Poverty

Alleviation in
India
Updated as of SEP 2020

ECONOMICS

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Poverty Alleviation Schemes

in India

Introduction
• The state of being inferior in quality or insufficient in amount is known as Poverty.
Poverty means that the income level is from employment is so low that basic human
needs can’t be met.

• In India 21.9% of the population lives below the national poverty line in 2011.x

• Common traits for those who are living is extreme poverty includes:

a. Little or no education

b. Under the age of eighteen

c. Work in farm or agriculture

• Some of the actionable plans to eradicate poverty include the following: -

a. Educating farmers on How to produce more food

b. Building educational institutions to educate disadvantaged community.

c. Installing wells that provide access to clean drinking water.

d. Providing access to enhanced health facilities.

e. Constructing shelter for poor.

• Poverty Alleviation is the steps taken in an economic and humanitarian way for
eradicating poverty from a country.

• According to World Bank if a person is living on $1.90 a day or less then he/she is
living in extreme poverty and currently around 767 million people of the World fall
under this category.

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Below Poverty Line

Below Poverty Line can be defined as an economic benchmark used in the identification
of economically weaker people and household. The proportion of the population that is
below this poverty line is called the Poverty Ratio. It is also known as the Head Count
Ratio.

Types of Poverty
1. Absolute Poverty

2. Relative Poverty

3. Situational Poverty

4. Multidimensional Poverty

• Absolute Poverty: A condition in which household income is below a necessary

level to maintain basic living standards like food, shelter, home.

 The countries with poorest population in absolute numbers are India, Nigeria
and Democratic republic of Congo followed by Ethiopia and Bangladesh.

 It is caused by debt, world population increase, natural disasters, conflicts

and child Labour.

• Relative Poverty: It is defined from the social perspective that is living standard
compared to economic standards of population living in surroundings. Hence it is a
measure of Income inequality.

 Relative poverty is considered as the easiest way to measure the level of

poverty in a dynamic country.

 It refers to lack of income needed to maintain the average standard of living in

your society.

 Relative poverty is measured as the percentage of the population with income

less than some fixed proportion of median income.

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• Situational Poverty:

 Situational poverty is a period wherein an individual falls below the poverty

line because of a sudden event.

 Situational poverty can be caused by a range of factors, such as: a divorce,

death of the family head, illness, a natural disaster or loss of job.

 These are uncontrollable and often unpredictable events that can escalate
until the person finds themselves without material possessions or an income
source.

• Multidimensional Poverty:

 Multidimensional poverty measures can be used to create a more

comprehensive picture.

 They reveal who is poor and how they are poor – the range of different
disadvantages they experience.

 As well as providing a headline measure of poverty, multidimensional

measures can be broken down to reveal the poverty level in different areas of
a country, and among different sub-groups of people.

Some of the indicators of poverty are:

1. Lack of access to health care.

2. Lack of opportunities.

3. Lack of access to safe drinking water.

4. Lack of access to safe sanitation facilities.

5. Lack of general resistance due to malnutrition.

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Poverty Estimation in India

• Poverty estimation in India is carried out by NITI Aayog. Calculation of poverty line is
based on the data captured by National Sample Survey Office under the Ministry of
Statistics and Programme Implementation (MOSPI).

• Poverty line estimation in India is based on the consumption expenditure and not on
the income levels.

• Committees formed to define poverty line in India:

 National Planning Committee

 First Planning Commission working group

 Alagh committee (1979)

 Lakdawala committee (1993)

 Tendulkar committee (2009)

 Rangrajan committee (2012)

National Planning Committee

• In 1938, the National Planning Committee was set up by Subhash Chandra Bose
under the chairmanship of Jawaharlal Nehru for the purpose of drawing up an
economic plan with the fundamental aim to ensure an adequate standard of living for
the masses.

• This committee decided poverty line ranging from ₹15 to ₹20 per capita per month. It
was based on a minimum standard of living perspective in which nutritional
requirements were implicit.

• However, this was not tagged as a poverty line of the country.

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First Planning Commission working Group

• The concept of the poverty line was first introduced by a working group of the
Planning Commission in 1962 and subsequently expanded in 1979 by a task force.

• The 1962 working group recommended that the national minimum for each
household of five persons should be not less than Rs 100 per month for rural and
Rs. 125 for urban at 1960-61 prices.

• These estimates excluded the expenditure on health and education, which both
were expected to be provided by the state.

Y K Alagh Committee
• Till 1979, the approach to estimate poverty was traditional i.e. lack of income. It
was later decided to measure poverty precisely as starvation i.e. in terms of how
much people eat.

