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Poverty | Indian Economic Development | Class 12


Economists identify the poor on the basis of their occupation and ownership of assets.

They state that the rural poor work mainly as landless agricultural labourers, cultivators with very small landholdings, landless labourers who are engaged in a variety of non agricultural jobs and tenant cultivators with small land holdings.

The urban poor are largely the overflow of the rural poor who had migrated to urban areas in search of alternative employment and livelihood, labourers who do a variety of casual jobs and the self-employed who sell a variety of things on roadsides and are engaged in various activities.

How are Poor People Identified?

If India is to solve the problem of poverty, it has to find viable and sustainable strategies to address the causes of poverty and design schemes to help the poor out of their situation.

However, for these schemes to be implemented, the government needs to be able to identify who the poor are. For this there is need to develop a scale to measure poverty, and the factors that make up the criteria for this measurement or mechanism need to be carefully chosen.

In pre-independent India, Dadabhai Naoroji was the first to discuss the concept of a Poverty Line.

He used the menu for a prisoner and used appropriate prevailing prices to arrive at what may be called ; jail cost of living.

However, only adults stay in jail whereas, in an actual society, there are children too. He, therefore, appropriately adjusted this cost of living to arrive at the poverty line.

For this adjustment, he assumed that one-third population consisted of children and half of them consumed very little while the other half consumed half of the adult diet.

This is how he arrived at the factor of three-fourths;

(1/6) (Nil) + (1/6) (Half) + (2/3) (Full) = (3/4) (Full).

The weighted average of consumption of the three segments gives the average poverty line, which comes out to be three-fourth of the adult jail cost of living.

In post-independent India, there have been several attempts to work out a mechanism to identify the number of poor in the country.

For instance, in 1962, the Planning Commission formed a Study Group. In 1979, another body called the;Task Force on Projections of Minimum Needs and Effective Consumption Demand; was formed.

In 1989 and 2005, Expert Groups; were constituted for the same purpose.

Besides Planning Commission, many individual economists have also attempted to develop such a mechanism.

For the purpose of defining poverty we divide people into two categories;

  • the poor

  • the non-poor;

  • The poverty line separates the two.

However, there are many kinds of poor; the absolutely poor, the very poor and the poor.

Similarly there are various kinds of non-poor; the middle class, the upper middle class, the rich, the very rich and the absolutely rich. Think of this as a line or continuum from the very poor to the absolutely rich with the poverty line dividing the poor from the non-poor.

Categorizing Poverty:

There are many ways to categories poverty. In one such way people who are always poor and those who are usually poor but who may sometimes have a little more money are grouped together as the chronic poor.

Another group is the churning poor who regularly move in and out of poverty.

The occasionally poor who are rich most of the time but may sometimes have a patch of bad luck. They are called the transient poor.

And then there are those who are never poor and they are the non-poor.

The Poverty Line

There are many ways of measuring poverty. One way is to determine it by the monetary value (per capita expenditure) of the minimum calorie intake that was estimated at 2,400 calories for a rural person and 2,100 for a person inthe urban area.

Based on this, in 2009-10, the poverty line was defined for rural areas as consumption worth Rs 673 per person a month and for urban areas it was Rs 860.

Economists state that a major problem with this mechanism is that it groups all the poor together and does not differentiate between the very poor and the other poor.

Also this mechanism takes into account expenditure on food and a few select items as proxy for income, economists question its basis.

This mechanism is helpful in identifying the poor as a group to be taken care of by the government, but it would be difficult to identify who among the poor need help the most.

There are many factors, other than income and assets, which are associated with poverty; for instance, the accessibility to basic education, health care, drinking water and sanitation. They need to be considered to develop Poverty Line.

The existing mechanism for determining the Poverty Line also does not take into consideration social factors that trigger and perpetuate poverty such as illiteracy, ill health, lack of access to resources, discrimination or lack of civil and political freedoms.

The aim of poverty alleviation schemes should be to improve human lives by expanding the range of things that a person could be and could do, such as to be healthy and well-nourished, to be knowledgeable and participate in the life of a community.

From this point of view, development is about removing the obstacles to the things that a person can do in life, such as illiteracy, ill health, lack of access to resources, or lack of civil and political freedoms.

Though the government claims that higher rate of growth, increase in agricultural production, providing employment in rural areas and economic reform packages introduced in the 1990s have resulted in a decline in poverty levels, economists raise doubts about the governments claim.

They point out that the way the data are collected, items that are included in the consumption basket, methodology followed to estimate the poverty line and the number of poor is manipulated to arrive at the reduced figures of the number of poor in India.

Due to various limitations in the official estimation of poverty, scholars have attempted to find alternative methods.

For instance, Amartya Sen., noted Nobel Laureate, has developed an index known as Sen Index. There are other tools such as Poverty Gap Index and Squared Poverty Gap.

The Number of Poor in India

When the number of poor is estimated as the proportion of people below the poverty line, it is known as ; Head Count Ratio

What Causes Poverty?

The causes of poverty lie in the institutional and social factors that mark the life of the poor. The poor are deprived of quality education and unable to acquire skills which fetch better incomes.

