POVERTY

A MAJOR
CHALLENGE TO
INDIAN ECONOMY

What does poverty

Lack of shelter
mean?
Lack of food
Lack of education
Lack of basic transportation
Lack of ability to pay off debts
Lack of good health and
medical infrastructure

How are the poor

identified?
1. Relative Poverty
It refers to poverty in relation to different classes,
regions or countries. The country or class of people
whose level of living is low, is treated as poor or
relatively poor in comparison to the country or
class of people having high level of living.
According to a report published by UNO, those
countries are considered relatively poor where per
capita income is less than $1.25 per day or about
$455 per annum. According to this benchmark,
India ranks very low in terms of quality of life with
per capita income of only US $ 330 per annum. Per
capita income even of countries like Egypt, Sri
Lanka and Pakistan is higher than that of India.
Thus, India is one of the poorest countries of the

2. Absolute Poverty
The poverty threshold or poverty line is the
minimum level of income deemed adequate in a
particular country.
Absolute poverty is the level of poverty as defined
in terms of the minimal requirements necessary to
afford minimal standards of food, clothing, health
care and shelter. In India, the concept of poverty
line is used as a measure of absolute poverty.
Recently
the
Indian
Planning
Commission
recommended the countrys poverty line at Rs 47 a
day for urban areas and Rs 32 in rural areas. Those
persons are treated as absolutely poor whose
monthly consumption expenditure falls below this
line.

Causes
Of
poverty

1. Climatic factors:

Climatic conditions constitute an important cause

of poverty. The hot climate of India reduces the
capacity of people especially the ruralites to work
for which production severely suffers. Frequent
flood, famine, earthquake and cyclone cause heavy
damage to agriculture. Moreover, absence of timely
rain, excessive or deficient rain affect severely
countrys agricultural production.

2. Low Productivity in Agriculture:

The level of productivity in agriculture is low due to

subdivided and fragmented holdings, lack of
capital, use of traditional methods of cultivation,
illiteracy etc. This is the main cause of poverty in
the country.

3.Rapid growth of population:

Rapid growth of population aggravates the poverty

of the people. The growth of population exceeds
the rate of growth in national income. Population
growth not only creates difficulties in the removal
of poverty but also lowers the per capita income
which tends to increase poverty. The burden of this
reduction in per capita income is borne heavily by
the poor people. Population growth at a faster rate
increases labour supply which tends to lower the
wage
rate. Utilized Resources:
4. Under

The existence of under employment and disguised

unemployment of human resources and under
utilization of resources has resulted in low
production in agricultural sector. This brought a
down fall in their standard of living.

5. Inflationary pressures:

Owing to low rate of production and high rate of

population growth, less developed economies like
India are often caught in the cobweb of inflationary
pressures. It means a situation of persistent rise in
prices. The continuous and steep price rise has
added to the miseries of poor. It has benefited a
few people in the society and the persons in lower
income group find it difficult to get their minimum
needs.

6. Chronic Unemployment and

Underemployment:

India is a country sustaining chronic unemployment

and underemployment. Poverty is just a reflection
of
the
continuously
expanding
army
of
unemployed. The job seeker is increasing in
number at a higher rate than the expansion in
employment opportunities.

7. Shortage of capital:

Capital is one of the principal drivers of economic

growth.
Accumulation
of
capital
points
to
production capacity of a nation. Unfortunately,
capital stock and capital formation continue to be
highly deficient. It is a significant bottle neck in the
process of growth and development. Accordingly,
poverty continues to persist. Low capital formation
implies low production capacity and hence poverty.

8. Paucity of able entrepreneurs:

Development
needs
efficient
and
skilled
entrepreneurs. Unfortunately, there is a paucity of
such
entrepreneurs
in
India.
Consequently,
production activity has failed to show a rapid rise.
Low level of production implies low level of
employment and high level of poverty.

9. Social Factors:

The social set up of our country is still backward

and is not conducive to faster development. It is
full of outdated traditions, customs and institutions
like caste system and joint family system. These
are putting hindrances in the way
of faster
development. Growth rate is hampered and poverty
is sustained.

10. Lack of infrastructure:

Energy, transport and communication the vital

components of economic structure as well as
education, health and housing services the
principal components of social infrastructure, are
grossly
deficient.
Economic
and
social
infrastructure serves as the foundation of growth
and development. Unfortunately, this foundation
continues to be weak and unstable despite more
than 60 years of planning. Slow pace of growth and

Effects
Of
poverty

1. Malnutrition

Malnutrition is especially seen in children of poor

families. People living in poverty rarely have
access to highly nutritious foods. Evenif they have
access to these foods, it is unlikely that they are
able to purchase them. The healthiest foods are
usually the most expensive; therefore, a family on
a very small budget is much more likely to
purchase food that is less nutritious, simply
because that is all they can afford.
Sometimes people in poverty are malnourished
simply because they do not eat enough of
anything. For some people around the world,
quality food is a luxury. A total of 14.3 percent of
people in developing countries face hunger. Poor
nutrition causes 45 percent of deaths in children
under the age of 5. Malnutrition can also lead to
many other health issues as well.