• This approach was first of all adopted by the YK Alagh Committee’s

recommendation in 1979 whereby, the people consuming less than 2100 calories in
the urban areas or less than 2400 calories in the rural areas are poor.

• The logic behind the discrimination between rural and urban areas was that the rural
people do more physical work.

• Moreover, an implicit assumption was that the states would take care of the health
and education of the people. Thus, YK Alagh eventually defined the first poverty
line in India.

Lakdawala Formula
• Till as recently as 2011, the official poverty lines were based entirely on the
recommendations of the Lakdawala Committee of 1993.

• This poverty line was set such that anyone above them would be able to afford 2400
and 2100 calories worth of consumption in rural and urban areas respectively in
addition to clothing and shelter. These calorie consumptions were derived from YK
Alagh committee only.

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• According to the Lakdawala Committee, a poor is one who cannot meet these
average energy requirements. However, Lakdawala formula was different in the
following respects in comparison to the previous models:

 In the earlier estimates, both health and education were excluded because
they were expected to be provided by the states.

 This committee defined poverty line on the basis of household per

capita consumption expenditure. The committee used CPI-IL (Consumer
Price Index for Industrial Laborers) and CPI- AL (Consumer Price Index for
Agricultural Laborers) for estimation of the poverty line.

 The method of calculating poverty included first estimating the per capita
household expenditure at which the average energy norm is met, and then,
with that expenditure as the poverty line, defining as poor as all persons who
live in households with per capita expenditures below the estimated value.

 The fallout of the Lakdawala formula was that number of people below the
poverty line got almost double. The number of people below the poverty line
was 16 per cent of the population in 1993-94. Under the Lakdawala
calculation, it became 36.3 percent.

Suresh Tendulkar Committee

• In 2005, Suresh Tendulkar committee was constituted by the Planning Commission.

• The current estimations of poverty are based upon the recommendations of this
committee.

• This committee recommended to shift away from the calorie-based model and made
the poverty line somewhat broad based by considering monthly spending on
education, health, electricity and transport also.

• Recommendations of Tendulkar Committee

 It strongly recommended target nutritional outcomes i.e. instead of calories;

intake nutrition support should be counted.

 It suggested that a uniform Poverty Basket Line be used for rural and urban
region.

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 It recommended a change in the way prices are adjusted and demanded for
an explicit provision in the Poverty Basket Line to account for private
expenditure in health and education.

 Tendulkar adopted the cost of living as the basis for identifying poverty.

• The Tendulkar panel stipulated a benchmark daily per capita expenditure of Rs. 27
and Rs. 33 in rural and urban areas, respectively, and arrived at a cut-off of about
22% of the population below poverty line.

• However, this amount was such low that it immediately faced a backlash from all
section of media and society.

• Since the numbers were unrealistic and too low, the government appointed another
committee under Prime Minister’s Economic Advisory Council Chairman C.
Rangarajan to review the poverty estimation methodology. Brushing aside the
Tendulkar Committee.

Rangrajan committee:
• The committee was set up in the backdrop of national outrage over the Planning
Commission’s suggested poverty line of ₹22 a day for rural areas.

• Objectives

 To review international poverty estimation methods and indicate

whether based on these, a particular method for empirical poverty
estimation can be developed in India.

 To recommend how these estimates of poverty can be linked to eligibility

and entitlements under the various schemes of the Government of India.

• Recommendations

 Methodology Used: The Rangarajan committee estimation is based on

an independent large survey of households by Center for Monitoring
Indian Economy (CMIE). It has also used different methodology wherein
a household is considered poor if it is unable to save.

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 Normative and Behavioral level: Poverty line should be based on

Normative level of adequate nutrition: Ideal and desirable level of
nutrition.

 Behavioral determination of non-food expenses: What people use or

consume as per general behavior.

 Nutritional Requirement: For normative levels of adequate nutrition –

average requirements of calories, proteins and fats based on Indian
Council of Medical Research (ICMR) norms, differentiated by age, gender
and activity for all-India rural and urban regions is considered

 Calories: 2090 kcal in urban areas and 2155 Kcal in rural areas.

 Protein: For rural areas 48 gm and for urban areas 50 gm.

 Fat: For urban areas 28 gm and for rural areas 26 gm.

 Modified Mixed reference period: Instead of Mixed reference Period

(MRP) it recommended Modified Mixed Reference Period (MMRP) in
which reference periods for different items were taken as:

 365-days for clothing, footwear, education, institutional medical

care, and durable goods.

