Poverty in India

I have personally visited Calcutta, India, wondering exactly why so many

people line the streets in absolute destitution. Seeing homeless and poverty
stricken people is sad anywhere in the world; I have seen it in much of the
United States and in other countries as well. But nowhere is it as vast and grave
a problem as it is in India. Every time someone asks for a few rupees on the
street, it is an eye-opening experience that makes you realize how many people
in this world are living below the poverty line with not enough to eat, nowhere
to live, no quality of life to speak of. India holds about one sixth of the worlds
population, yet is responsible for thirty-five percent of the worlds poverty. If
one wants to begin fighting the worlds poverty problems, India is probably the
place to start.
In the year 2000, twenty-six percent of the people of India were living
under the poverty level. This is a fairly shocking statistic, especially when one
considers the World Bank definition of poverty income of less than one dollar a
day, per capita. As surprising as this statistic may be, the situation has in fact
improved drastically in the last quarter century. In fact, from 1951 to 1974,
during Indias first quarter of independence, the poverty rate increased from 47
percent to 56 percent, but the last 25 years have seen this figure drop to 26
percent. (Nathan) With this paper, I seek to understand the determinants of this
decreasing yet alarmingly high rate of poverty in India. I will focus on the stateby-state effects, especially as relating to factors such as religion, caste

breakdown, proportion of agrarian workers, literacy rate and other demographic

factors. In addition, I will examine what has been done in India with regard to
hunger and poverty elimination efforts, take a look at what has been successful
and what might need to be changed in the future.
The problem of poverty in India arises in the rural population. (Dahiwale)
Urban slums are growing in number because of the movement of poor people
from the villages to the cities. As mentioned earlier, poverty levels have
decreased across India. They have not, however, done so equally in all regions.
For example, in examining the data given in Rural Poverty and Slums by
Dahiwale, Indias decline in poverty from 1970 to 1988 was 12.35 percent. But
it was just 3.72 in the state of Maharashtra and 15.02 percent in the state of
Gujarat. It is interesting to note that both these states have a similar level of
urbanization. The place where the difference arises is in the rural setting. Both
states saw a drop in poverty of almost the same percentage in urban centers. But
Gujarat saw a drop in poverty in rural areas that was 7 times as much as that of
Maharashtra.
Breaking down the issue of differential poverty, let us move beyond the
states to the actual demographics of the poor in India. There is a very evident
caste breakdown. Although the caste system is not formally used anymore, many
of the associations continue to this day, especially in rural areas. The scheduled
castes are a designation given to the lowest caste, consisting of those formerly
associated with the designation of untouchables amongst others. A second
lower caste is the scheduled tribes. This group of aboriginal people generally

rejects the caste system and chooses to reside in jungles, forests and mountains.
(Daniel) These two castes make up a disproportionate fraction of the poor in
India. In fact, in 1988, 54.2 percent of the scheduled castes and 62.2 percent of
the scheduled tribes were living below the poverty line. One of the reasons that
we saw a higher percentage in Maharashtra as compared to Gujarat was that there
is a higher population percentage of scheduled castes in that state as compared to
Gujarat.
If religious groups are considered, India has 6 significant religious groups:
Hinduism, Islam, Christianity, Sikhism, Buddhism, and Jainism. The majority of
the country identifies with the Hindu faith, about 82 percent. Islam represents
about 12 percent of all Indians, while Christianity, Sikhism, Buddhism, and
Jainism represent much smaller percentages of people 2.5 percent, 2 percent, .7
percent, and .5 percent, respectively. (Daniel) In examining the data, there
appears to be a correlation with higher percentage of poverty with the Islam
religion. According to a 1987-1988 consensus survey, 35 million of the nations
76 million Muslims, or 46 percent, were living below the poverty line. Muslims
also exceeded Hindus in urban poverty levels by more than 17 percent.
(Dahiwale) The reason for this is possibly due to the different backgrounds from
which the Muslims arrived in India. In the 8 th century, Arabs and other Muslims
began invading India. Since then, those Indians that converted to Islam were
from two main groups: the lower classes of Indian society and the ruling classes
from various Indian kingdoms. The former of these two classes is a likely
contributor to the large proportions of poor Muslims in present day India.