2. Health

One of the most severe effects of poverty is the health effects

that are almost always present. This includes things from
diseases to life expectancy to medicine. Diseases are very
common in people living in poverty because they lack the
resources to maintain a healthy living environment. They are
almost always lacking in nutritious foods, which decreases
their bodies ability to fight off diseases. Sanitation
conditions are usually very low, increasing the chance of
contracting a disease. Sometimes these diseases can be
minor, but other times they can be life-threatening. In
general, people living in poverty cannot afford appropriate
medicines to treat these illnesses.
Life expectancy and child mortality are greatly affected by
poverty. Statistics show that life expectancy in poor nations
is up to 30 years below that of wealthy nations, like the
United States. Child mortality is shockingly high in poor
countries; 13.5 percent of children die before the age of 5 in
poor countries.

3. Education

Many people living in poverty are unable to attend

school from a very early age. Families may not be
able to afford the necessary clothing or school
supplies. Others may not have a way for their
children to get to school. Whatever the reason,
there is a clear correlation between families living
in poverty and their lack of education. Without the
ability to attend school, many people go through
life illiterate.
The literacy rates in countries with high poverty
levels indicate that these two are linked. Low
literacy rates can affect society in various ways
including the labour force and politics. Obtaining a
basic education could bring 171 million people out
of poverty. A bad cycle is created; poverty prevents
people from gaining a good education, and not
obtaining an education prevents people from

4. Economy

Mainly, the number of people living in poverty

influences employment rates heavily. Without an
education, people are unlikely to find a paying job.
Unemployment hinders a country from developing
into
a
strong
economic
system.
A
high
unemployment rate can impede a country from
progressing in all aspects.
The labor force suffers when a large part of the
citizens
cannot
contribute
to
economic
development. For example, the Indian economy has
not been able to develop at a high rate for many
years because of the high number of people living
in poverty. About 22 percent of the population in
India lives in poverty and their economy can only
improve when this percentage decreases.

5. Society

Many people living in poverty are homeless, which

puts them on the streets. There also seems to be a
connection between poverty and crime. When
people are unemployed and homeless, social
unrest may take over and lead to increases in
crime. When people have nothing and no money to
buy necessities, they may be forced to turn to theft
in order to survive. Homelessness and high crime
rates impact of a countrys peopleand can create
many problems within a society.
It is clear that poverty has far-reaching effects on
all people. By improving global poverty, economies
could prosper, health could improve and countries
can develop into strong global presences. All
countries will benefit when decreasing global
poverty becomes a priority in the world.

Measures to
Remove
poverty

1. Increase in per capita food production:

The rate of growth of production of food grains as a whole

has barely kept ahead of population growth. An increase in
per capita food production would ensure steady supply and
stable price. An examination of the different components of
food grain output is very revealing. Superior food grains, i.e.,
wheat and rice have done perceptibly better than the coarse
grains, and wheat has done very significantly better. It is true
that theGreen Revolutionstrategy, particularly in relation to
wheat has been very successful. However, there is much
that needs to be done.

2. Agricultural and Land reforms:

In Indian conditions, radical socio-economic changes are

required to ensure the self-reliant, long-term growth of the
economy. These changes should ensure reforms of the land
tenure system helpful to the poor and middle peasants,
liberate them from the hardgrip of the moneylenders, ensure
supply of agricultural inputs to working farmers, widen
irrigation facilities and help a quicker advance of agroindustries.

3. Increase in production of essential items:

In the industrial sphere, units manufacturing luxury
consumer items must be made to refashion their
patterns of production in terms of export potential
and the limited range of internal consumption
potentialities, and use the rest of the productive
capacity towards producing low-cost essential
commodities like inexpensive textiles, bulbs, tube
lights, transistors, shoes, cycles, etc.
4. Ceiling on maximum income:
A ceiling on maximum individual incomes has to be
defined
and
strictly
enforced,
whether
an
individual is in a job, profession or business.
Individual incomes above the ceiling should be
impounded for the building up of a national
development fund by the Government. This would
ensure, firstly, substantial financial resources for
the Government to make planned investments and
secondly, drastically reduce internal demand

