Poverty and

Unemployment
By Dr Vipan Goyal
 Poverty & Poverty Line in India

The Planning Commission of India (Now NITI Aayog)

periodically estimates poverty lines and poverty ratios for each
year for which Large Sample Surveys on Household Consumer
Expenditure have been conducted by the National Sample
Survey Office (NSSO) of the Ministry of Statistics and
Programmee Implementation.
 How Poverty is defined?

• Poverty is the lack of sufficient money to meet the minimum standard of

living-including food, clothing, shelter, health and education.
• It was based on minimum daily requirement of 2,400 and 2,100 calories
for an adult in rural and urban areas, respectively.
 Reasons Behind Poverty in India
• 1. Poor fiscal capacity of the government due to tax evasion and avoidance
versus large population
• Poor Public healthcare, education, housing, water & sanitation infra.
 Educational outcomes are poor, illiteracy, lack of vocational skills
 Unemployment, Underemployment, Disguised Unemployment is
there.
 Unhygienic slums leads to Disease .
• 2. Lack of family planning so higher birth rate and leads to child labour.
• 3. Large family so insufficient food and malnutrition leads to insufficient
mental & physical capacity to pursue better economic opportunities.
 Reasons Behind Poverty in India
• 4. Low asset base : Most of the rural households don’t possess land, milch
animals, farm machinery or sufficient bank deposits so reduces their
capacity to generate self-employment / business opportunities.
• 5. Lack of financial planning
• 6. Leakages in the poverty removal programs
• 7. Lack of financial inclusion.
• 8. Majority of labour engaged in unorganized / informal sector
• 9. Social barriers faced by SC / ST / Minorities in advancing economically in
rural area.
 Measurement and Estimation
• World Bank: ~21% Indian population is poor
• World Bank’s International Poverty Line stands at person living daily on
US$1.90 (PPP exchange rate).
• So, a person who spends less than an absolute amount ‘US$1.90’ a day is
considered ‘Below International Poverty line’ and classified as poor.
• So, spending $1.91 is non-poor while $1.89 is poor. This is an example of
“Absolute Poverty” measured with an artificial line.
• The result is usually expressed in Poverty Head Count Ratio (HCR) i.e.
proportion of a population that lives, below this poverty line.
 Measurement and Estimation
• 2011: India’s 21.2% population classified as poor by World Bank’s method.
• But, 2018 Nigeria took over India.
• World bank aims to eliminate extreme poverty by 2030.
• Relative Poverty : Households are arranged in ascending order of annual
income i.e. Households earning less than x% of median income is classified
as poor.
• Thus it measures poverty ‘relative’ or ‘compared‘ to how much others are
earning.
 Poverty Line
• The old formula for estimating the poverty line is based on the desired calorie
requirement.
• Food items such as cereals, pulses, vegetables, milk, oil, sugar etc. together provide
these needed calories.
• The accepted average calorie requirement in India is 2400 calories per person per
day in rural areas and 2100 calories per person per day in urban areas.
• Since people living in rural areas engage themselves in more physical work, calorie
requirements in rural areas are considered to be higher than urban areas.
• On the basis of these calculations, for the year 2000, the poverty line for a person
was fixed at Rs 328 per month for the rural areas and Rs 454 for the urban areas.
• In this way in the year 2000, a family of five members living in rural areas and
earning less than about Rs 1,640 per month will be below the poverty line.
 Anti poverty measures and Employment
Generating programmes
• 1. Integrated Rural Development Programme (IRDP):
 The Integrated Rural Development Programme (IRDP), which was
introduced in 1978-79 and universalized from 2nd October, 1980,
aimed at providing assistance to the rural poor in the form of subsidy
and bank credit for productive employment opportunities through
successive plan periods.
 On 1st April, 1999, the IRDP and allied programmes were merged into
a single programme known as Swarnajayanti Gram Swarozgar Yojana
(SGSY).
 The SGSY emphasizes on organizing the rural poor into self-help
groups, capacity-building, planning of activity clusters, infrastructure
support, technology, credit and marketing linkages.
 Anti poverty measures and Employment
Generating programmes
• 2. Jawahar Rozgar Yojana/Jawahar Gram Samriddhi Yojana:
 Under the Wage Employment Programmes, the National Rural
