Tendulkar Committee focused on nutritional outcomes.
  • The Lakdawala Committee assumed that health and education are provided by the state, so expenditure on these items was excluded from the consumption basket it proposed.
  • The Tendulkar Committee included health and education in the basket because expenditure on these items increased significantly in the 1990s.
  • The percentage of individuals living below the poverty line increased from 35.97 percent to 45.3 percent in 1993-94 as a result of adjustments to the basket and other changes in the technique of calculation.
  • In addition, knowing where impoverished people live is crucial for fighting poverty.
  • They are not uniformly distributed throughout a country, or even within a family.


  • Conclusion:


  • Because it incorporates components that capture the standard of life more efficiently, the Multi-Dimensional Poverty Index (MPI) is a more comprehensive measure of poverty.
  • However, because it considers "outcomes" rather than "expenditure," the presence of an undernourished member in the family will cause it to be labelled as "poor," regardless of whether or not the household spends money on healthy food.


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