Next let us examine the proportion of agricultural laborers, since most

people in the rural communities take part in agriculture. According to the World
Bank, 45.6 percent of people in rural households are in poverty. The highest
level of poverty, on state lines, was in Maharashtra, where there were 56.6
percent of rural labor households under the poverty line. Maharashtra also has a
higher ratio of agricultural workers to all other workers. (Dahiwale) All of this
evidence points to the conclusion that agricultural laborers are, on the average,
more likely to be living under the poverty line than the average laborer. Census
data, interestingly, also suggest that a reduction in the proportion of agricultural
workers causes unemployment to decrease. From all of this information on
agricultural labor, we might conclude that reduction in agricultural labor, relative
to all other labor, and therefore a reduction in rural labor unemployment, could
help decrease the incidence of poverty.
If we take a look at education, we find another correlation. Slum and
rural poor areas can be identified with low literacy rates as well as educational
levels. For example, in a slum in the city of Kanpur, a literacy rate of 36.2
percent was found, as compared to a literacy rate of 50.8 percent in the rest of
the city. Some cities found literacy rates as low as 20 percent in slums. There is
also a correlation between literacy rates and caste. As found in Kohalpur city in
the study done by Dahiwale, the backward castes, in which the scheduled castes
are included, showed a literacy rate of 18.1 percent, while the upper castes had a
literacy rate of 88.2 percent a tremendous differential. While all of this data on
literacy rates is interesting to note, we cannot make any decisive conclusions

based on this because there is no evident causation. In fact the correlation likely
runs in the opposite way: being born into a destitute family, you have little or no
money. Children are forced to find work to make money just so they can eat, and
in the process are unable to attend school. The correlation can be extrapolated to
a state level Keralas poverty rate is a bit lower than other countries and we see
a very high literacy rate in Kerala, the highest in the nation.
Going beyond the numbers of people that are in poverty, let us take a lok
at the conditions in which they are living. The most important of their living
conditions to take a look at, with regards to poverty, is their food situation. It is
important to see what sort of nourishment the poor have, and what sort of food
security measures are in place because it gets at the core of the problem: those
under the poverty level are undernourished. Before we go into the programs that
have been tried, or should be tried, let us examine the current situation with
regards to nutrition. India has actually made rapid progress over the years when
it comes to food production, having nearly achieved self-sufficiency in the
1970s with regard to availability of foodgrains. (Chelliah and Sudarshan) The
1980s saw an increase in food production per capita of 1.6 percent per year.
Interestingly, however, foodgrain and cereal consumption has been decreasing
since the early 1970s. Especially in the more well-off states such as Punjab and
Haryana, people are consuming less cereals and more milk and milk products,
eggs, meat, fish, vegetables, fruits and so on. This changing diet, on the whole
implies a less efficient means of getting calories. While this is fine for those that
can afford it, it falls hard upon those that cannot. With an overall decrease in the