Also access to health care is denied to the poor.

The main victims of caste, religious and other discriminatory practices are poor. These can be caused as a result of social, economic and political inequality, social exclusion, unemployment, indebtedness, unequal distribution of wealth.

Aggregate poverty is just the sum of individual poverty.

Poverty is also explained by general, economy-wide problems, such as low capital formation, lack of infrastructure , lack of demand, pressure of population, lack of social/welfare nets.

As over 70 per cent of Indians were engaged in agriculture throughout the British Raj period, the impact on that sector was more important on living standards than anything else.

British policies involved sharply raising rural taxes that enabled merchants and moneylenders to become large landowners.

Under the British, India began to export food grains and, as a result, as many as 26 million people died in famines between 1875 and 1900.

Britain’s main goals from the Raj were to provide a market for British exports, to have India service its debt payments to Britain, and for India to provide manpower for the British imperial armies.

The British Raj impoverished millions of people in India. Our natural resources were exploited, our industries worked to produce goods at low prices for the British and our food grains were exported. Many died due to famine and hunger.

In 1857-58, anger at the overthrow of many local leaders, extremely high taxes imposed on peasants, and other issues boiled over in a revolt against British rule by the sepoys, Indian troops commanded by the British.

Even today agriculture is the main means of livelihood and land is the primary asset of rural people; ownership of land is an important determinant of material well-being and those who own some land have a better chance to improve their living conditions.

Since independence, the government has attempted to redistribute land and has taken land from those who have large amounts to distribute it to those who do not have any land, but work on the land as wage labourers.

However, this move was successful only to a limited extent as large sections of agricultural workers were not able to farm the small holdings that they now possessed as they did not have either money (assets) or skills to make the land productive and the land holdings were too small to be viable.

Also most of the Indian states failed to implement land redistribution policies.

A large section of the rural poor in India are the small farmers. The land that they have is, in general, less fertile and dependent on rains. Their survival depends on subsistence crops and sometimes on livestock.

With the rapid growth of population and without alternative sources of employment, the per-head availability of land for cultivation has steadily declined leading to fragmentation of land holdings.

The income from these small land holdings is not sufficient to meet the family’s basic requirements.

A large section of urban poor in India are largely the overflow of the rural poor who migrate to urban areas in search of employment and a livelihood.

Industrialization has not been able to absorb all these people. The urban poor are either unemployed or intermittently employed as casual laborers.

Casual laborers are among the most vulnerable in society as they have no job security, no assets, limited skills, sparse opportunities and no surplus to sustain them.

All this has created two distinct groups in society: those who possess the means of production and earn good incomes and those who have only their labour to trade for survival.

Over the years, the gap between the rich and the poor in India has widened. Poverty is a multi-dimensional challenge for India that needs to be addressed on a war footing.

Policies and Programmes towards Poverty Alleviation

The Indian Constitution and five year plans state social justice as the primary objective of the developmental strategies of the government.

To quote the First Five Year Plan (1951-56), ;the urge to bring economic and social change under present conditions comes from the fact of poverty and inequalities in income, wealth and opportunity.

The Second Five Year Plan (1956-61) also pointed out that ;the benefits of economic development must accrue more and more to the relatively less privileged classes of society.

One can find, in all policy documents, emphasis being laid on poverty alleviation and that various strategies need to be adopted by the government for the same.

The government’s approach to poverty reduction was of three dimensions.

1. Growth-oriented approach : It is based on the expectation that the effects of economic growth rapid increase in gross domestic product and per capita income would spread to all sections of society and will trickle down to the poor sections also.

This was the major focus of planning in the 1950s and early 1960s. It was felt that rapid industrial development and transformation of agriculture through green revolution in select regions would benefit the underdeveloped regions and the more backward sections of the community.

2. Employment generation approach : While looking for alternatives to specifically address the poor, policy makers started thinking that incomes and employment for the poor could be raised through the creation of additional assets and by means of work generation.

This could be achieved through specific poverty alleviation programmes. This second approach has been initiated from the Third Five Year Plan (1961-66) and progressively enlarged since then.

One of the noted programmes initiated in the 1970s was Food for Work.

Most poverty alleviation programmes implemented are based on the perspective of the Five Year Plans.

Expanding self-employment programmes and wage employment programmes are being considered as the major ways of addressing poverty.

Earlier, under self-employment programmes, financial assistance was given to families or individuals.

Since the 1990s, this approach has been changed. Now those who wish to benefit from these programmes are encouraged to form self-help groups.

Initially they are encouraged to save some money and lend among themselves as small loans. Later, through banks, the government provides partial financial assistance to SHGs which then decide whom the loan is to be given to for self-employment activities.

Swarnajayanti Gram Swarozgar Yojana(SGSY) is one such programme.

The government has a variety of programmes to generate wage employment for the poor unskilled people living in rural areas.

In August 2005, the Parliament passed a new Act to provide guaranteed wage employment to every rural household whose adult volunteer is to do unskilled manual work for a minimum of 100 days in a year.