5. Tackle the problem of income disparity:

To bring about this change in our private sector
production mix, however, exhortations will be selfdefeating, since production thus conceived, is
much less profitable per individual commodity
produced. Apart from considerations of social
justice,
even
purely
in
terms
ofeconomic
development, glaring income disparities have to be
quickly
tackled.
6. Massive
investment in public sector:
A massive investment and expansion programme
in the public sector is required. This expansion has
to embrace not only infrastructural areas like
power, energy and so on but also the key and
consumer sectors of the industry along with the
commercial
and
distributive
agencies.
This
expansion has become urgent to safeguard the
working people from the vagaries of hoarding and

7. Education:
Illiteracy is a major national problem and a major
cause for poverty. Illiterate people living in villages
and small towns find it hard to get employment.
Around 51 percent of rural families are engaged in
casual labour jobs, while another 30 percent
isengaged in agriculture. Education will empower
them to engage in better jobs, which in turn would
help them come above the poverty line.
8. Check on population growth:
Due to massive increase in population, the demand
for basic necessities such as housing, food and
shelter is at its peak. The resources are
limited.The growth in demand for essential
commodities far exceeds the supply of these
commodities leading to a situation of prise-rise
(inflation). Awareness campaigns explaining the
benefits of controlling the population growth

9. Skill development:
Most industries engageskilled labours. There is a
decline in demand for un-skilled labours in most
factories and mills. In such a situation, there is a
need to stress on development of skills for specific
trade, so that these modern industries can get
skilled labours. This step would a big step towards
the eradication of poverty from our country.
10. Women empowerment:
Women (and girls) forms around 50 percent of the
world population. Since ages, they have been
treated as a burden to the society. They
weredeprivedof equal opportunity for education,
food,nutrition, and economic participation leading
to the situation of Feminization of poor. Women
empowerment
and
education
wouldstrengthenthem to bring economic benefits
both
at
individual
andnational
level.
The
government and social organisations are taking

Poverty
Alleviation
Programmes

National Old Age Pension Scheme (NOAPS)

As the name suggests this scheme provided pension to old

people who were above the age of 65['Now 60' ]who could not
fend for themselves and did not have any means of
subsistence. The pension that was given was Rs 200 a month.
This pension is given by the central government. The job of
implementation
of
this
scheme
instatesandunion
territoriesis given to panchayats andmunicipalities. The
states contribution may vary depending on the state. The
amount of old age pension is Rs. 200 per month for
applicants aged 6079. For applicants aged above 80years,
the amount has been revised in Rs. 500 a month according to
National
family
Benefit Scheme (NFBS)
the (20112012)
Budget.
This scheme was started in August 1995 by theGovernment
of India. This scheme is sponsored by the state government.
It was transferred to the state sector scheme after 2002-03.
It is under the community and rural department. This scheme
provides a sum of Rs 10000 to a person of a family who
becomes the head of the family after the death of its primary
breadwinner. The breadwinner is defined as a person who is
above 18 who earns the most for the family and on whose
earnings the family survives. It is for families below the

Annapurna
This scheme was started by the government in
19992000 to provide food to senior citizens who
cannot take care of themselves and are not under
the National Old Age Pension Scheme (NOAPS), and
who have no one to take care of them in their
village. This scheme would provide 10kg of free
food grains a month for the eligible senior citizens.
The allocation for this scheme as off 2000-2001 was
National Maternity Benefit Scheme
Rs 100crore.
This scheme provides a sum of 500 Rs to a
pregnant mother for the first two live births. The
women have to be older than 19years of age. It is
given normally 128weeks before the birth and in
case of the death of the child the women can still
avail it.
The NMBS is implemented by states and union
territories with the help of panchayats and
municipalities.
During
19992000
the
total

Integrated Rural Development

IRDP
in India is among the world's most ambitious programs to alleviate rural
Program(IRDP)

poverty by providing income-generated assets to the poorest of the poor.

This program was first introduced in 1978-79 in some selected areas, but
covered all the areas by November 1980. During the sixth five year plan
(1980-85) assets worth 47.6 billion rupees were distributed to about 16.6
million poor families. During 1987-88, another 4.2 million families were
assisted with an average investment of 4,471 per family or 19 billion rupees
overall.
The main objective of IRDP is to raise families of identified target group
below poverty line by creation of sustainable opportunities for selfemployment in the rural sector. Assistance is given in the form of subsidy by
the government and term credit advanced by financial institutions
(commercial banks, cooperatives and regional rural banks.) The program is
implemented in all blocks of the country as centrally sponsored scheme
funded on 50:50 basis by the centre and the states. The target group under
IRDP consists of small and marginal farmers, agricultural labourers and rural
artisans having annual income below Rs. 11,000 defined as poverty line in
the Eighth Plan. In order to ensure that benefits under the program reach the
more vulnerable sectors of the society, it is stipulated that at least 50 per
cent of assisted families should be from scheduled castes and scheduled
tribes with corresponding flow of resources to them. Furthermore, 40 per
cent of the coverage should be of women beneficiaries and 3 per cent of
handicapped persons. At the grassroots level, the block staff is responsible
for implementation of the program. The State Level Coordination Committee
(SLCC) monitors the program at state level whereas the Ministry of Rural
Areas and Employment is responsible for the release of central share of funds

