POVERTY

Part 1

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Contents
1 INTRODUCTION ..................................................................................................................................................... 3
2 What is Poverty? ....................................................................................................................................................... 4
2.1 Types of poverty ................................................................................................................................................ 4
3 Measuring Poverty .................................................................................................................................................... 6
3.1 Pre independence poverty estimates: .............................................................................................................. 6
3.2 Post independence poverty estimates: ............................................................................................................. 7
3.2.1 Alagh Committee (1979): .......................................................................................................................... 7
3.2.2 Lakdawala Committee (1993): .................................................................................................................. 8
3.2.3 Tendulkar Committee (2009): ................................................................................................................... 8
3.2.4 Rangarajan Committee: ........................................................................................................................... 10
3.3 So, which poverty line should we adopt? ....................................................................................................... 12
4 Reducing poverty in India ........................................................................................................................................ 13
5 Poverty Indexes and India’s performance ............................................................................................................... 20
5.1 Human Development Index............................................................................................................................. 20
5.2 Gender Development Index (GDI): .................................................................................................................. 21
5.3 Gender Inequality Index (GII): ......................................................................................................................... 21
6 Strategy for Combating Poverty .............................................................................................................................. 21

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1 INTRODUCTION
India is home to 26 percent of the global extreme poor. This means that the world’s ability
to end extreme poverty by 2030–an objective originally adopted by the World Bank and
now a key element of the Sustainable Development Goals, hinges on India’s ability to make
strong and sustained inroads in reducing poverty. The good news is that India has made
notable strides in tackling extreme poverty and promoting growth among its poorest – what
we call shared prosperity.

Following decades of lacklustre performance, growth accelerated in the 1980s and picked
up steam after economic reforms began in earnest in the early 1990s. After 1991, per capita
income grew nearly two-and-a-half times in real terms compared to the preceding three-
and-a-half decades - from 1.8 percent per year to 4.3 percent per year. India is now among
the fastest-growing economies in the world.

The country is also home to the largest number of people that have escaped poverty in
recent years, based on a poverty line set at $1.90 per person per day (in 2011 Purchasing
Power Parity). Indeed, in contrast with the 1990s, the rate of decline in extreme poverty in
India not only outpaced the developing world as a whole but also the middle and lower-
middle income countries as a group.

With that said the poverty challenge in India remains broad, and sometimes contradictory.
Even though there is an emerging middle class, many people who have escaped poverty are
not yet economically secure, living precariously close to the poverty line. What’s more,
when the definition of poverty is expanded beyond what people consume to include
other dimensions of well-being, such as access to education, health care and basic
infrastructure, poverty has a grip on a much larger share of India’s people.

And when we compare India to other countries, there is marked room for improvement. For
example, even though India has grown rapidly, its growth has been less effective at reducing
poverty than in some of India’s middle income peers such as China, Vietnam, Brazil and
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Turkey. India’s performance on key non-monetary indicators of well-being such as child
nutrition and improved sanitation facilities lags behind countries at similar stages of
development. And estimates that look at the country as a whole can often mask very large
differences in the standard of living between states.

What lessons do the past two decades offer for what it will take for the country to sustain
progress and bring about deeper changes?

To answer this question, we would have to understand the true meaning of Poverty and its
various dimensions. We would have to measure it and explore its various effects. Then we
would read about various schemes to tackle poverty which are being run by the
government. We would end this report by suggesting some measures needed to address
this menace.

Again, it remains important that only the concepts, definitions and indexes mentioned
hereafter are of significance. Data given is just to establish relevance and bring clarity to the
issue; please don’t go into depths.

2 What is Poverty?
Poverty is a state or condition in which a person or community lacks the financial resources
and essentials to enjoy a minimum standard of life and well-being that's considered
acceptable in society.

2.1 Types of poverty

Poverty can be of many types.

Absolute poverty or destitution refers to the lack of means necessary to meet basic needs
such as food, clothing and shelter. Absolute poverty is meant to be about the same,
independent of location.

Relative poverty occurs when people in a country do not enjoy a certain minimum level of
living standards as compared to the rest of the population and so would vary from country
to country, sometimes within the same country.