Employment Programme (NREP) and Rural Landless Employment
Guarantee Programme (RLEGP) were started in Sixth and Seventh Plans.
 The NREP and RLEGP were merged in April 1989 under Jawahar Rozgar
Yojana (JRY).
 The JRY was meant to generate meaningful employment opportunities for
the unemployed and underemployed in rural areas through the creation
of economic infrastructure and community and social assets.
 The JRY was revamped from 1st April, 1999, as Jawahar Gram Samriddhi
Yojana (JGSY).
 It now became a programme for the creation of rural economic
infrastructure with employment generation as the secondary objective.
 Anti poverty measures and Employment
Generating programmes
• 3. Rural Housing – Indira Awaas Yojana:
 The Indira Awaas Yojana (IAY) programme aims at providing free
housing to Below Poverty Line (BPL) families in rural areas and
main targets would be the households of SC/STs.
 It was first merged with the Jawahar Rozgar Yojana (JRY) in 1989
and in 1996 it broke away from JRY into a separate housing
scheme for the rural poor.
 Anti poverty measures and Employment
Generating programmes
• 4. Food for Work Programme:
 The Food for Work Programme was started in 2000-01
 It aims at enhancing food security through wage employment.
 Food grains are supplied to states free of cost, however, the
supply of food grains from the Food Corporation of India.
 Anti poverty measures and Employment
Generating programmes
• 5. Sampoorna Gramin Rozgar Yojana (SGRY):
 Sampoorna Gramin Rozgar Yojana (SGRY) Scheme started from
1st September, 2001.
 The main objective of the scheme continues to be the
generation of wage employment, creation of durable economic
infrastructure in rural areas and provision of food and nutrition
security for the poor.
 Anti poverty measures and Employment
Generating programmes
• 6. Mahatma Gandhi National Rural Employment Guarantee Act
(MGNREGA) 2005:
 It was launched on February 2, 2005.
 The Act provides 100 days assured employment every year to every
rural household.
 One-third of the proposed jobs would be reserved for women.
 Under the programmee, if an applicant is not provided employment
within 15 days s/he will be entitled to a daily unemployment
allowance.
 Anti poverty measures and Employment
Generating programmes
• 7. National Food for Work Programme:
 It was launched on November 14, 2004 in 150 most backward
districts of the country.
 The objective of the programme was to provide additional
resources available under Sampoorna Grameen Rojgar Yojna.
 This was 100% centrally funded programme. Now this
programme has been subsumed in the MGNREGA from Feb 2,
2006.
 Anti poverty measures and Employment
Generating programmes
• 8. National Rural Livelihood Mission: Ajeevika (2011)
 It is the skill and placement initiative of Ministry of Rural
development.
 It is a part of National Rural Livelihood Mission (NRLM)–the mission
for poverty reduction is called Ajeevika (2011).
 It evolves out the need to diversify the needs of the rural poor and
provide them jobs with regular income on monthly basis.
 Self Help groups are formed at the village level to help the needy.
 Now it is called Deen Dayal Antyodaya Yojana .
 Anti poverty measures and Employment
Generating programmes
• 9. Pradhan Mantri Kaushal Vikas Yojna:
 The cabinet on March 21, 2015 cleared the scheme to provide
skill training to 1.4 million youth with an overall outlay of Rs.
1120 crore.
 This plan is implemented with the help of Ministry of Skill
Development and Entrepreneurship through the National Skill
Development Corporation.
 It will focus on fresh entrant to the labour market, especially
labour market and class X and XII dropouts.
 Anti poverty measures and Employment
Generating programmes
• 10. National Heritage Development and Augmentation Yojna (HRIDAY):
 HRIDAY scheme was launched (21 Jan. 2015) to preserve and rejuvenate the
rich cultural heritage of the country.
 This Rs. 500 crore programme was launched by Urban Development Ministry in
New Delhi.
 Initially it is launched in 12 cities: Amritsar, Varanasi, Gaya, Puri, Ajmer,
Mathura, Dwarka, Badami, Velankanni, Kanchipuram, Warangal and Amarvati.
 These programmes played/are playing a very crucial role in the development of
the all sections of the society so that the concept of holistic development can
be ensured in the real sense.
 Inequality
• Gini Coefficient− Italian
statistician Corrado Gini(1912)’s a
formula for measuring inequality.
 0 or 0% = perfect equality; 1 or
100% = perfect inequality.
 India’s Gini coefficient
degraded from 81% (2013) to