National Rural Employment Guarantee Act

(NREGA)

TheNREGAbill notified in 2005 and came into force in 2006 and

further modified it as theMahatma Gandhi National Rural
Employment Guarantee Act (MGNREGA)in 2008. This scheme
guarantees 100 days of paid work to people in the rural areas. The
scheme has proved to be a major boost in Indian rural population's
income.
To augment wage employment opportunities by providing
employment on demand and by specific guaranteed wage
employment every year to households whose adult members
volunteer to do unskilled manual work to thereby extend a security
net to the people and simultaneously create durable assets to
alleviate some aspects of poverty and address the issue of
development in the rural areas.
TheMinistry of Rural Development(MRD) is the nodal Ministry for
the implementation of NREGA. It is responsible for ensuring timely
and adequate resource support to the States and to the Central
Council. It has to undertake regular review, monitoring and
evaluation of processes and outcomes. It is responsible for
maintaining and operating the MIS to capture and track data on
critical aspects of implementation, and assess the utilization of
resources through a set of performance indicators. MRD will support
innovations that help in improving processes towards the

Prime Ministers Rozgar Yojana (PMRY)

The PMRY is a self-employment programme for the
educated unemployed youth. This programme has
been implemented since October 2, 1993 to provide
employment
opportunities
to
the
educated
unemployed youths in the country.
The minimum qualification required under the
scheme is matriculation (passed or failed) or
having
undergone
a
government
sponsored
technical course for a period of six months or ITI
passed. In this scheme the youth between the age
of 18 and 35 belonging to families having income
less than Rs. 25,000 per annum are provided
assistance.
The educated unemployed entrepreneurs are given
subsidy of 15 per cent subject to a ceiling of Rs.
75,000 each for starting small projects. They are
required to bring 5 per cent of the project cost as

Swaranjayanti Gram Swarozgar Yojana(SGSY)

To remove poverty from the rural areas, a new
programme was launched in the villages, in April
1999. It is known as Swaranjayanti Gram Swarozgar
Yojana.
Under this programme a large number of small
enterprises are established in rural areas. The
small enterprises are organized as individual
enterprises as well as on collective basis as Self
Help Groups (SHGs). The poor are granted bank
loans and subsidies to establish these enterprises.
Subsidy for SGSY is uniform. It is 30% of the cost of
the project for the individual and 50% of the Self
Help Groups. The expenditure on SGSY is shared by
central and state governments on the basis of
75:25. The Yojana is enforced by District Rural
Development Agencies through the medium of
Panchayat Samities. Its progress will be monitored

Sampoorna Gramin Rozgar Yojana (SGRY)

Sampoorna Gramin Rozgar Yojana was launched on 1 st

September, 2001. The main objectives of this Yojana are:
i) To provide employment opportunity to the surplus
workers.
ii) To focus on the development of regional economic and
social conditions.
iii) To focus on the development of infrastructure.
This Yojana has set a target of creating 100 crore man-days
for labour. The central and state governments bear the
cost of this project in the ratio of 87:5:12.5.

Pradhan Mantri Gramoday Yojana (PGY)

It was launched in 2001. It aims at improving the standard of

living of the rural people by developing five important areas:
i) Health
ii)Primary Education
iii)Drinking Water
iv)Housing v)Roads
It incorporated three projects, viz.,
a) Pradhan Mantri Gram Sadak Yojana (Its focus was on
building all weather roads by 2007 in all villages having
population of 500 persons or more)
b) Pradhan Mantri Gramin Awas Yojana
c) Pradhan Mantri Gramin Drinking water Yojana

The Swaran Jayanti Shahri Rozgar Yojana

(SJSRY)

This Yojana was launched on December 1, 1997. Nehru

Rozgar Yojana and Prime Ministers Integrated Urban
Poverty Eradication Programme have been merged with
this Yojana. The objective of this Yojana is to provide selfemployment or wage employment to urban unemployed or
underemployed persons. It includes the following two
programmes:
i) Urban Self-Employment Programme (USEP)
ii) Urban Wage Employment Programme (UWEP)
Of the total expenditure of this project, 75 per cent is borne
the central
government
and the
remaining
25 per
Jaiby
Prakash
Rozgar
Guarantee
Yojana
(JPRGY)
by the state
government.
Thecentscheme
seeks
to provide
guaranteed

employment in the most backward districts of the

country. Operational modalities for launching the
scheme are being worked out.

Made byArushi
Sood
XI - A