This Act is known as Mahatma Gandhi National Rural Employment Guarantee Act. Under this Act all those among the poor who are ready to work at the minimum wage can report for work in areas where this programme is implemented. In 2013-14, nearly five crore households got employment opportunities under this law.

3. Minimum basic amenities approach: To the people. India was among the pioneers in the world to envisage that through public expenditure on social consumption needs provision of food grains at subsidized rates, education, health, water supply and sanitation people’s living standard could be improved.

Programmes under this approach are expected to supplement the consumption of the poor, create employment opportunities and bring about improvements in health and education.

Major Programmes For the Upliftment of the Poor

The major programmes that aim at improving the food and nutritional status of the poor are

  • Public Distribution System

  • Integrated Child Development Scheme and Midday Meal Scheme.

  • Pradhan Mantri Gram Sadak Yojana

  • Pradhan Mantri Gramodaya Yojana

  • Valmiki Ambedkar Awas Yojana ; are also attempts in developing infrastructure and housing conditions.

It may be essential to briefly state that India has achieved satisfactory progress in many aspects.

The government also has a variety of other social security programmes to help a few specific groups. National Social Assistance Programme is one such programme initiated by the central government.

  • National Social Assistance Programme : Under this programme, elderly people who do not have anyone to take care of them are given pension to sustain themselves. Poor women who are destitute and widows are also covered under this scheme.

The government has also introduced a few schemes to provide health insurance to poor people. From 2014, a scheme called Pradhan Mantri Jan-Dhan Yojana is available in which people in India are encouraged to open bank accounts.

(Financial Inclusion)

Poverty Alleviation Programmes A Critical Assessment

Efforts at poverty alleviation have borne fruit in that for the first time since independence, the percentage of absolute poor in some states is now well below the national average.

Despite various strategies to alleviate poverty, hunger, malnourishment, illiteracy and lack of basic amenities continue to be a common feature in many parts of India.

Though the policy towards poverty alleviation has evolved in a progressive manner, over the last five and a half decades, it has not undergone any radical transformation.

Scholars, while assessing these programmes, state three major areas of concern which prevent their successful implementation.

  • Due to unequal distribution of land and other assets, the benefits from direct poverty alleviation programmes have been appropriated by the non-poor.

  • Compared to the magnitude of poverty, the amount of resources allocated for these programmes is not sufficient. Moreover, these programmes depend mainly on government and bank officials for their implementation.

Since such officials are ill motivated, inadequately trained, corruption prone and vulnerable to pressure from a variety of local elites, the resources are inefficiently used and wasted. There is also non-participation of local level institutions in programme implementation.

Government policies have also failed to address the vast majority of vulnerable people who are living on or just above the poverty line.

It also reveals that high growth alone is not sufficient to reduce poverty. Without the active participation of the poor, successful implementation of any programme is not possible.

Poverty can effectively be eradicated only when the poor start contributing to growth by their active involvement in the growth process.

This is possible through a process of social mobilization, encouraging poor people to participate and get them empowered. This will also help create employment opportunities which may lead to increase in levels of income, skill development, health and literacy.

Moreover, it is necessary to identify poverty stricken areas and provide infrastructure such as schools, roads, power, telecom, IT services, training institutions etc.


The objective of all our policies had been stated as promoting rapid and balanced economic development with equality and social justice.

Poverty alleviation has always been accepted as one of India’s main challenges by the policy makers, regardless of which government was in power. The absolute number of poor in the country has gone down and some states have less proportion of poor than even the national average.

Yet, critics point out that even though vast resources have been allocated and spent, we are still far from reaching the goal.

There is improvement in terms of per capita income and average standard of living; some progress towards meeting the basic needs has been made. But when compared to the progress made by many other countries, our performance has not been impressive.

Moreover, the fruits of development have not reached all sections of the population. Some sections of people, some sectors of the economy, and some regions of the country can compete even with developed countries in terms of social and economic development, yet, there are many others who have not been able to come out of the vicious circle of poverty.

Important Poverty Alleviation Programs

After independence, the Government has launched several poverty alleviation programmes, the important among these are as follows:

  1. Legal elimination of bonded labourers.

  2. Preventing the centralisation of wealth by modifying the law.

  3. Antyodaya plan.

  4. Small Farmers Development Programme (SFDP)

  5. Drought Area Development Programme (DADP)

  6. Twenty point programme

  7. Food for work programme

  8. Minimum needs programme (MNP)

  9. Integrated Rural Development Programme (IRDP)

  10. National Rural Employment Programme (NREP)

  11. Rural Labour Employment Guarantee Programme (RLEGP)

  12. TRYSEM scheme

  13. Jawahar Rojgar Yojna (JRY)

  14. Swarna Jayanti Gram Swarozgar Yojna.

  15. National Social Assistance Programme (NSAP)

  16. Rural Housing Programme.

  17. Indira A was Yojana.

  18. Pradhan Mantri Rojgar Yojna.

  19. Nehru Rozgar Yojna (NRY)

  20. Self-Employment Programme for the Urban Poor, (SEPUP)

  21. Prime Minister’s Integrated Urban Poverty Eradication Programme (PMIUPEP)