POVERTY AND INEQUALITY

UGI USER
May 08, 2024
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Definitions of Poverty by Various Institutions and Organizations

The concept of poverty is complex and multifaceted, with various institutions and organizations offering their definitions to capture the essence of what it means to live in poverty.

World Bank’s Definition of Poverty

The World Bank defines poverty as a severe deprivation of well-being, highlighting its multidimensional nature. This definition acknowledges that poverty extends beyond mere financial scarcity. Key elements of the World Bank’s definition include:

Low Income and Inability to Access Basic Goods and Services: This indicates that individuals living in poverty lack the financial resources necessary for a dignified living, unable to afford essential goods and services.
Lack of Health and Education: It emphasizes the absence of access to healthcare and educational opportunities, which are critical for breaking the cycle of poverty.
Insufficient Access to Safe Water and Sanitation: Highlights the importance of basic infrastructure that many of us take for granted.
Inadequate Physical Security: Points to the vulnerability of people living in poverty to physical harm and a lack of safety in their environment.
Lack of Voice: Reflects the exclusion of the impoverished from participating in societal decisions that affect their lives.
Lack of Capacity and Opportunity to Improve One’s Life: This underscores the systemic barriers that prevent people from escaping poverty, including the inability to access capital, education, and other resources needed for upward mobility.

United Nations Organisation’s Definition of Poverty

The UN’s definition of poverty encompasses a broader view, focusing on the inability to secure a sustainable livelihood due to a lack of resources and income. It emphasizes several critical aspects:

Hunger and Malnutrition: Signifying the extreme consequences of food insecurity.
Restricted Access to Healthcare and Additional Necessities: This broadens the scope of poverty to include not only financial but also physical barriers to accessing care and basic needs.
Social Exclusion and Prejudice: Indicates the societal and cultural dimensions of poverty, where individuals or groups may be marginalized based on their socio-economic status.
Lack of Participation in Decision-Making: Highlights the disenfranchisement of people living in poverty from political and societal processes.

United Nations Human Rights Council’s Definition of Poverty

The United Nations Human Rights Council offers a definition of poverty that frames it as a violation of human rights. It is described as:

A Human Condition Characterized by Sustained or Chronic Deprivation: This definition underscores the persistent nature of poverty, implying that it is not merely a temporary setback but a long-term condition.
Lack of Resources, Capabilities, Choices, Security, and Power: It broadens the concept of poverty to include elements such as the ability to make life choices, to live securely, and to have the power to influence one’s circumstances.
Required for the Enjoyment of an Adequate Standard of Living and Other Rights: This definition explicitly ties poverty to the inability to enjoy basic human rights, including civil, cultural, economic, political, and social rights.

Poverty in India (2011)

In 2011, the statistic provided mentions that 21.9% of India’s population was living below the national poverty line. This figure illustrates the scale of poverty in a highly populous country, where a significant portion of the population faced challenges meeting basic needs and accessing essential services. It underscores the importance of targeted poverty reduction efforts and policies to improve the living conditions and well-being of millions.

Sustainable Development Goal (SDG) And Poverty

Sustainable Development Goals (SDGs) represent a universal call to action to end poverty, protect the planet, and ensure that all people enjoy peace and prosperity by 2030. These goals are integrated and interdependent, acknowledging that actions in one area will affect outcomes in others. SDG 1, specifically, focuses on eradicating poverty in all its forms everywhere.

Objective of SDG 1: End Poverty in All Its Forms Everywhere

Eradicate Extreme Poverty: The primary aim is to eliminate extreme poverty, defined as living on less than $1.90 a day, for all people worldwide by 2030.
Reduce at Least by Half the Proportion of Men, Women, and Children of All Ages Living in Poverty: This includes all dimensions of poverty, not just financial but also those related to health, education, and living standards.
Implement Social Protection Systems: To support those in need, including through coverage of the poor and the vulnerable.
Ensure Equal Rights to Economic Resources: This goal highlights the importance of access to basic services, ownership, and control over land and other forms of property, inheritance, natural resources, appropriate new technology, and financial services for all.
Build Resilience: Strengthen the resilience of the poor and those in vulnerable situations, reducing their exposure and vulnerability to climate-related extreme events and other economic, social, and environmental shocks and disasters.

Progress Indicator

Between 2015 and 2018, there was notable progress in reducing global poverty. The percentage of the world’s population living in extreme poverty fell from 10.1% in 2015 to 8.6% in 2018. This reduction is a significant achievement, marking a historical low in the period mentioned and indicating positive momentum toward achieving SDG 1.

Challenges and Barriers

Despite the progress, several challenges hinder the eradication of poverty by 2030:

Inequality: Increasing inequality within and among countries can slow down poverty reduction efforts, as the benefits of growth are not evenly distributed.
Climate Change and Environmental Degradation: These phenomena disproportionately affect the poorest and most vulnerable, undermining their livelihoods and capacities to secure food, water, and shelter.
Conflicts and Disasters: Wars, conflicts, and natural disasters disrupt societies, economies, and infrastructures, pushing more people into poverty.
Lack of Inclusive Economic Growth: Economic growth that does not create sufficient opportunities for all segments of the population, especially the poor, can limit the effectiveness of poverty reduction efforts.
COVID-19 Pandemic: The recent pandemic has posed new challenges, threatening to reverse decades of progress in poverty eradication. It has led to a significant increase in global unemployment, disruptions in food supply chains, and has placed immense pressure on health and social protection systems worldwide.

Moving Forward

To continue making progress towards achieving SDG 1 by 2030, it is crucial to:

Enhance Social Protection: Strengthen social safety nets to ensure that the vulnerable populations can withstand economic shocks.
Promote Inclusive Growth: Foster economic policies that create jobs, improve livelihoods, and reduce inequalities.
Strengthen Resilience: Invest in climate-resilient infrastructure and agriculture to protect the livelihoods of the poor against environmental risks.
Ensure Access to Basic Services: Improve access to education, healthcare, clean water, and sanitation to address the multidimensional aspects of poverty.
International Cooperation: Enhance global partnerships to provide the necessary resources and support to countries most in need.

Achieving SDG 1 requires concerted efforts from governments, the private sector, civil society, and international organizations to implement integrated strategies that address the root causes of poverty and inequality.

Types of Poverty
Absolute Poverty

Absolute Poverty refers to a condition where a household’s income is insufficient to meet the basic necessities of life, including food, shelter, and clothing. This type of poverty is measured against a fixed standard or threshold, which is the same across different countries and over time, allowing for international comparisons and historical data analysis.

Historical Context and Measurement:

The concept of Absolute Poverty was officially introduced in 1990. It aimed to create a global benchmark for assessing poverty across different regions and over periods, focusing on the essential needs that every human being should be able to satisfy.
“Dollar a Day” Poverty Line: Originally, Absolute Poverty was measured by the “dollar a day” threshold, which represented the minimum income level required for basic living standards in the world’s poorest countries.
Adjustment by the World Bank: Recognizing changes in global economic conditions and purchasing power parity, the World Bank updated this threshold. In October 2015, it raised the poverty line to $1.90 per day to reflect more accurately the minimum income required to secure basic living standards globally.

Relative Poverty

Relative Poverty is identified not by a universal standard, but by comparing individuals’ or households’ living standards to those of the surrounding population. It highlights social and economic disparities within a society, focusing on how well individuals are doing relative to their community or the wider society in which they live.

Measurement and Implications:

Social Context: Unlike Absolute Poverty, which looks at survival on basic necessities, Relative Poverty assesses quality of life and social exclusion. It underscores the inability of individuals or groups to participate fully in economic, social, and cultural life, as well as their access to resources, capabilities, and rights.
Income Thresholds: Typically, Relative Poverty is measured by determining what percentage of the population earns less than a certain percentage (often 50% or 60%) of the median income. This approach makes it a valuable indicator of income inequality and social stratification within a country.
Dynamic Nature: Since Relative Poverty is based on median income, its threshold can vary significantly from one country to another and can change over time as a society’s overall wealth and income distribution evolve.

Comparison and Significance

While both Absolute and Relative Poverty provide critical insights into the conditions and challenges faced by the impoverished, they serve different purposes in policy formulation and social analysis. Absolute Poverty emphasizes survival and the basic rights to food, shelter, and clothing. In contrast, Relative Poverty focuses on societal integration, equality, and the right to participate in one’s community and culture. Together, these concepts help in devising targeted interventions and policies to combat poverty in its many forms, aiming for both the fulfillment of basic needs and the reduction of economic and social inequalities.