consumption of cereals, we find that the poor become very succeptible to a

sudden change of price of cereals. Furthermore, as non-cereal consumption is
proportionately increased, the cereal prices are destabilized by lesser
consumption. Thus this overall trend is hurtful to the nations poor both by
creating unstable prices, and making the poor more vulnerable to these volatile
prices. (Chelliah and Sudharshan)
These trends of changing diets have also not necessarily improved
nourishment. In fact, according to surveys taken in 1994, the lowest 30 percent
of rural populations were only taking in about 1680 calories per day, when a
minimum of 2000 is needed for a healthy diet. (Chelliah and Sudarshan) In
addition, many experience a lack of protein and certain essential micro-nutrients.
Many poor households suffer from a lack of Vitamin A, Riboflavin, and Niacin,
for instance. (National Nutrition Monitoring Bureau) Thus, this change in
consumer preferences shows that even though there has been a decline in
income-poverty between 1972 and 1992, there has not been much of a decline in
food-poverty. In fact, overall the problem of food-poverty is much worse than
the issue of income poverty. As of 1994, over one half of all children under the
age of 15 were either severely or moderately malnourished. Similarly 46 percent
of all rural adults suffered from chronic energy deficiency. (Chelliah and
Sudharshan) It is quite evident that dietary nourishment is a major problem in
India, even beyond those who are living under the poverty level, and the problem
is augmented the less money you have.

During the 1960s there was a foodgrain shortage which caused the birth
of a program called the Public Distribution System, or PDS. It focused mostly
upon stabilization of prices in urban areas until the 1980s when it began
expanding to rural areas as well. Since then, it has tried to maintain a supply of
foodgrains especially to protect the poor who might be affected by sudden price
hikes either due to natural fluctuations in the economy, or from the effects of
economic reforms. If we take a look at some of the data provided for who has
benefited from the PDS over the years, we see that those states with high
incidence of poverty have not necessarily been the states that have received a lot
of aid from PDS. Kerala, for instance has a low incidence of poverty, yet a high
share in PDS. Meanwhile, Uttar Pradesh has an incidence of poverty that is more
than six times as high as Kerala, yet its share in PDS is lower than that of Kerala.
There appears, therefore, to be some sort of an inter-regional bias in how the
PDS operates. There also seems to be an urban bias with the PDS. The States of
Jammu and Kashmir as well as West Bengal show a large urban bias. On the
whole, it is evident that the Public Distribution System is not providing the
safety net it intends to for the rural poor in India. (Chelliah and Sudarshan)
Given the vast nature of the problem of poverty in India, many programs
beyond the Public Distribution System have been tried out in an attempt to
alleviate the situation. Many of these programs have focused on eliminating
rural poverty, since, as mentioned earlier, rural poverty is largely where all
poverty in India stems from. The following is a listing of programs enacted since
1971:

Program
Small Farmers
Development Agency

Launching year
1971

Objectives
Controlling soil conservation and
promoting agricultural
productivity

Tribal Area Development 1972

Program

Improving Economy of the tribal

Minimum Needs
Program

1972

Providing construction assistance

and controlling drop-out rate of
children in school and improving
health

Drought Prone Area

1973

Promoting dryland agriculture

Twenty-Point Program

1975, 1982, 1986

Eradicating poverty under various

schemes

Food for Work Program

1977

Improving the consumption level

of the poor

Training Rural Youth for

Self Employment

1979

Upgrading the technical skills of

rural youth for taking up selfemployment ventures

Integrated Rural
Development Program

1979

Providing assistance for

acquisition of productive assets for
self-employment

National Rural
Employment Program
(NREP)

1980

Providing wage employment for

assets creation

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Rural Landless
Employment Guarantee
Program (RLEGP)

1983

Providing wage employment to

landless agricultural laborers for
creating a social forestry and for
construction activities

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Jawahar Rojgar Yojana

(JRY)

1989

NREP and RLEGP merged into

JRY for generating additional
employment on productive works.
It is to be implemented in all
villages in the country

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Urban Basic Services

Scheme, Urban Basic
Services for the poor
(revised)

1986

Aiming at child survival

development. Assistance to
handicapped and street children

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Nehru Rojgar Yojana

1986

Encouraging unemployed youth to

take up self-employment ventures
and providing/upgrading shelter to
pavements/slum dwellers

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National Poverty Line

Benefit Schemes

1995

Paying Rs.300 to a pregnant

woman, a pension of Rs. 75 per
month to an old aged and a sum of
Rs. 5,000 in the event of a death of
the bread earner and Rs. 10,000 in
the case of an accident

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Prime Ministers
1995
Uplifting the urban poor by
Integrated Urban Poverty
mobilizing the women power and
Eradication Program
encouraging for self-employment
(PMIUPEP) in 345 Class
and training
II cities
Table 1. Anti-Poverty Programs
(Taken from Table 1.4 of Rural Poverty and Slums)

Basically all of these programs are of four basic types.