 7-days for edible oil, egg, fish and meat, vegetables, fruits, spices,
beverages, refreshments, processed food, pan, tobacco and
intoxicants

 30-days for the remaining food items, fuel and light, miscellaneous
goods and services including non-institutional medical; rents and
taxes.

 Criticism: Rangarajan committee missed the opportunity to go beyond the

expenditure-based poverty rates and examine the possibility of a wider multi-
dimensional view of deprivation.

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Cause of Poverty in India

1. Population Explosion: India’s population has steadily increased throughout the
years. During the past 45 years, it has been risen at a rate of 2.2% per year which
means on an average around 17 million people are added to the country’s
population each year. This also increases the demand for consumption goods
tremendously.

2. Low agriculture productivity: A major reason for poverty is the low productivity in
the agriculture sector. It is because of fragmented and sub divided land holdings,
lack of capital, illiteracy about new technology in farming, the use of traditional
methods in farming, the use of traditional methods in cultivation, wastage during
storage etc.

3. Insufficient resource utilization: There is underemployment and disguised

employment in the country, particularly in the farming sector. This has resulted in
low agriculture output and also led to a dip in the standard of living.

4. Price rise: Although a few people have benefited from this, the lower income groups
have suffered because of it and are not even able to satisfy their minimum wants.

5. Low rate of economic development: Economic development has been low in

India especially in the first 40 years of independence before the LPG reform in 1991.

6. Unemployment: It is also one of the leading factors for causing Poverty in India.
The ever increasing population has lead to a higher number of job-seekers.
However, there is not even expansion of job opportunities for job seekers.

7. Social factors: Social factors are hindering the eradication of poverty in India apart
from economic factors. Some of the common barrier is caste system, Laws of
inheritance etc.

8. Lack of Capital and Entrepreneurship: The shortage of capital and

entrepreneurship results in low level of investment and job creation in the economy.

9. Climate factors: Most of India’s poor people belong to the state of Bihar, Uttar
Pradesh, Madhya Pradesh, Chhattisgarh, Jharkhand, Orissa etc. Natural calamities
such as frequent flood, disaster, earthquakes and cyclones can cause heavy
damage agriculture in these states.

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10. Colonial exploitation: Colonial Polices transformed India to a mere raw material
producer for European industries.

World Bank Poverty Line:

• The international poverty line, which is currently $1.90 a day, is the threshold that
determines whether someone is living in poverty.

• The line is based on the value of goods needed to sustain one adult.

• This metric, however, does not take into account access to sanitation, water, and
electricity and what effect that has on their quality of life.

• The World Bank sets the international poverty line at periodic intervals as the cost of
living for basic food, clothing, and shelter around the world changes.

Global Hunger Index:

• The Global Hunger Index (GHI) is a tool designed to comprehensively measure and
track hunger at global, regional, and national levels.

• GHI scores are calculated each year to assess progress and setbacks in combating
hunger.

• The GHI is designed to raise awareness and understanding of the struggle against
hunger, provide a way to compare levels of hunger between countries and regions,
and call attention to those areas of the world where hunger levels are highest and
where the need for additional efforts to eliminate hunger is greatest.

• Measuring hunger is complicated. To use the GHI information most effectively, it

helps to understand how the GHI scores are calculated and what they can and
cannot tell us.

How are the GHI scores calculated?

• GHI scores are calculated using a three-step process that draws on available data
from various sources to capture the multidimensional nature of hunger.

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• First, for each country, values are determined for four indicators:

1. UNDERNOURISHMENT: the share of the population that is undernourished

(that is, whose caloric intake is insufficient)

2. CHILD WASTING: the share of children under the age of five who are wasted
(that is, who have low weight for their height, reflecting acute undernutrition)

3. CHILD STUNTING: the share of children under the age of five who are
stunted (that is, who have low height for their age, reflecting chronic
undernutrition)

4. CHILD MORTALITY: the mortality rate of children under the age of five (in
part, a reflection of the fatal mix of inadequate nutrition and unhealthy
environments).

• Second, each of the four component indicators is given a standardized score on a

100-point scale based on the highest observed level for the indicator on a global
scale in recent decades.

• Third, standardized scores are aggregated to calculate the GHI score for each
country, with each of the three dimensions (inadequate food supply; child mortality;
and child undernutrition, which is composed equally of child stunting and child
wasting) given equal weight.

• This three-step process results in GHI scores on a 100-point GHI Severity Scale,
where 0 is the best score (no hunger) and 100 is the worst. In practice, neither of
these extremes is reached.

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• A value of 0 would mean that a country had no undernourished people in the

population, no children younger than five who were wasted or stunted, and no
children who died before their fifth birthday.