PERSPECTIVES TOWARDS POVERTY
The Old Perspective: Individual Actions and Providence

The old perspective on poverty attributes it primarily to two factors: the personal actions of individuals and the role of providence or fate. This viewpoint suggests that poverty is a consequence of either personal failings or unfortunate circumstances that are divinely ordained or beyond human control.

Key Points:

Individual Responsibility: According to this perspective, poverty often results from poor decision-making, lack of effort, or moral failings of individuals. It emphasizes personal responsibility, suggesting that with the right choices and hard work, one can overcome poverty.
Providence or Fate: This aspect attributes poverty to external factors that are considered beyond human control, such as natural disasters, illness, or the will of a higher power. It implies a level of resignation to poverty as part of the natural order or divine plan.

Critique:

Critics argue that this perspective oversimplifies the complex nature of poverty and unfairly places the burden of escape from poverty on the individual, without acknowledging systemic barriers that can impede progress regardless of personal effort.

The Modern Perspective: Social System Functioning

The modern perspective shifts the focus from individual actions and providence to the role of social systems in the creation and perpetuation of poverty. It argues that poverty is primarily a result of how society is organized and functions, highlighting the impact of structural and systemic factors.

Key Points:

Structural Inequalities: This viewpoint emphasizes the existence of systemic barriers and inequalities within society’s institutions (e.g., education, economy, healthcare) that limit individuals’ opportunities and access to resources, perpetuating cycles of poverty.
Economic and Social Policies: According to the modern perspective, policies and practices at the governmental and societal levels play a significant role in determining who experiences poverty. It suggests that without systemic change, poverty will persist regardless of individual efforts.
Beyond Individual Control: It acknowledges that while personal choices and behaviors can influence one’s situation, the broader socio-economic context and systemic issues are more significant determinants of poverty.

Critique:

Some critics of the modern perspective argue that it may diminish personal agency and responsibility. However, its proponents emphasize the importance of addressing structural inequalities and advocating for systemic reforms to effectively combat poverty.

CONCEPT OF POVERTY LINE

The concept of the poverty line is a critical tool used by economists, policymakers, and social scientists to measure and understand poverty. It serves as a quantitative benchmark to identify individuals or populations living in poverty, enabling targeted interventions and policies aimed at poverty reduction. This concept, while straightforward in its definition, involves various dimensions and methodologies for its determination.

Poverty Line

The poverty line represents a threshold or a minimum level of income (or expenditure) deemed necessary to secure the basic necessities of life, such as food, clothing, shelter, and healthcare. Individuals or families whose income falls below this threshold are considered to be living in poverty. The establishment of a poverty line facilitates a concrete measure to quantify the extent of poverty within a given population.

Poverty Ratio or Headcount Ratio (HCR)

The Headcount Ratio (HCR) is a straightforward measure of poverty, representing the proportion of a population that lives below the poverty line. It is calculated as the number of people living in poverty divided by the total population, expressed as a percentage. While HCR provides an immediate sense of the poverty level within a community or country, it does not capture the depth or severity of poverty among the poor.

International Poverty Line (IPL)

The International Poverty Line (IPL) is a global benchmark set by the World Bank to identify extreme poverty across different countries. As of the 2017 revisions, the IPL is defined as living on less than US$1.90 per day, adjusted for purchasing power parity (PPP). This figure allows for comparisons of poverty rates across countries by providing a consistent standard, despite varying local economic conditions.

Societal Poverty Line (SPL)

Recognizing that poverty is not solely a matter of absolute deprivation but also of relative social standing, the World Bank introduced the Societal Poverty Line (SPL) in 2018. The SPL is a hybrid metric that incorporates the absolute poverty line of $1.90 USD per day with a relative component that adjusts in relation to the median income or consumption of an economy. This approach aims to reflect both the absolute and relative dimensions of poverty, acknowledging that as economies grow, the standards for what constitutes poverty may also rise.

Regional Poverty Lines

Different regions or organizations may set their own poverty lines based on local economic conditions and societal norms. For example, the Asian Development Bank (ADB) has set a poverty line of $1.51 per person per day, which is tailored to the context of Asian countries. These regional poverty lines allow for more nuanced assessments and policies that are sensitive to local realities.

Limitations of Single Indicator Measures

One critical understanding about the poverty line and its associated measures, such as the HCR, is that they cannot encapsulate all dimensions of poverty. Poverty is a multifaceted issue that includes not only economic deprivation but also lack of access to education, healthcare, clean water, and sanitation, among others. Therefore, while the poverty line and HCR are valuable tools for assessing and comparing poverty levels, they are part of a broader set of indicators needed to fully understand and address poverty.

Estimation of Poverty in India: Committees On Poverty

In India, poverty is typically gauged by measuring household income or consumption levels. When these levels fall beneath a certain threshold, a household is classified as Below the Poverty Line (BPL). The assessment of poverty and the determination of the poverty line involve complex methodologies and have evolved over time, reflecting shifts in policy, economic understanding, and societal needs.

Poverty Line Calculation

The NITI Aayog task force is currently responsible for calculating the poverty line in India, utilizing data collected by the National Sample Survey Office (NSSO) under the Ministry of Statistics and Programme Implementation (MOSPI).

Consumption vs. Income Level

The decision to use consumption expenditures rather than income levels for determining poverty lines in India is based on several considerations:

Income Variation: Incomes, especially for self-employed individuals and wage workers, can fluctuate significantly, while consumption patterns tend to be more stable.
Additional Income: Even individuals with regular salaries often have additional or side earnings, which can be difficult to accurately measure.
Data Collection: Surveys based on consumption inquire about household consumption over a specific reference period (e.g., the past 30 days), offering a proxy for overall consumption.
Income Trend: Identifying a clear trend in income levels is challenging due to these variations.

Data Collection Methods for Poverty Estimation

Method

Description

Period of Implementation

Key Features

Uniform Resource Period (URP)

This method involved asking respondents about their consumption expenditures during a 30-day recall interval. It was based on the recall of consumption expenditures in the previous 30 days.

Up until 1993–1994

– Sole focus on a 30-day recall period for all goods and services.

– Relies heavily on the respondents’ ability to accurately recall their consumption expenditures.

Mixed Reference Period (MRP)

This technique examines the consumption of five low-frequency goods (clothing, footwear, durables, education, and institutional health expenditure) in the year prior as well as all other goods over the previous 30 days.

Since 1999-2000

– Differentiates between high-frequency and low-frequency goods.

– Combines a 30-day recall for regular goods with a yearly recall for specific low-frequency goods.

Uniform Resource Period (URP)

Purpose: The URP method was designed to estimate poverty by capturing the short-term consumption behavior of individuals or households within a 30-day period.
Implementation: Respondents were asked to recall and report their consumption expenditures on all goods and services consumed in the previous 30 days.
Limitations: The accuracy of the data collected through the URP method can be affected by the respondents’ memory and their ability to accurately recall their consumption over the past month. This could potentially lead to underestimation or overestimation of poverty levels.

Mixed Reference Period (MRP)

Purpose: The MRP technique was introduced to improve the accuracy of poverty estimation by addressing the limitations of the URP method. It recognizes the difficulty in recalling infrequent or seasonal expenditures over a short recall period.
Implementation: This method employs a mixed approach by asking respondents to recall their consumption of regular goods and services over the past 30 days and their expenditure on five specified low-frequency goods over the past year.
Advantages: By separating the recall periods based on the frequency of consumption, the MRP technique aims to provide a more accurate and comprehensive picture of household consumption patterns, leading to better poverty estimation.

Pre-independence Poverty Estimation

Aspect	Details
Dadabhai Naoroji	· Poverty Line Estimation: In his seminal work, “Poverty and Un-British Rule in India,” Dadabhai Naoroji estimated the poverty line to be between 16 and 35 rupees per capita per year. · Poverty Standard Advocacy: He proposed a poverty standard based on the cost of a basic subsistence diet, which included essential food items such as rice or flour, dal (lentils), mutton, vegetables, ghee (clarified butter), vegetable oil, and salt.
National Planning Committee	· Poverty Definition: Defined poverty with a range between ₹15 to ₹20 per capita per month, focusing on a basic standard of living that incorporated dietary needs. · Foundation and Leadership: Initiated by Subhash Chandra Bose in 1938, the committee was chaired by Jawaharlal Nehru, aiming to draft policies for economic development and poverty alleviation in India.
Bombay Plan (1944)	· Poverty Line Proposal: Suggested a poverty line of $75 per person per year, emphasizing economic growth strategies for post-independence India. · Origin and Contributors: Developed by a select group of influential businessmen in Bombay, the plan laid out a comprehensive strategy for India’s economic expansion, highlighting the role of industrialization and modernization in overcoming poverty.