1) Programs that promote economic growth and overall development,
2) Programs that promote human development with emphasis on health,
education and minimum needs,
3) Programs that directly target poverty eradication through creation of
employment, training and creating asset endowments of the poor

4) Lastly, the targeted Public Distribution System (PDS) mentioned

earlier, which provides protection from inflationary pressures by
providing food at affordable prices.
The Integrated Rural Development Program (IRDP), started in 1979, works to
help poor families in rural areas by providing them with government subsidies
for food. The program brought about an incremental income of more than Rs
2000 for 57 percent of households affected and less for all other families.
(Chelliah and Sudharshan) While the IRDP did in fact bring extra income to
families, it has generally not been enough extra income to allow these families to
cross the poverty line. Other similar programs for self-employment, such as the
Development of Women and Children in Rural Areas (DWCRA) and the Training
of Rural Youth for Self-Employment have met with similar weak results. Studies
have pointed out two major reasons for this: there has been very little interaction
with the actual people being affected after the program has been enacted, and
there has been a lack of concern for responding to actual markets. In other words
the programs have received little feedback, have not adapted to meet changing
demands of its beneficiaries, and have not created opportunities that have been
viable in existing markets.
In addition to self-employment programs, there have been different wageemployment programs intended for poverty alleviation. One major example is
the Jawahar Rozgar Yojana (JRY). The JRY was actually created as a merger of
two earlier plans known as the National Rural Employment Program (NREP) and
the Rural Landless Employment Guarantee (RLEGP). The main objective for the

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JRY is to create rural economic infrastructure and community and social assets,
providing employment as a by-product. The employment offered through the
program is a minimum wage for unskilled labor. The wage is generally below
the market rate for such work, but the opportunities are created at many rural
areas and for anyone who is willing to work. Specifically, the JRY projects are
two-fold. One area, called the Indira Awas Yojana (IAY) works on creating
housing, and the Million Wells Scheme (MWS) aims to create open irrigation
wells free of cost to the needy in rural agricultural areas.
Generally the JRY program has been moderately successful. It has created
millions of jobs, while contributing to the development of projects such as
medium irrigation, soil conservation, land development, drinking water wells,
rural roads, construction of school buildings, Panchyat offices (Panchyats are
those responsible for project direction at the local levels), womens club
buildings, housing and sanitation and social forestry. (Chelliah and Sudarshan)
Despite this, however, there has been much criticism of the programs inefficacy.
According to evaluations of the program, more than half of the Panchyat heads
had no training for the projects they were undertaking. Shortage of funds and
organization led to about half the projects not being completed on time. There
were very few womens jobs created, and differential rates were paid to women
and men. Local resources were not properly utilized, driving up production
costs. The overall organization was not impressive either, as annual action plans
were rarely discussed.

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Many of the programs created in the 1970s, as shown in Table 1 were