• A value of 100 would signify that a country’s undernourishment, child wasting, child
stunting, and child mortality levels were each at approximately the highest levels
observed worldwide in recent decades.

• The GHI Severity Scale shows the severity of hunger - from low to extremely
alarming - associated with the range of possible GHI scores.

What is meant by HUNGER?

The problem of hunger is complex, and different terms are used to describe its various
forms.

I. Hunger is usually understood to refer to the distress associated with a lack of

sufficient calories. The Food and Agriculture Organization of the United Nations
(FAO) defines food deprivation, or undernourishment, as the consumption of too few
calories to provide the minimum amount of dietary energy that each individual
requires to live a healthy and productive life, given that person’s sex, age, stature,
and physical activity level.

II. Undernutrition goes beyond calories and signifies deficiencies in any or all of the
following: energy, protein, and/ or essential vitamins and minerals. Undernutrition is
the result of inadequate intake of food in terms of either quantity or quality, poor
utilization of nutrients due to infections or other illnesses, or a combination of these
factors. These, in turn, are caused by a range of factors, including household food
insecurity; inadequate maternal health or childcare practices; or inadequate access
to health services, safe water, and sanitation.

III. Malnutrition refers more broadly to both undernutrition (problems caused by

deficiencies) and over nutrition (problems caused by unbalanced diets, such as
consuming too many calories in relation to requirements with or without low intake of
micronutrient-rich foods).

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I. In this report, “hunger” refers to the index based on four component indicators.
Taken together, the component indicators reflect deficiencies in calories as well as
in micronutrients.

Composition of Global Hunger Index

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List of Poverty Alleviation Programmes

in India
• The rate of poverty in the rural areas is comparatively higher than that in the urban
areas due to lack of proper infrastructure, insufficient food supply and poor
employment system.

• The major poverty alleviation programmes that were developed with an initiative to
eradicate poverty are mentioned below:

• Integrated Rural Development Programme: Formed in the year 1978 by Ministry

of Rural Development.

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 It is to raise the families of identified target groups living below the poverty
line through the development of sustainable opportunities for self-employment
in the rural sector.

• Pradhan Mantri Grameen Awaas Yojna:

 Formed in the year 1985 by Ministry of Rural Development.

 Its objective is to provide loans at subsidized rates to the people and to create
housing units for everyone along with providing 13 lakhs housing units to the
rural household.

• National Family Benefit Scheme:

 Started in August 1995 by Ministry of Rural Development.

 It’s objective is to provide a sum of 20,000 to the beneficiary who will be the
next head of the family after the death of its primary breadwinner.

• Rural housing/Indra awaas Yojna:

 It aims at providing free housing to Below Poverty Line families in rural areas
and main targets would be the households of SC/STs.

• Annapurna Scheme:

 This scheme was started by the government in 1999-2000 to provide food to

senior citizens who can’t take care of themselves and are not under the
National Old Age Pension Scheme (NOAPS) and who have not care of them
in their village.

 They mostly target groups of ‘poorest of the poor’ and ‘indigent senior
citizens’.

• National Maternity benefit scheme:

 Started in the year 2016 by Ministry of Health and Family affair (MoHFW).

 It’s objective is to provide a sum of 6,000 to a pregnant mother who is aged

above 19 years.

 The sum is provided normally 12 to 8 weeks before the birth in three

installments and can also be availed even after the death of the child.

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• Jawahar gram samriddhi yojna :

 Started in the year 1st April 1999 and implemented by the Village Panchayat.

 To develop the infrastructure of rural areas this included the connecting

roads, school and hospital.

 To provide sustained wage employment to the families belonging to the below

poverty line.

• Pradhan Mantri Kaushal Vikas Yojna :

 It will focus on fresh entrant to the labour market, specially labour market and
class 10th and 12th dropouts.

• Pradhan Mantri Jan Dhan Yojna:

 It aimed at direct benefit transfer of subsidy, pension, insurance etc. and

attained the target of opening 1.5 crore bank accounts. The scheme
particularly targets the unbanked poor.

• Sampoorna Grameen Rozgaar Yojna:

 The main objective of this scheme continues to be generation of wage

employment, creation of durable economic infrastructure in rural areas and
provision of food and nutrition security for the poor.

 Apart from eradicating poverty in India, the Poverty Alleviation Programmes

also took an initiative in providing employment opportunities to the household
of the BPL categories.

 The government of India developed the Mahatma Gandhi National Rural

Employment Guarantee Act (MNEREGA) with an aim to provide legal
guarantee for one hundred days of employment to the adult members of any
rural household in every financial year.

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