These efforts reflect the early recognition and attempts to address poverty in India, laying the groundwork for post-independence economic policies and planning. Each approach, from Dadabhai Naoroji’s advocacy for a subsistence-based poverty standard to the Bombay Plan’s focus on economic growth, underscores the multifaceted strategy required to tackle poverty. The National Planning Committee’s work, especially, paved the way for planned economic development in independent India, emphasizing the importance of meeting basic dietary needs as a core component of poverty alleviation.

Post-independence Poverty Estimation

Committee/Group	Year	Key Contributions and Recommendations
V M Dandekar and N Rath	1971	· Conducted a comprehensive analysis using National Sample Survey (NSS) data. · Proposed a poverty line based on a diet providing 2250 calories per day for both rural and urban areas.
Alagh Committee	1979	· Developed a poverty line based on dietary needs and associated consumption expenditure for rural and urban areas. · Recommended revising estimates for inflation by considering price levels. · Led by YK Alagh under the Planning Commission.
Lakdawala Committee	1993	· Based findings on the hypothesis that the consumption patterns of the poor are reflected in CPI-IW and CPI-AL baskets. · Led by Prof. D T Lakdawala, the group recommended: · The poverty line approach should be based on caloric intake with a fixed consumption basket. · Establish state-specific poverty lines revised according to CPI-IW in urban areas and CPI-AL in rural areas. · Use only NSS data for poverty estimates. · The Indian government approved these recommendations in 1997 with few modifications.
Tendulkar Committee	2009	· Recommended moving away from estimating poverty using calorie consumption alone. · Advocated for a uniform poverty line basket (PLB) in rural and urban areas. · Introduced reforms in price adjustment technique.<br>- Considered private health and education expenses in poverty determination. · Used Mixed Reference Period instead of the Universal Reference Period. · Set specific poverty lines for different years.
C Rangarajan Committee	2012	· Formed by the Planning Commission to provide an alternative method for calculating poverty levels. · Explored discrepancies between National Accounts aggregates and NSSO consumption data. · Examined various global poverty calculation methods. · Suggested eligibility criteria for poverty-eradication programs. · Criticised the Tendulkar Committee’s poverty level assessment in its 2014 report, indicating a higher poverty rate of 29.5% in 2011-2012.
Arvind Panagariya Task Force	2015	· Proposed forming a committee to identify BPL individuals, with state participation. · Discussed four options for poverty tracking: 1. Continue with the Tendulkar poverty line. 2. Switch to the Rangarajan or other higher rural and urban poverty lines. 3. Track the bottom 30% of the population over time.<br> 4. Track the bottom 30% based on specific components (housing, sanitation, etc.).
NITI Aayog Task Force	(Year not specified)	· Favored the Tendulkar line (21.9%) for poverty estimation. · Suggested using Socio Economic and Caste Census (SECC) data for entitlements, following recommendations by the Saxena and Hashim committee. · The Ministry of Rural Development formed the Dr N.C. Saxena Committee for BPL Census methodology advice, and the Planning Commission established a Working Group led by Professor S. R. Hashim for identifying BPL families in urban areas.

IMPORTANCE AND UTILITY OF POVERTY ESTIMATION

Poverty estimation is a critical tool used by governments, researchers, and policymakers worldwide to assess and understand the extent and depth of poverty within a population. Its significance spans across multiple facets of governance and societal development, primarily aimed at crafting targeted interventions to alleviate poverty.

Impact of Welfare Programs

Tracking Effectiveness: Poverty estimates are pivotal in monitoring the success of government policies, especially those designed to reduce poverty. These estimates provide quantitative data to analyze if social welfare programs are reaching their intended goals and improving the living standards of the poor.
Academic and Policy Research: Beyond policy evaluation, poverty estimates serve academic purposes, enabling researchers to study the socio-economic impacts of poverty and the efficacy of various intervention strategies.

Poverty Elimination Planning

BPL Census: The Ministry of Rural Development, in collaboration with the government, conducts a Below Poverty Line (BPL) Census to identify households living in poverty. This data is crucial for allocating resources and designing poverty alleviation programs.
Formulation of Poverty Lines: Poverty lines, derived from poverty estimates, are used to develop focused poverty elimination plans. These plans are crucial for directing efforts and resources towards the most effective poverty reduction strategies.

Constitutional Requirement

Eradication of Poverty: Estimating poverty is not just a policy tool but a constitutional imperative towards eradicating poverty. It lays the groundwork for creating a just and equitable society by identifying the scope and scale of poverty that needs to be addressed.

Targeted Delivery of Services

Minimizing Exclusion Errors: Accurate poverty estimation helps in minimizing errors of exclusion, where eligible households might be left out of welfare schemes. Ensuring that the intended beneficiaries receive the support they need is essential for the success of any welfare program.

Evaluating Policy Success

Data-Driven Analysis: Collection and analysis of poverty data are essential for evaluating the success of all policies in terms of their ability to meet the needs of the majority. Transparent evaluation is possible only when the exact numbers of the poor are known and established, allowing for adjustments and improvements in policies.

Assessing Rising Inequality

Understanding Wealth Disparities: Poverty estimates allow for the assessment of increasing inequality within a society. They enable citizens to question the relationship between wealth accumulation by a few and the conditions of poverty experienced by many. This critical analysis can drive conversations and actions towards more equitable wealth distribution.

Challenges In Estimating poverty

Estimating poverty is a complex process fraught with various challenges. These challenges arise from the need to accurately define, measure, and understand poverty across different regions and populations.

Components of the Poverty Line Basket (PLB)

Variability in Prices: The Poverty Line Basket (PLB) comprises essential goods and services necessary for an individual’s basic subsistence. However, the prices of these basket constituents can vary significantly from state to state and over different periods. This variability complicates the determination of the PLB’s components, as the cost of living can differ widely across regions, affecting the estimation of the poverty line.
Selection of Constituents: Deciding on what constitutes the PLB is another challenge. The basket must be comprehensive enough to cover all basic needs, yet specific enough to allow for accurate price assessments. This involves choosing a range of goods and services that reflect the minimum necessary for health and wellbeing, including food, shelter, clothing, healthcare, and education.

Demographic and Economic Dynamics

Changing Consumption Patterns: As societies evolve, so do their consumption patterns and dietary requirements. These changes are influenced by various factors, including economic development, cultural shifts, and technological advancements. As a result, a PLB that accurately reflects the needs of the population at one point in time may become outdated as consumption habits change.
Fluctuating Component Prices: The prices of the components included in the PLB are subject to fluctuations due to macroeconomic conditions such as inflation, unemployment rates, and economic growth. These dynamics can significantly affect the cost of living, thereby impacting the poverty line estimation.

Lack of Consensus on Poverty Estimation Methods

Diverse State Opinions: The reports of committees such as the Tendulkar and Rangarajan have sparked debates among states regarding the best approach to estimate poverty. While some states have supported the Rangarajan report’s methodology, others have favored the Tendulkar Poverty Line or proposed alternative methods. This lack of consensus complicates the adoption of a unified approach to measuring poverty across India.
Political and Financial Implications: The determination of the poverty line has significant political and financial implications. Governments must balance the need to accurately reflect the extent of poverty against the financial constraints of providing support to those below the poverty line. This balancing act can lead to controversies over the appropriate threshold for poverty, affecting policy decisions and the allocation of resources.

Problem of Threshold Determination

Financial Stability vs. Inclusivity: Setting the poverty threshold involves a delicate balance between maintaining the government’s financial stability and ensuring that aid reaches those who need it most. A low poverty threshold might limit the number of individuals eligible for assistance, potentially excluding vulnerable populations. Conversely, a high threshold could strain government budgets and resources, challenging the sustainability of poverty alleviation programs.