poverty alleviation programs that worked through assistance to the poor. The
programs introduced in the 1980s, however, were more focused on creation of
employment. Thus far, many of these programs have worked and are very good
programs in theory. Beyond the aforementioned Integrated Rural Development
Program, Public Distribution System, Training of Rural Youth for SelfEmployment, Development of Women and Children in Rural Areas, and Jawahar
Rozgar Yojana, many of the other programs in practice many have also fallen
through due to issues with corruption. (Dahiwale) Often, people who should not
have been classified as poor benefited from the programs, then misused or sold
the assets, such as animals, that they received. The IRDP was reported upon by
the National Commission on Rural Labor as not having sustainable potential.
The Jawahar Rojgar Yojana program, was reported upon by a parliamentary
standing committee in The Times of India, as having a misappropriation of
funds. Similarly a committee on urban and rural development publicly
criticized the Nehru Rojgar Yojana for poor implementation. Former Prime
Minister Rajiv Gandhi also openly admitted to a large corruption, stating that just
15 percent of development funds actually reached the intended beneficiaries.
(Dahiwale)
Amidst all of this corruption and misappropriation of funds, much has
been accomplished in the last quarter century; as mentioned earlier the poverty
rate has been almost cut in half. What this implies is that although India has
seen improvements in poverty alleviation, elimination of the corruption at the

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government level could ensure a much greater outcome. Perhaps the way to
achieve this is to create government bodies at a local level that can monitor and
enforce the policies. Given that these programs are spread across such vast areas
and therefore go through many levels of management, there is lots of room for
corruption. Creating some greater accountability at the local leve will be very
helpful in eliminating such corruption.
With regards to the future, and what steps should be taken in an effort to
reduce poverty in India, different groups have differing opinions. For one thing,
Chelliah and Sudarshan suggest structural reformation of the Public Distribution
System. They suggest removing government controls on the grain markets. They
also suggest for the very poor states with weak administrative structures, creation
of schemes which connect the food distribution to programs that create wage
employment, improve nutrition, and are tied to welfare programs for the old and
disabled to employment of the poor.
The Asian Development Bank provides some ideas for the future of Asian
economies, and I will focus on some of their suggestions for improvement of
agrarian economies, while eliminating poverty. According to the ADB, the main
goal of India should be what they call inclusive growth. This implies creating
opportunities for the poor as part of plans for development. By providing them
with greater access to markets, increasing their productivity, and creating more
opportunities for their employment, you can directly involve the poor in the
development process. (ADB) This will be better for the economy in general,
while aiding the poor simultaneously.

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One of the most important challenges for India, given its large percentage
of rural poor, will be the development of infrastructure. In the age of
globalization and fast moving technology, India must keep pace and be able to
utilize all of its resources, which include the labor of the poor. A strong
infrastructure will aid in bringing private investment, both domestic and foreign;
integration of new technologies in the production process; as well as increasing
productivity. This improved infrastructure will help lead to market expansion
which will decrease regional disparities within India, easier integration of
changing technologies in Asia, and will create employment opportunities within
itself.
It will be important for the nation to capture and capitalize upon all
opportunities created by globalization. Foreign and domestic private investment
must be facilitated by the creation of solid infrastructure, as well as
implementation of appropriate incentives and institutions. It has actually been
estimated by the World Bank that if all of Indias states were to improve their
investment climate to equal that of the most successful ones, the potential rate of
growth of the nation would increase by 2 percentage points (World Bank 2002).
From a policy standpoint, India should seek to implement policies that reduce
constraint on competition and entrepreneurship, and help to bolster legal
systems, perhaps by finding ways to reduce corruption in these systems. This
will give foreign investors more confidence, especially given the large volume of
resources and labor available.

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Improvement of infrastructure and infrastructure services will improve

investment climate directly. According to the ADB, the current inadequate
infrastructure in place in many parts of rural India makes the price of business
increase tremendously. In fact, a survey found that most small and medium size
enterprises in India have their own power generators because of the unreliable
power grids. Improvement of these parts of the infrastructure will reduce the
risk of small business start-ups. Such an infrastructure would also be increased
incentive for large multinational firms to invest in India as well. This would in
turn provide further economic stability for the local small and medium size
enterprises (SMEs). Since SMEs are the majority of businesses in Asian
developing economies, the end result would be employment of much of the
available labor force from the poor in rural communities.
Another important component for the Asian Development Banks inclusive
growth strategy is to modernize agriculture and augment the development of
rural economies. In countries such as India, technological centers have sprung
up in cities like Bangalore, one of the tech capitals of the world. While much of
the countries GDP is shifting towards these new technological industries, the
agricultural industry remains in its archaic state. This causes agriculture to be
very inefficient, relative to the rest of the economy. As an example, China
employs fifty percent of its labor force in agriculture, a sector that provides just
15 percent of the nations GDP. (ADB) Agricultural growth will be sped up
through investment in technological change. Increased technology will then
provide a boost in the agriculture industry which will then create a larger need