85% (2018), which proves
inequalities increasing in India.
 Kuznets Curve
• The Kuznets Curve is a graph used in
economics that says that as an economy
develops, market forces first cause a rise
in the economic inequality, then closes
the gap in economic inequality.
• A justification for this kind of a
progression is that early on in the
development stage of an economy,
investment opportunities increase for
those who possess money, and the
arrival of cheap rural labour into the
urban areas would suppress wages.
 Kuznets Curve
• Inequality lowers the rate of growth
by dropping educational levels since
poor and disadvantaged people do
not have the necessary finance for
their education in inadequate credit
markets.
 Lorenz Curve
• The Lorenz Curve (the actual
distribution of income curve), a
graphical distribution of wealth
developed by Max Lorenz in 1906,
shows the proportion of income
earned by any given percentage of the
population.
• The line at the 45º angle shows
perfectly equal income distribution,
while the other line shows the actual
distribution of income.
• The further away from the diagonal,
the more unequal the size of the
distribution of income.
 Poverty Line
• Alagh Committee (1979) : Adult daily calories intake: 2100 (Urban), 2400
(Rural). If a person is not getting this much calorie he is Below Poverty Line (BPL)
• Lakadwalla (1993) : Calories Intake, Clothing and Shelter
• Suresh Tendulkar committee (2005-09) : Setup by Planning Commission, this
Committee defined poverty line at monthly per capita expenditure ₹ 27 (rural),
₹ 33 ( urban).
 As per Tendulkar method, 22 %(All India), 25.7% (Rural India), 13.7% (Urban
area) in 2011-12 of Indians living below poverty line.
 State/UT that have higher % poverty than 21.9%: Uttar Pradesh < Madhya
Pradesh < Assam < Odisha < Bihar < Arunachal Pradesh < Manipur <
Jharkhand < Dadra & Nagar Haveli < Chhattisgarh (most poor)
 Poverty Line
• Rangarajan committee (2012-14) : Setup by Planning Commission,
this Committee suggested poverty line @monthly expenditure for
family of five: ₹ 4860 (Rural), ₹ 7035 (Urban).
 This generated uproar because it translates to a person spending daily
₹ 32/> (rural) or ₹ 47/> (urban) is not a poor.
 UNEMPLOYMENT
• A person who is not getting daily 8 hrs works at a min wage rate.
• It is calculated by NSSO.
• Voluntary Unemployment:
 a person is out of job on his own choice. Either he wants higher wages
or doesn’t want to work at all.
• Involuntary unemployment:
 It is a situation where a person is willing to work at the prevailing wage
rates, but unable to find work due to factors beyond his control.
 Types of Unemployment
• Cyclical Unemployment : mainly occurs during recession or depression when
workers are laid off on mass scale.
• Frictional Unemployment : When a person is out of one job and is searching for
another job. During this transition time, he’s deemed frictionally unemployed.
• Disquised Unemployment : Unemployment which is not visible because person
seems visibly working but his marginal productivity / contribution is zero. This is
seen in rural areas in the agriculture field.
• E.g. Farming family of 4 persons produces 200 kgs of wheat, but even if you remove
3 persons still production remains at 200 kgs.
• Seasonal Unemployment : Due to change in seasons. Example : Labourers in
Agriculture, Salt-pans, Sugar Mills, Ice-factory, Tourist spots, Marriage Catering-
Orchestra etc.
 Types of Unemployment
• Underemployment or Educated unemployment : person is employed but
not in a befitting position or salary corresponding to his qualification. e.g.
M.Com working as Swiggy delivery boy, M. Tech working as Bank clerk and
Dentist working as Dy. Section Officer.
• This is seen in urban areas.
• Technological : Technological unemployment occurs when men are replaced
with machines e.g. textile / automobile.
• Open / Structural : Lack of jobs when person’s skill/qualification is
insufficient for the jobs available in the market e.g. post graduate student
working as clerk.
• In India Structural Unemployment is there due to lack of resources.
 NSSO MEASUREMENT
 Unemployment Rate: = Total no. of unemployed / total labour force (of
all people in the working age.)
 NSSO measures unemployment in 3 different approaches viz.
• Usual Principal Activity status :- Unemployed for majority of the year.
• Current Weekly Status If not employed even 1 hr work in a week
• Current Daily Status If not employed even 1 hr work in a day.
• Daily Unemployment data is the best data to calculate Unemployment.
Thank You