Solution for Effective Measurement of Poverty

The proposal for an effective measurement of poverty encompasses several strategic approaches aimed at accurately identifying and addressing the root causes and manifestations of poverty.

Redefining Poverty Lines

The poverty line serves as a threshold to distinguish who is considered poor based on income or consumption levels. This benchmark is crucial for identifying the population in need of assistance.

Rationale for Recalculation: Over time, changes in income levels, consumption patterns, and price fluctuations necessitate the recalibration of poverty lines to reflect current economic realities accurately.
Implementation Strategy: Regular assessment of economic data, including inflation rates, cost of living adjustments, and changes in average consumption habits, should inform the adjustment of poverty thresholds.

Establishing a Viable Poverty Line

Setting a poverty line that allows for the coverage of basic needs is essential for ensuring the well-being of individuals and families.

Criteria for Determination: The poverty line should be set at a level where families can afford not only two square meals a day but also other essential needs such as shelter, healthcare, and education.
Practical Considerations: This approach emphasizes the importance of a multidimensional poverty assessment that goes beyond mere caloric intake to include other critical dimensions of living standards.

Hybrid of Absolute and Relative Poverty Measurement

A combined approach to measuring poverty that incorporates both absolute and relative poverty metrics can provide a more comprehensive understanding of poverty.

Absolute Poverty Measurement: This dimension focuses on a global benchmark, typically based on a minimum income or consumption level necessary to meet basic life requirements.
Relative Poverty Measurement: This assesses poverty in relation to the economic standards of a particular society, recognizing that deprivation in one country may differ significantly from that in another.
Hybrid Model Implementation: The poverty line in this model would reflect the amount necessary to achieve a specific welfare status that encompasses basic nutritional needs and social inclusion, adapting to different national contexts.

Political-Economic Equilibrium in India

As India progresses towards middle-income status, its approach to defining and addressing poverty must evolve to reflect new economic and social realities.

Transitioning Focus: The definition of poverty shifts from the risk of hunger to the inability to engage with the opportunities presented by a growing economy. This redefinition requires a reassessment of policy priorities and government spending.
Policy Adaptation: It is suggested that the focus of government expenditure shift towards investment in public goods, such as infrastructure, healthcare, and education, rather than direct subsidies.
Administrative and Policy Shifts: To support this transition, India’s political, policy, and administrative systems must adapt to foster an environment where the benefits of economic growth are more inclusively distributed.

Highlights of Fifth-Five-Year Plan (1974-79): Garibi-Hatao

The Fifth Five-Year Plan of India, which spanned from 1974 to 1979, was an essential phase in the country’s planned economic development efforts. Aimed primarily at eradicating poverty, which was encapsulated in the slogan “Garibi Hatao” (Remove Poverty), this plan introduced significant policies and amendments to achieve its objectives.

Launch of the Minimum Needs Program (MNP)

Objective: The MNP was initiated in the first year of the Fifth Five-Year Plan with the primary goal of meeting the basic needs of India’s population. This program focused on providing essential services and facilities such as drinking water, nutrition, health, education, and public transportation.
Preparation: The program was meticulously prepared by D.P. Dhar, an influential figure in Indian politics and a key advisor in economic planning. His work laid the foundation for implementing strategies aimed at improving the living standards of the poorest segments of the society.

Amendment to the Electricity Supply Act, 1975

Legislative Change: An amendment to the Electricity Supply Act was made in 1975, marking a significant policy shift in the energy sector. This amendment allowed state governments to actively participate in the production and transmission of electricity.
Impact: By enabling state involvement, the amendment sought to decentralize power generation and distribution, which was critical for meeting the growing energy demands of the country and ensuring that electricity reached remote and underserved areas.

Economic Growth Achievements

Growth Rate Goals: The Fifth Five-Year Plan set an ambitious target growth rate of 4.4% for the Indian economy. This target was based on the need to accelerate economic development and improve the overall standard of living.
Outcome: Impressively, the plan surpassed its growth target, achieving an actual growth rate of 4.8%. This success indicated a strong economic performance and was a positive sign of the effectiveness of the policies and strategies implemented during the plan period.

Rejection by the Morarji Desai Administration

Political Shift: In 1978, a change in the political landscape occurred when the newly elected administration led by Morarji Desai came into power. The new government had different priorities and perspectives on economic planning and development.
Plan Abandonment: The Morarji Desai administration decided to reject the Fifth Five-Year Plan. This decision was influenced by the administration’s ideological and policy differences with the previous government. As a result, the ongoing initiatives and future proposals under the plan were halted or reevaluated.

The Fifth Five-Year Plan was a pivotal moment in India’s economic history, reflecting the government’s resolve to address poverty and improve the living conditions of its citizens through structured economic planning and reforms. Despite its eventual rejection, the plan’s achievements, especially in exceeding its growth target and launching the Minimum Needs Program, left a lasting impact on India’s developmental trajectory.

Concept of Poverty by Amartya Sen

Amartya Sen, a Nobel laureate in Economics, introduced a revolutionary perspective on development and poverty, which significantly diverges from traditional economic metrics focused on income levels or GDP growth. His Capability Approach offers a profound understanding of what it means to live a fulfilling life, emphasizing the enhancement of people’s freedoms and abilities to lead the lives they value.

Development as Expansion of Capabilities

Core Premise: Sen argues that the essence of development should be the expansion of human capabilities, which involves increasing the choices and freedoms people have to live the lives they desire.
Beyond Material Wealth: Unlike conventional views that equate development with the accumulation of goods and wealth, Sen’s approach prioritizes the capacity of individuals to function effectively in society.

Poverty Defined Through Capabilities

Poverty as Capability Deprivation: According to Sen, poverty should be understood as a lack of fundamental capabilities, not merely an absence of income or resources. It’s about being deprived of the opportunity to lead a decent and valued life.
Consequences of Capability Deprivation: This deprivation leads to a constrained existence where the poor are unable to fulfill their potential, resulting in increased suffering and reduced well-being.

The Influence and Impact of Capability Theory

Shifting the Development Discourse: Sen’s Capability Theory has significantly influenced contemporary discussions on development, shifting the focus from economic outputs to human well-being.
A People-Centered Approach: By focusing on people and their capabilities, Sen’s framework emphasizes the importance of enhancing individual freedoms as the primary goal of development.

A Comprehensive View on Social Issues

Addressing Beyond Economics: Sen’s approach provides a richer framework for understanding various societal issues that economic indicators might overlook, including poverty, inequality, gender bias, and social exclusion.
Positive vs. Negative Freedom: In his influential work “Equality of What,” Sen distinguishes between positive freedom (the actual ability to achieve well-being) and the traditional focus on negative freedom (the absence of constraints) prevalent in economics.

The Uniqueness of the Capability Approach

Person-Centered and Flexible: Sen’s model is inherently adaptable, recognizing the diversity of human needs and preferences. It moves beyond seeing individuals as mere participants in economic transactions.
Acknowledging Individual Differences: Unlike models that assume a generic human experience, the Capability Approach acknowledges the unique differences among individuals, emphasizing the importance of considering these differences in policy-making and development strategies.

SOCIO-ECONOMIC AND CASTE CENSUS (SECC)

Aspect	Details
Conducting Bodies	State Governments, Office of the Registrar General and Census Commissioner, Ministry of Rural Development, Ministry of Housing and Urban Poverty Alleviation, Ministry of Urban Development
Purpose	To provide comprehensive data on various socio-economic factors such as housing, education, land ownership, disabilities, occupations, asset ownership, SC/ST households, incomes, etc.
Utility	The SECC data is utilized for multiple government programs including housing, education, skill development, MGNREGA, the National Food Security Act, etc.
Key Recommendation	The Sumit Bose Committee recommended using SECC-2011 data specifically for rural development programs.

Features of SECC

Feature	Details
First Paperless Census	The SECC 2011 marked India’s transition to a paperless census process.
Identification & Registration	Utilized temporary identification numbers and household information from the National Population Register.
Transparency & Grievance Redressal	Ensured transparency and provided mechanisms for grievance redressal at every stage of the census.
Poverty Identification Methodology	Departed from using consumption metrics, employing deprivation criteria instead to identify poverty.
Caste Data Collection	First time since 1931, caste data was collected, asking respondents for their specific caste name to assess economic advantages or disadvantages.

