Poverty in Indian Andthe World

India is defined as an ‘emerging and developing economy'[1]. For the purpose of this paper I will be discussing what progress has been made in reducing poverty in India over the last two decades. Poverty can be defined by ‘a condition in which a person or community is deprived of, or lacks the essentials for a minimum standard of well-being and life.'[2]
Our understanding can be further developed by the concept of a poverty-line. This is the threshold of ‘the money an individual needs to achieve the minimum level of welfare' and have an adequate standard of living.[3]
As a summary measure, the updated World
Bank international poverty line of $1.25 a day in 2005 PPP shows that there has been a decrease in global poverty numbers. The revised World Bank statistics estimate that
‘global poverty rates fell from 52% in 1981 to
26% in 2005'[4]. Consequently, statistical estimates for India also show a decline in poverty levels; the population percentage living below $1.25 a day declined from ‘60% in 1981 to 42% in 2005[5]'. We note that 41.01% of the world's extreme poverty (under $1.00 a day) is concentrated within India.[6] It is important to distinguish that ‘India's income poverty line is the monetary equivalent of a minimum daily calorie intake - 2400 calories per person in rural areas and 2100 calories per person in urban areas.'[7] Therefore, poverty statistics may vary depending on the measures used. For the purposes of this paper
UN data and the $1.00 a day poverty line will be used unless mentioned otherwise.
India's Poverty Gap Ratio gives us a better understanding (See appendix 1). India's PGR fell from 13.6% in 1994 to 10.5% in 2005.[8]
Furthermore, the total population below the poverty line has fallen from 36% in 1994 to
28.6% in 2000.[9] The CIA World Fact-book puts this figure at 25% in 2007.[10] Whilst the absolute levels of poverty are decreasing, there is increasing disparity between urban poverty and rural poverty. Academics also acknowledge that India ‘has recorded impressive gains in many areas and significant reductions in the intensity of poverty, but there is still much ground to cover in terms of ending human deprivations.'[11] Finally, there needs to be a clear distinction made between Poverty Alleviation (PA) and
Human Development (HD). PA can be defined as ‘any process which seeks to reduce the level of poverty in a community, or amongst a group of people or countries.'[12] Greater clarity can be found if we think in terms of reducing number of people under the poverty line. Furthermore, ‘the objective of [human] development is to create an enabling environment for people to enjoy long, healthy and creative lives.'[13] This includes greater access to knowledge, nutrition and health services, more secure livelihoods, security against crime and physical violence. This first section of this paper aims to explore the progress made in decreasing rural poverty. The second section focuses solely on HD factors which effectively alleviate urban poverty.
The bulk of the rural poor are constructed by agricultural wage earners, small and marginal farmers and casual workers engaged in non- agricultural activities.[14] Furthermore, statistics show ‘as late as 1993-94, about 70% of the population was dependent for work on agriculture in rural areas.'[15] Therefore, the rural poor are more affected by changes in food prices and agricultural conditions. In reference to Millennium Development Goal 1
(MDG1: eradicating poverty and hunger)[16] there has been much progress made in rural
India. Kumar notes that in times of bad harvests stronger urban food demand lead to a flow of food-grains to urban areas which decreases the availability of food in rural areas. This tends to push food-grain prices up in rural areas.[17] As a result there is a double marginalization problem; poor harvests mean the rural poor face decreasing employment and income levels, and higher food prices push them further below the poverty line. In 1997, the Targeted Public Distribution System (TPDS) was launched which ‘aims to protect the poor from the adverse effects of a rise in prices and ensures food and nutrition security at affordable prices.'[18] It was estimated that through the TPDS 60m families under the poverty line would benefit from a quantity of about 720,000 tonnes of subsidized food grains which was earmarked annually.[19] For example, in 1987-88 poor harvests affected by severe droughts led to the aforementioned double marginalization problem. In this instance public action took the form of drought-relief works and depletion of buffer stocks to meet the demands of the TPDS. ‘As a result, rural food prices did not rise to that extent, and this protected the rural poor.
However, this was not so in 1991-92 when the decline in agricultural output accentuated rural poverty.
The decline in agricultural output adversely affected rural incomes, but at the same time, a steep rise in the open market prices of wheat and rice worsened their situation.'[20] This lack of consistency in reform and welfare programs means that many people in rural poverty often
‘yo-yo' around the poverty line. More comprehensive poverty alleviating provisions include the Integrated Rural Development
Programme (IRDP) which was launched in 1978 and universalised in 1980. It has provided assistance to rural poor in the form of subsidies and bank credit for productive employment opportunities.[21] The IRDP enables those in rural poverty to cross the poverty line by providing productive assets and inputs to targeted areas. The assets are provided through financial assistance in the form of subsidy by the government and credit advanced by financial institutions.[22] The core concept of the IRDP is on self-help through learning new vocational skills and income generating activities. However, the IRDP was not without its problems, and it suffered from insufficient investments, lack of bank credit, overcrowding in certain projects, and a lack of market linkages. They were seen as standalone welfare programs rather than a comprehensive package. Following Planning Commission recommendations in 1999, the IRDP and other welfare programmes were merged into a single programme known as Swarnajayanti Gram
Swarozgar Yojana (SGSY). ‘The SGSY is conceived as a holistic programme of micro- enterprise development in rural areas with emphasis on organising the rural poor into self-help groups, capacity-building, planning of activity clusters, infrastructure support, technology, credit and marketing linkages.'[23]
The SGSY allows those in poverty help themselves by providing a framework of infra- structure and income-generating training.
Further poverty alleviation measures in rural
India have included Wage Employment
Programmes, Food for Work Programmes and
Employment Assurance Schemes. These provide employment opportunities during poor agricultural seasons, as well as times of floods, droughts and other natural disasters. These schemes aim to create rural infrastructure which supports further economic activity.
‘These programmes also put an upward pressure on market wage rates by attracting people to public works programmes, thereby reducing labour supply and pushing up demand for labour.'[24] But there is inefficient resource allocation and too little resources are spread over too many areas. Help with rural housing has also been given. The Indira Awaas
Yojana (IAY) scheme aims to provide financial assistance to the rural poor below the poverty line for construction of a house.[25] ‘Overall the scheme has benefited thousands of poor households in the state, most of whom had no or very poor accommodation. Before coverage under IAY in the state, 4% surveyed beneficiaries were houseless, 80% had katcha house [made of mud, thatch, or other low quality material] and only 2% had a ‘pacca' house [bricks and mortar]. Whereas, after coverage under IAY, 31% had a ‘pacca' house,
57% ‘semi-pacca' house and none had a
‘katcha' house.'[26] Whilst it is recognised that the IAY scheme has been successful, it does have weaknesses; around 7% of beneficiaries who had an annual income of Rs. 30,000 or more were selected, whereas some families with an annual income of less than Rs.10,000 were left out. This indicates that families above the poverty line were also given benefits under the scheme whereas some families in extreme poverty were left uncovered despite applications to the IAY.[27] Finally, ‘the provision of free houses has meant that other loan-based schemes have not been able to takeoff.'[28] The prospect of free/subsidized housing takes priority over risky loan-based
schemes.