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for skilled and trained labor which can be provided by the labor surplus that
exists in rural India. This will continue on in a cycle of increased employment,
increased technology, and increased efficiency which will allow the agriculture
industries in India to catch up in efficiency to the high-technology industries at
urban industrial centers. Development of these rural economies will also involve
increases in the quality of infrastructure. Most technology will rely on
electricity reaching all rural lands, proper roads and vehicles to decrease the time
of transport, better communication through telephone and internet services, and
improvements in irrigation and water supply for crops. (ADB)
Finally, inclusive growth will involve market expansion in rural
economies. This again relies heavily on infrastructure. Many regions of India
have isolated markets due to poor infrastructure such as roads. Poor
transportation causes people to be unable to access different marketplaces and
prevents sellers from selling outside of their small communities, thus reducing
competition both on the buyer and seller sides. This barrier to trade and
reduction of competition inhibits the potential for growth and productivity, such
as commercial production of goods. Overall, development of larger markets will
encourage better products, more competitive prices, increased technology and
thus increased employment of the available labor force by reducing transaction
costs and facilitating exchange.
All of the aforementioned factors are contingent upon improvement of the
current infrastructure in place, especially in rural India, the site of the
agricultural industry. This will require that the Indian government put forth

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funding towards these improvements if reduction of poverty is high on their list

of priorities.
I have found throughout this study a number of things that have surprised
me. First, it was no shock to see the vast amount of poverty that exists in India.
Since I have visited firsthand, the numbers only confirmed my fears of the extent
of the problem. But it was interesting to learn that there is a significant state by
state difference in the poverty problem. These state differences arose due to
differential inhabitants of different religions, and varying amounts of people
from the Scheduled Castes and Scheduled Tribes, and the amount of
agriculture in that area. I was also surprise to find the large number of social
programs that have been put into place already in an attempt to alleviate the
situation. But, in conclusion, it was apparent that even with such a large number
of programs in existence, many have not been efficiently implemented. Due to
disorganization, lack of funds, and most importantly, corruption, these programs
have not helped out their beneficiaries in the way they have the potential to do.
Furthermore, as suggested by the World Bank, if India can adopt an attitude of
inclusive growth where they include the countrys poor in the grand scheme of
wanting to achieve economic growth in a globalizing economy, they will be most
benefited. India can grow economically, while its people deep in the villages can
become financially able and independent beings. It is my hope that during my
life time I see the number of poverty-stricken individuals decrease drastically.
We have the resources to accomplish it, now we just need the organization and
cooperation of all people in India to get that country to achieve its potential.

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Works Cited
Caste System in Modern India. http://adaniel.tripod.com/modernindia.htm
Aharon Daniel.

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India at a Glance. http://www.censusindia.net/scst.html

Know India http://www.incadoindia.com/knowindia.htm
Raja J. Chelliah and R. Sudarshan. Income-Poverty and Beyond. Anthem Press, London,
UK 1999
Ratnakar Gedam. Poverty in India. Deep & Deep Publications, New Delhi. 1995
Rohini Nayyar. Rural Poverty in India. Oxford Unviersity Press, Bombay 1991
S.M Dahiwale. Rural Poverty and Slums. Rawat Publications, Jaipur and New Delhi.
1997
Poverty in India Since 1974. Nathan Associates, Inc. 2002
Asian Development Bank. www.adb.org

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