Objectives of SECC

Objective	Details
Household Ranking	To rank households based on socio-economic status, enabling state governments to identify families below the poverty line.
Caste Data Collection	To accumulate precise data on the caste composition of the country’s population.
Socio-Economic Data Collection	To gather detailed information on the socio-economic standing, educational levels, and caste/sectional demographics.

Methodologies Used in SECC

Committee	Focus Area	Methodology
NC Saxena Committee	Rural Areas	Proposed a three-fold classification of households, criteria for automatic exclusion (owning assets like cars, washing machines, etc.), inclusion (vulnerabilities like homelessness), and ranking the rest based on seven deprivation indicators.
S R Hashim Committee	Urban Centres	Appointed by the Planning Commission to devise the most effective method for conducting the SECC in urban areas, addressing the unique socio-economic conditions present in these settings.

Indexes/ Reports Pertaining to Poverty And Inequality

Index/Report	Description	Developed/Released By	Dimensions/Indicators
Multidimensional Poverty Index (MPI)	A composite index developed to better capture the complexity of poverty beyond income alone, focusing on multiple deprivations that individuals may face simultaneously in health, education, and standard of living.	United Nations Development Programme (UNDP) in collaboration with the Oxford Poverty and Human Development Initiative (OPHI).	Health: Child Mortality, Nutrition Education: Years of Schooling, School Attendance Standard of living: Cooking Fuel, Sanitation, Drinking Water, Electricity, Housing, Assets
Global Hunger Index (GHI)	An annual report that measures and tracks hunger globally, focusing on undernutrition and food scarcity.	Concern Worldwide and Welthungerhilfe.	Indicators:– Percentage of the population that is undernourished. – Prevalence of underweight children under five years of age.- Child mortality rate (under five years of age).
World Development Indicators (WDI)	A comprehensive set of data about development, including poverty and inequality measures, to help with the analysis of the economic and social state of nations.	World Bank.	Inequality Indicators:– Gini index – Consumption or income share by quintiles – Growth in the consumption or income of the bottom 40% of the population (in comparison to the national average).
World Inequality Report (WIR)	A detailed analysis of global income and wealth distribution, aiming to provide a clearer understanding of global inequality trends.	World Inequality Lab at the Paris School of Economics.	Focus Areas: – Income distribution among individuals and nations. – Wealth distribution and its implications on global inequality. – Comparative analyses of financial data to assess disparities.
State of Inequality in India Report	A comprehensive examination of inequality in India, covering various dimensions such as household characteristics, labor market dynamics, health, and education disparities.	Economic Advisory Council to the Prime Minister (EAC-PM) of India.	Crucial Areas: – Household characteristics and dynamics – Income distribution – Labor market dynamics – Health and Education disparities Data Sources: PLFS, NFHS, United Information System for Education Plus.

Causes of Poverty

Poverty is a complex and multifaceted issue that affects millions of people worldwide. Its causes can be broadly categorized into economic, social, political, historical, geographical, and environmental factors. Each of these factors contributes to the cycle of poverty in various ways, impacting individuals, communities, and entire nations.

Economic Factors

Poor Economic Growth and Development: Slow or stagnant economic growth due to ineffective government policies leads to widespread poverty. Nations failing to progress economically experience high poverty rates.
Rising Unemployment: Unemployment, exacerbated by an imbalanced ratio of population to available jobs, is a primary cause of poverty. An unchecked population growth intensifies this issue.
Reduced Agricultural Output: Factors like unpredictable weather patterns can lead to decreased agricultural production, contributing to inflation and poverty. Agriculture is a cornerstone of many economies; its decline destabilizes economic equilibrium.
Inadequate Infrastructure: Poor infrastructure hinders economic development and growth, contributing to poverty in affected regions.
Lack of Industrialization: In areas with minimal industrial activity, job opportunities are scarce, leading to high poverty levels. Industrialization provides higher-paying jobs compared to part-time or informal work.
Inadequate Production of Necessities: Insufficient production of food and essential goods leads to scarcity, driving up prices and contributing to poverty.
Uneven Distribution of Wealth and Resources: Disparities in wealth and resource allocation result in significant poverty among the less privileged, with wealth concentration leading to societal extremes of wealth and poverty.
Underutilized Natural Resources: Failure to exploit natural resources fully can lead to missed economic opportunities and contribute to poverty.
Deprivation of Resources: Poverty can result from being denied access to necessary resources and opportunities, whether through natural scarcity, imposed limitations, or situational challenges.
Inflationary Economics: Inflation affects not only the poor but also the middle class, pushing more people towards poverty. The impact of inflation can be long-lasting and difficult to reverse.

Social Factors

Untouchability: In some regions, discriminatory practices like untouchability limit opportunities for certain communities, perpetuating poverty among them.
Abuse of Power: Corruption and misuse of authority maintain the status quo, hindering efforts to alleviate poverty.
Illiteracy and Ignorance: Lack of education limits individuals’ potential and opportunities, contributing significantly to poverty.
High Population Density: In densely populated areas, increased competition for jobs and resources leads to higher poverty rates.
Caste-based Discrimination: Caste-based job allocation restricts individuals’ employment opportunities, exacerbating poverty among lower castes.
Gender Inequality and Feminization of Poverty: High divorce rates and gender inequality contribute to the feminization of poverty, with women being disproportionately affected.
Limited Access to Opportunities: Social inequality restricts access to opportunities for the disadvantaged, perpetuating poverty.

Political Factors

Communal Tensions and Political Conflict: These disrupt efforts to address and reduce poverty, hindering the implementation of effective solutions.
Failed Rural Reforms: Inadequate or stalled rural reforms and short-term solutions fail to address the root causes of poverty.
Vote Bank Politics: Political manipulation often excludes vulnerable groups from poverty alleviation efforts.
Political Interests Over Development Plans: Development initiatives driven by political interests rather than community needs fail to effectively combat unemployment and poverty.

Historical Factors

Colonial Exploitation: Historical colonization and exploitation have long-term impacts on nations’ economies, contributing to poverty by undermining local industries and economic independence.

Geographical Factors

Population Density and Soil Fertility: High population density and uneven distribution of fertile land contribute to geographical disparities in poverty. Infertile areas face higher poverty rates due to limited agricultural opportunities.
Varying Agricultural Output: Fluctuations in agricultural productivity due to natural conditions can lead to periodic poverty.
Rural vs. Urban Poverty: Differences in living costs and opportunities between rural and urban areas affect poverty levels, with rural areas often having lower costs but fewer opportunities.

Environmental and Climatic Factors

Natural Disasters: Events like floods and droughts devastate agricultural output, leading to poverty for affected communities.
Seasonal Rainfall Variability: Irregular rainfall patterns disrupt agricultural production, inflating prices and contributing to poverty.

Multifaceted Impact of Poverty

Poverty is a global challenge with profound implications that extend beyond the mere lack of financial resources. Its impact pervades social, health, economic, and environmental realms, shaping the lives of individuals and communities in multiple, interlocking ways.

Social Consequences of Poverty

Family Dynamics and Poverty: Financial strain exacerbates stress within households, contributing to a higher incidence of family conflicts and domestic violence. The constant struggle to meet basic needs can erode familial bonds and exacerbate mental health issues.
Social and Cultural Isolation: Limited financial resources restrict participation in social activities, leading to isolation from community and cultural events. This social withdrawal affects the quality of life and can impede the development of supportive relationships.
Marginalization in Decision-Making: Poverty diminishes individuals’ influence in their communities, leaving them dependent on others to advocate for their rights and needs. This dynamic undermines democratic participation and can perpetuate a cycle of disenfranchisement.
Increased Crime and Victimization: Economic desperation and marginalization can drive individuals toward criminal activities for survival. Concurrently, impoverished communities often face higher rates of victimization, including street crime.
Exploitation: Those in poverty are more vulnerable to severe exploitation, including forced labor and sex trafficking. These conditions not only violate basic human rights but also perpetuate cycles of poverty and abuse.
Link to Terrorism: Poverty and lack of opportunity can make extremist groups’ offers of employment appealing, contributing to the cycle of violence and instability.

Health Consequences of Poverty

Poor Health Outcomes: Impoverished individuals face higher rates of infant and young adult mortality, mental health disorders, and chronic illnesses due to inadequate access to quality healthcare, nutrition, and living conditions.
Healthcare Access and Financial Burden: The high cost of private healthcare forces many to pay out of pocket, often leading to further financial distress or impoverishment. The lack of affordable healthcare options exacerbates health inequalities.

