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Poverty Alleviation in India - Study Notes
Poverty Alleviation in India - Study Notes
Alleviation in
India
Updated as of SEP 2020
ECONOMICS
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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
• 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.
Types of Poverty
1. Absolute Poverty
2. Relative Poverty
3. Situational Poverty
4. Multidimensional Poverty
The countries with poorest population in absolute numbers are India, Nigeria
and Democratic republic of Congo followed by Ethiopia and Bangladesh.
• 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.
• Situational Poverty:
These are uncontrollable and often unpredictable events that can escalate
until the person finds themselves without material possessions or an income
source.
• Multidimensional Poverty:
They reveal who is poor and how they are poor – the range of different
disadvantages they experience.
2. Lack of opportunities.
• Poverty line estimation in India is based on the consumption expenditure and not on
the income levels.
• 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.
• 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.
• 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.
• 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.
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.
• 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.
It suggested that a uniform Poverty Basket Line be used for rural and urban
region.
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
• Recommendations
Calories: 2090 kcal in urban areas and 2155 Kcal in rural areas.
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.
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.
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.
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.
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.
10. Colonial exploitation: Colonial Polices transformed India to a mere raw material
producer for European industries.
• 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.
• 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.
• First, for each country, values are determined for four indicators:
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).
• 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.
• 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.
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.
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.
• The major poverty alleviation programmes that were developed with an initiative to
eradicate poverty are mentioned below:
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.
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.
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.
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:
They mostly target groups of ‘poorest of the poor’ and ‘indigent senior
citizens’.
Started in the year 2016 by Ministry of Health and Family affair (MoHFW).
Started in the year 1st April 1999 and implemented by the Village Panchayat.
It will focus on fresh entrant to the labour market, specially labour market and
class 10th and 12th dropouts.