Impact on Children

Educational Disparities: Children in poverty often have limited access to quality education, leading to lower academic achievement and reduced future opportunities.
Impaired Development: Malnutrition and lack of access to healthcare can stunt physical, mental, and emotional development, affecting children’s long-term well-being.
Child Marriage and Labor: Economic pressures contribute to practices like child marriage and labor, further entrenching cycles of poverty and limiting personal development.

Economic Consequences of Poverty

Limited Social Mobility: The cycle of poverty is perpetuated through restricted access to education and employment opportunities, hindering economic advancement and reinforcing social stratification.
Housing Insecurity: Poverty increases the risk of homelessness and living in substandard conditions, impacting health and opportunities for improvement.
Economic Segregation: Impoverished communities often face systemic barriers to development, including limited access to quality jobs, education, and healthcare, further entrenching poverty.

Ethical and Environmental Consequences

Violation of Human Rights: Poverty undermines the indivisibility of human rights, with discrimination and inequality stifling economic growth and social cohesion.
Environmental Degradation: The struggle for survival can lead to overexploitation of natural resources, contributing to deforestation, loss of biodiversity, and environmental degradation.

CONCEPT OF “FEMINIZATION OF POVERTY”

The concept of the “Feminization of Poverty” is a critical framework for understanding the gendered aspects of poverty, emphasizing how poverty disproportionately affects women. This concept has evolved since its inception in the 1970s and its broader recognition in the 1990s, primarily through United Nations documents. Originating from Diane Pearce’s studies in the mid-20th century, this notion highlighted the increasing proportion of women among the poor and in households headed by women among poor households. However, the initial approach, which directly correlated the feminization of poverty with female-headed households, was eventually reconsidered due to its susceptibility to demographic changes.

Revising the Concept

Subsequent research shifted focus, examining poverty within gender groups rather than the demographic composition of households. This was partly because the direct association between female-headed households and poverty faced criticism for oversimplification and not accounting for broader systemic and economic factors affecting women’s poverty.

Feminization of Income Poverty

The feminization of income poverty refers to the observed trend where women are overrepresented among the income poor. While this phenomenon is widely recognized, claims of a systematic global feminization of income poverty have been met with skepticism due to varying evidence. For example, data from the UK did not show a significant increase in poverty among women from the late 1960s to the mid-1980s. Nonetheless, disparities in unpaid work, highlighted by an Oxfam study, underscore the economic contributions of women through unpaid care and domestic work, significantly impacting their economic status and contributing to gender inequality in poverty.

Causes of Feminization of Poverty

The feminization of poverty is attributed to multiple interrelated factors:

Family organization and composition, including gender roles and the dynamics of household resource control, contribute to gender disparities in economic security.
Inequality in public services, such as education and healthcare access, exacerbates gender-based disparities.
Labour market inequalities, including occupational segregation and wage discrimination, further entrench women in poverty.
Social protection and legal systems often fail to adequately support women, reflecting and reinforcing existing inequalities.

Measures for Addressing Feminization of Poverty

To combat the feminization of poverty, comprehensive measures are needed across social, economic, and political spheres:

Social measures include improving women’s health and education, directly impacting their economic status and empowerment.
Economic measures focus on ensuring equal wages and skill development for women, aiming to enhance their economic independence and contributions to household and community welfare.
Political measures emphasize the importance of women’s participation in decision-making processes, advocating for policies that reflect the interests and needs of women.

The feminization of poverty concept underscores the need for targeted interventions that address the structural and systemic barriers women face. By understanding and addressing these issues, it is possible to make significant strides toward eradicating poverty and advancing gender equality.

SOCIAL SECTOR IN INDIA

The social sector in India encompasses various domains crucial to improving the overall quality of life and ensuring sustainable development. It includes key areas such as income, education, employment, community safety, and social support. The functioning and effectiveness of this sector significantly influence an individual’s ability to make healthy decisions, afford housing and healthcare, manage stress, and engage in community life. This paper elaborates on the importance of focusing on the social sector, outlines India’s social sector expenditure, and highlights the key issues faced by the sector.

Why Focus on the Social Sector?

Achievement of Sustainable Development Goals (SDGs): India’s commitment to achieving the SDGs by 2030 necessitates a robust development of the social sector. The goals emphasize eradication of poverty, improvement of health and education, and ensuring equality, among others, which are directly tied to the social sector’s performance.
Necessity for Progress: Historical evidence suggests no country has achieved significant progress without substantial investment in its social sector. Such investments are not only valuable for their intrinsic benefits but also serve as a catalyst for broader economic growth.
Instrumental for Economic Targets: Advancing the social sector is critical for India to achieve its ambitious economic targets, such as becoming a $5 trillion economy. Investments in health, education, and social welfare are foundational to creating a productive workforce and stimulating sustainable economic activities.

India’s Social Sector Expenditure

Education

Between 2014–15 and 2019–20, the GDP proportion allocated to education remained stable at approximately 2.83–3%.
Despite the recognition of the need for higher investment, the total expenditure on education by both state and central governments has stagnated at around 2.9% of GDP since 2019.

Health

Health spending as a percentage of GDP increased from 1.2% in 2014 to 2.1% in the financial year 2023, nearing the recommended range of 2-3%.
The 15th Finance Commission highlighted the importance of a strategic vision for the social sector, suggesting that both state and central governments should aim for a substantial increase in health expenditure.

Key Issues in the Social Sector

Undernutrition

The NFHS-5 report indicates a marginal reduction in malnutrition levels in some states between 2015–16 and 2019–20, while others saw an increase. A significant percentage of Indian children being underweight poses a challenge to sustainable development.

Social Safety Nets

The pandemic underscored the vulnerability of migrant workers due to the lack of social safety nets. There’s a pressing need for enhanced MGNREGA allocations in rural areas to accommodate the reverse migration phenomenon.

Support for Vulnerable Sections

The Indian government has made strides in launching initiatives such as Swachh Bharat Abhiyan, housing schemes, financial inclusion programs, and loans for the self-employed. Specific schemes like Ujjwala Yojana and Saubhagya Yojana have been instrumental in providing essential services like cooking gas and electricity to the underserved.

Quality Education

Achieving equal access to high-quality education is paramount for human development. Various committees have recommended that the government should allocate 6% of GDP to education to ensure significant improvements in this sector.

FINANCIAL INCLUSION AND POVERTY ALLEVIATION

Financial inclusion and its role in poverty alleviation form a critical nexus in the broader strategy of reducing poverty and enhancing economic stability. This detailed expansion provides an in-depth understanding of the concept, its significance, the role it plays in poverty reduction, the challenges it faces, and the strategies to enhance financial inclusion.

Financial Inclusion

Financial inclusion denotes the process of ensuring access to important financial services and products at affordable costs to all individuals and businesses, irrespective of their net worth or company size. It emphasizes providing these services in a responsible and sustainable manner, tailored to meet the specific needs of consumers. Financial inclusion is fundamental to creating a more equitable society by ensuring everyone has the opportunity to engage with the financial system.

Objective of Financial Inclusion

The core objective is to bridge the gap for underbanked and unbanked populations, making financial services accessible to everyone without bias. This entails offering a variety of financial products, from savings accounts to loans and insurance, designed to meet the diverse needs of the population.

Role of Financial Inclusion in Poverty Reduction

Reduction of Dependence on Informal Financial Sources: By providing access to formal financial services, individuals can avoid high-interest rates charged by informal moneylenders, thus preventing the debt cycle commonly seen among the poor.
Empowerment Through Financial Services: Financial inclusion enables women and other marginalized groups to participate in labor markets or entrepreneurial activities they could not consider without financial backing. This leads to increased consumption, investment, and improvements in social factors like health care.
Promotion of Savings and Investments: Encouraging the habit of saving among the poor leads to capital formation and investments, vital for economic growth and stability.
Enhancement of Self-Confidence and Risk-Taking: Financial inclusion fosters a sense of belonging among the poor, boosting their confidence and willingness to take calculated risks, thereby encouraging entrepreneurship.

Challenges to Financial Inclusion

Financial Literacy: A significant barrier to financial inclusion is the lack of financial knowledge among the target population, which impedes their ability to make informed decisions.
Absence of Official Identification: Many underbanked individuals lack the necessary official documents to access financial services.
Consumer Protection: Ensuring the rights and interests of consumers, especially in the digital financial landscape, is a challenge.
Gender Inequality and Rural Disadvantage: Women and residents of rural areas often face higher barriers to accessing financial services due to systemic inequalities.
Inadequate Infrastructure: The scarcity of banking facilities and ATMs in rural and remote areas limits financial access for residents.

Strategies to Enhance Financial Inclusion

Innovations in Financial Education: Tailoring financial literacy programs to the needs of the underbanked can significantly improve their access to financial services.
Bank Employee Sensitization: Training bank staff to better serve the needs of the underprivileged can foster a more inclusive banking environment.
Improving Banking Correspondent Models: Enhancing the efficiency and reach of banking correspondents can provide a vital link between financial institutions and remote populations.
Infrastructure Development: Expanding the physical banking infrastructure in underserved areas is crucial to broadening financial access.
Development of Tailored Financial Products: Creating financial products specifically designed to meet the needs of the poor, such as micro-pensions and micro-insurance, can significantly contribute to financial inclusion.

ROLE OF SELF-HELP GROUPS (SHG) IN POVERTY ALLEVIATION

Self-help groups (SHGs) have emerged as a significant mechanism for poverty alleviation in various communities around the world. Their role in enhancing financial inclusion, promoting self-employment, skill development, and improving living standards is pivotal.

Financial Inclusion and Credit Accessibility

Enhanced Credit Access: SHGs play a critical role in improving financial inclusion among the poor. By pooling resources, these groups provide their members with access to credit at more reasonable terms than those offered by traditional moneylenders, who often charge exorbitant interest rates. This accessibility to credit is crucial for impoverished communities, enabling members to invest in small businesses, agriculture, or other income-generating activities.
Protection from Exploitative Lending: By offering an alternative to predatory lenders, SHGs help protect their members from falling into debt traps. This is significant in rural and underprivileged areas where access to formal banking services is limited or non-existent.

Promotion of Self-Employment and Micro-Enterprises

Empowerment through Entrepreneurship: SHGs encourage self-employment and entrepreneurship among their members by providing the initial capital needed to start micro-enterprises. These small-scale businesses can range from agricultural operations to home-based crafts and services, enabling members to create sustainable sources of income.
Collective Bargaining Power: The collective nature of SHGs often provides members with better bargaining power in markets, allowing them to secure inputs at lower costs and sell their products at more competitive prices.

Skill Development and Employability

Capacity Building: SHGs frequently organize skill development programs that enhance the vocational and managerial skills of their members. This training can include various aspects, from basic literacy and numeracy to specific trade skills, thereby improving their employability and enabling them to manage their businesses effectively.
Networking Opportunities: Membership in SHGs also facilitates networking, where individuals can learn from each other’s experiences and support one another in their entrepreneurial endeavors.

Improvement in Living Standards

Increased Income and Access to Services: The combined effect of access to credit, self-employment, and skill development leads to an increase in income levels among SHG members. This, in turn, enables them to afford better healthcare, education for their children, and improve their overall quality of life.
Social Impact: With improved financial stability, members are also better positioned to address social issues such as nutrition, health, and education within their families and communities.

Enhanced Status of Women and Societal Impacts

Women’s Empowerment: SHGs have been particularly effective in empowering women by providing them with economic opportunities and a platform for social interaction and support. This empowerment leads to improved status within their households and communities, enabling them to participate more actively in decision-making processes.
Reduction in Poverty and Social Evils: Communities with a high prevalence of SHGs show a marked reduction in poverty levels. Moreover, by promoting women’s empowerment, SHGs help address issues like nutrition poverty, low literacy rates, and other gender-related disparities.

Correlation between SHGs and Poverty Levels

Statistical Evidence: Observations across various states and regions have shown a correlation between the presence of a high number of SHGs and a reduction in the Below Poverty Line (BPL) population. This suggests that the collective action facilitated by SHGs can significantly contribute to poverty alleviation at a macro level.

APPROACHES FOR POVERTY ALLEVIATION

Poverty alleviation is a critical goal for governments and organizations worldwide, aimed at improving the living standards of their population.

Basic Income Programme

The Basic Income Programme proposes targeted income transfers as a new strategy to reduce poverty. This involves a direct financial support system where the government transfers an amount equal to the poverty gap—defined as the difference between a household’s per capita consumption and the poverty threshold they face—into the bank accounts of the poor.:

Targeted Support: By focusing on the poverty gap, the programme ensures that financial aid is directed specifically at those who need it the most, thus making poverty alleviation efforts more effective.
Reduction of Leakages: Traditional poverty reduction programmes often suffer from significant inefficiencies and corruption. A Universal Basic Income (UBI), as part of this approach, is seen as a means to minimize these leakages by providing direct transfers.
Enhanced Economic Freedom: UBI empowers individuals with the freedom to choose their employment without the pressure of engaging in unproductive or undesirable work just to meet daily needs. This autonomy is thought to boost personal and economic well-being.
Social Security and Dignity: By guaranteeing a basic income, UBI serves as a form of social security that can help eradicate poverty and reduce inequality, ensuring safety and dignity for all citizens.
Stimulation of Productivity: It is believed that UBI can lead to an increase in productivity. For example, agricultural workers who used to work for low wages might now be able to start their own farming ventures, thus contributing to higher agricultural productivity and reduced land idleness.

Tax Reforms

Tax reforms aim at enhancing the efficiency and equity of the tax system to support poverty alleviation efforts:

Inclusion in Higher Tax Brackets: The government is advised to broaden the tax base by including more people in higher income tax brackets, thereby increasing the pool of tax contributors.
Rate Reduction: To improve compliance and revenue realisation from direct taxes, it is recommended to lower the highest personal and corporate income tax rates to a flat rate of 25%. This strategy is expected to stimulate economic activity by leaving more money in the hands of individuals and businesses.

Investment Reforms

Investment reforms focus on directing funds into essential sectors to spur economic growth and, consequently, reduce poverty:

Critical Sector Investments: Adequate investments in crucial infrastructure sectors such as roads, railroads, and water supply are necessary to facilitate economic development and improve living standards.
Rationalising Spending and Taxation: The government must prioritize efficient allocation of resources by rationalizing its expenditure and adjusting tax rates. This would ensure that public funds are invested in areas that yield the highest social and economic returns, thus supporting poverty alleviation.

These approaches to poverty alleviation are interconnected and require a holistic implementation strategy that considers the unique socioeconomic dynamics of each country or region. By addressing the root causes of poverty through targeted support, fiscal reforms, and strategic investments, governments can make significant strides towards improving the welfare of their citizens.

Policies and Programmes Towards Poverty Alleviation in India

Programme/Policy	Launch Year	Objective	Target Audience	Key Features
Integrated Rural Development Programme (IRDP)	1978-79 (Universal on October 2, 1980)	To assist the rural poor with subsidies and bank credit for creating productive employment opportunities.	Rural poor	Provides financial assistance to enable income-generating activities.
Jawahar Rozgar Yojana/Jawahar Gram Samridhi Yojana	Not Specified	To offer employment by constructing economic infrastructure and community/social assets.	Rural unemployed and underemployed	Focuses on creating public assets to facilitate employment.
Rural Housing – Indira Awaas Yojana (IAY)	Not Specified	To provide free housing to Below Poverty Line (BPL) families, especially focusing on SC/ST households.	BPL families, with a focus on SC/ST	Aims at enhancing the living standard of the rural poor by providing them with shelter.
Food for Work Program	Not Specified	Enhance food security through wage employment, with food grains supplied at no cost from FCI godowns.	General rural population in need	Designed to generate employment while addressing food security. Supply issues from FCI godowns noted.
National Old Age Pension Scheme (NOAPS)	Not Specified	To provide pension by the federal government, executed by panchayats and municipalities.	Elderly below poverty line	Offers financial support to the elderly living in poverty.
Annapurna Scheme	1999-2000	To supply food to senior citizens who are not covered by NOAPS and have no one to take care of them.	Senior citizens not covered by NOAPS	Ensures food security for destitute elderly people.
Sampoorna Gramin Rozgar Yojana (SGRY)	Not Specified	To create wage employment and develop durable economic infrastructure, along with providing food and nutrition security.	Rural poor	Focuses on infrastructure development and nutritional support.
Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) 2005	2005	To guarantee 100 days of employment per year to every rural household, with one-third employment proposed for women. National and State Employment Guarantee Funds are established.	Rural households	Promotes gender equality in employment and ensures labor rights.
National Rural Livelihood Mission Aajeevika (2011)	2011	To diversify the needs of the rural poor and provide them with a stable monthly income.	Rural poor	Formation of self-help groups at the village level to support the needy.
National Urban Livelihood Mission (NULM)	Not Specified	To form Self-Help Groups among the urban poor, offer skill development for market-based employment, and assist in establishing self-employment ventures with easy credit access.	Urban poor	Empowers the urban poor through skill development and access to financial resources for self-employment.
Pradhan Mantri Kaushal Vikas Yojana	Not Specified	To target new entrants to the labour market, especially class X and XII dropouts for skill development.	New entrants to the labour market	Aims at increasing the employability of young individuals through skill development.
Pradhan Mantri Jan Dhan Yojana	Not Specified	To facilitate direct benefit transfer of subsidies, pensions, insurance, etc., with a significant achievement of opening 1.5 crore bank accounts.	The unbanked poor	Targets financial inclusion by opening bank accounts for the unbanked population and facilitating direct transfers.

REASONS FOR NON-EFFECTIVITY OF POVERTY ALLEVIATION PROGRAMMES

The effectiveness of poverty alleviation programs is often compromised by several challenges.

Insufficient Funding and Resource Allocation

Challenge: There’s a common understanding among policymakers and program administrators that the targets for poverty alleviation will be adjusted based on the funding available. This leads to the resources allocated for anti-poverty initiatives, like the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), being insufficient. For instance, despite the promise of guaranteeing 100 days of work annually to eligible individuals, many states fall short of this commitment due to budget constraints.
Implications: The gap between the designed capacity of these programs and their actual implementation undermines their potential impact. Insufficient funding limits the reach and depth of services provided to the needy, reducing the programs’ effectiveness in alleviating poverty.

Lack of Awareness Among the Target Population

Challenge: A significant barrier to the effectiveness of poverty alleviation programs is the lack of awareness among the intended beneficiaries. This issue is often compounded by factors such as illiteracy and ignorance, which prevent people from accessing these initiatives.
Implications: If the target population is unaware of the programs designed to assist them, they cannot benefit from the available resources and support. This lack of awareness essentially renders the programs ineffective for those who need them the most.

Role of NGOs and Civil Society Organizations (CSOs)

Challenge: It is suggested that implementing poverty alleviation programs through NGOs and Civil Society Organizations, after a rigorous screening process, might be more effective. This recommendation stems from the belief that these organizations are closer to the ground and may have a better understanding of the local needs and challenges.
Implications: Leveraging the networks, expertise, and trust that NGOs and CSOs have within communities can improve program delivery and impact. However, this approach requires careful coordination and oversight to ensure that the programs are implemented efficiently and transparently.

Need for Social Audits

Challenge: The absence of social audits to evaluate these programs allows for inefficiencies and corruption, which can lead to the leakage of resources meant for the poor. Social audits are crucial for assessing the social impact, transparency, and accountability of poverty alleviation initiatives.
Implications: Conducting impartial social audits can help identify and rectify leaks in the system, thereby enhancing the delivery and effectiveness of these programs. Audits can also foster community participation and ownership, further strengthening the programs’ impact.

Lack of Monitoring Systems

Challenge: The absence of a robust monitoring system to assess the effectiveness and outcomes of poverty alleviation schemes significantly hampers their success. Without effective monitoring, it is challenging to measure progress, identify issues, and make necessary adjustments.
Implications: Implementing comprehensive monitoring systems enables continuous evaluation and improvement of programs. Such systems can provide valuable feedback, helping policymakers and implementers to refine and enhance poverty alleviation efforts.

Inadequate Identification and Support for the Poor

Challenge: A coherent strategy to identify the poor accurately, understand their specific needs, and provide targeted support is often lacking. There is a critical need for organized efforts to equip the impoverished with the necessary tools and resources to lift themselves out of poverty.
Implications: Addressing poverty effectively requires a deep understanding of the multifaceted nature of poverty and a targeted approach to meet the diverse needs of the poor. By failing to identify and understand the needs of the impoverished accurately, programs may not effectively assist those who are most in need.

STRATEGIES FOR POVERTY REDUCTION IN RURAL AREAS

Strategies for reducing poverty in rural areas encompass a holistic approach that targets various sectors and demographics.

Promote Agricultural Growth

Agricultural growth is crucial for reducing poverty in rural areas, where the majority of the population depends on agriculture for their livelihood. However, this strategy goes beyond just increasing agricultural production. It involves:

Enhancing Agricultural Productivity: This can be achieved through the adoption of modern farming techniques, high-yield crop varieties, and efficient water management practices.
Market Access: Improving farmers’ access to markets is essential for selling their produce at better prices. This involves infrastructure development such as roads and storage facilities, as well as information technology for market information.
Agricultural Diversification: Encouraging farmers to diversify crops and integrate livestock farming can reduce vulnerability to market or weather-related shocks.
Support Services: Providing access to credit, agricultural extension services, and insurance products can support farmers in adopting new technologies and managing risks.

Accelerating the Reduction of Rural Poverty

To further reduce rural poverty, strategies must recognize the economic similarities between rural and smaller urban areas and leverage them:

Rural-urban Linkages: Strengthening the economic linkages between rural and smaller urban areas can create opportunities for rural economies. This includes promoting agribusiness ventures and small-scale manufacturing that cater to both rural and urban markets.
Skill Development: Investing in education and vocational training tailored to the rural economy can prepare the workforce for a broader range of economic activities.

Capitalising on Connectivity between Rural and Urban Areas

Enhancing connectivity involves leveraging the growing interdependence between rural and urban areas and across sectors:

Infrastructure Development: Improving physical infrastructure such as roads, bridges, and digital connectivity facilitates access to urban markets, services, and information.
Integrated Development Approaches: Policies that integrate rural and urban development can promote balanced regional growth, reducing migration pressures and spreading economic opportunities.

Creating More and Better Jobs

Addressing the quality and quantity of job opportunities in rural areas requires:

Investment in Non-Agricultural Sectors: Encouraging investments in sectors like manufacturing, services, and renewable energy can create jobs and reduce dependency on agriculture.
Entrepreneurship and Small Business Support: Providing training, credit, and market access can empower entrepreneurs to create jobs and stimulate local economies.

Focusing on Women and Scheduled Tribes

Special attention to marginalized groups can enhance their contribution to economic growth:

Empowering Women: Initiatives to increase women’s access to education, credit, and land rights, alongside promoting their participation in decision-making processes, are vital.
Development Programs for Scheduled Tribes: Tailored programs that address the specific needs and challenges of scheduled tribes, including access to education, healthcare, and employment opportunities, can accelerate their development.

Enhancing Human Development Outcomes

Improving the quality of life through better health, education, and sanitation is essential for sustainable poverty reduction:

Healthcare Access: Expanding access to quality healthcare services and improving health awareness can lead to a healthier, more productive workforce.

Education: Investing in education, from primary to vocational training, equips individuals with the skills needed for better-paying jobs and innovation.

Sanitation and Clean Water: Ensuring access to clean water and sanitation facilities improves health outcomes and frees up time for productive activities, particularly for women and girls.

UPSC PREVIOUS YEAR QUESTIONS

1. Critically examine whether the growing population is the cause of poverty or poverty is the main cause of population increase in India. (2016)

2. An essential condition to eradicate poverty is to liberate the poor from Substantiate this statement with suitable examples. (2016)

3. Despite the implementation of various programmes for eradication of poverty by the government in India, poverty is still existing. Explain by giving reasons. (2018)

What's New

POVERTY AND INEQUALITY

ECONOMIC PLANNING IN INDIA

EMPLOYMENT, UNEMPLOYMENT AND SKILL DEVELOPMENT

Indian Economy

INTERNATIONAL FINANCIAL INSTITUTIONS

WORLD TRADE ORGANIZATION (WTO)

BRETTON WOODS INSTITUTIONS

HUMAN DEVELOPMENT IN INDIA

LAND REFORMS IN INDIA

ECONOMIC REFORMS IN INDIA

SERVICE SECTOR

INDUSTRIAL SECTOR

PUBLIC DISTRIBUTION SYSTEM

Agriculture

Environment & Ecology

Disaster Management

Science & Techlonogy

Internal Security