These define Poverty in only one-dimensional measures, such as income. But no one
indicator alone can capture the multiple aspects that constitute poverty.

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Multidimensional poverty is made up of several factors that constitute poor people’s
experience of deprivation – such as poor health, lack of education, inadequate living
standard, lack of income (as one of several factors considered), disempowerment, poor
quality of work and threat from violence.

A multidimensional measure can incorporate a range of indicators to capture the

complexity of poverty and better inform policies to relieve it. Different indicators can be
chosen appropriate to the society and situation.

MULTI DIMENSIONAL POVERTY INDEX

Like development, poverty is multidimensional — but this is traditionally ignored by
headline money metric measures of poverty.
The Multidimensional Poverty Index (MPI), published for the first time in the 2010 Report,
complements monetary measures of poverty by considering overlapping deprivations
suffered at the same time.
The index identifies deprivations across the same three dimensions as the HDI and shows
the number of people who are multi-dimensionally poor (suffering deprivations in 33% or
more of weighted indicators) and the number of deprivations with which poor households
typically contend with.
It can be deconstructed by region, ethnicity and other groupings as well as by dimension,
making it an apt tool for policymakers.

The MPI can help the effective allocation of resources by making possible the targeting of
those with the greatest intensity of poverty; it can help address MDGs strategically and
monitor impacts of policy intervention.
The MPI can be adapted to the national level using indicators and weights that make sense
for the region or the country, it can also be adopted for national poverty eradication
programs, and it can be used to study changes over time.
The 2015 Multidimensional Poverty Index (MPI) counts 1.6 billion people as multi-
dimensionally poor, with the largest global share in South Asia and the highest intensity in

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Sub-Saharan Africa.

3 Measuring Poverty
Conventionally, poverty is measured by defining a threshold level of expenditure (or
income) required to purchase goods and services necessary to satisfy basic needs at the
minimal socially acceptable level. This threshold level of expenditure is called the poverty
line and the proportion of population living below it is called the poverty ratio.

Poverty line and the poverty ratio have three potential uses:

1. identification of poor;
2. the allocation of expenditures on anti-poverty programs across regions; and
3. Measuring and tracking poverty over time and across regions.
In India, identification of poor is done by the State Governments based on information
from Below Poverty Line (BPL) censuses of which the latest is the Socio-Economic Caste
Census 2011 (SECC 2011). Allocation of expenditures on anti-poverty programs can also be
done using instruments other than the poverty ratio. For example, the expenditure on the
provision of housing across states can be done according to the proportion of households
without house in the state. Universal programs such as those under the Mahatma Gandhi
National Rural Employment Guarantee Act (MGNAREGA) and Sarva Shiksha Abhiyan (SSA)
are available to all making the question of allocation moot.

This leaves tracking poverty over time and space as the principal objective behind
measurement of poverty. The current official measures of poverty are based on the
Tendulkar Poverty Line. But this line has been controversial with many observers criticizing
it as being too low. The controversies led the previous government to appoint the
Rangarajan Committee, which recommended higher rural and urban poverty lines. To
understand and appreciate the problem fully, let’s take look at the historical aspects and
approaches of poverty measurement in India.

3.1 Pre independence poverty estimates:

 One of the earliest estimations of poverty was done by Dadabhai Naoroji in his book,
‘Poverty and the Un-British Rule in India’.

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  He formulated a poverty line ranging from Rs 16 to Rs 35 per capita per year, based
on 1867-68 prices.
 The poverty line proposed by him was based on the cost of a subsistence diet
consisting of ‘rice or flour, dhal, mutton, vegetables, ghee, vegetable oil and salt’.
 Next, in 1938, the National Planning Committee (NPC) estimated a poverty
line ranging from Rs 15 to Rs 20 per capita per month.
 Like the earlier method, the NPC also formulated its poverty line based on ‘a
minimum standard of living perspective in which nutritional requirements are
implicit’.
 In 1944, the authors of the ‘Bombay Plan’ (Thakurdas et al 1944) suggested a poverty
line of Rs 75 per capita per year.

3.2 Post independence poverty estimates:

 In 1962, the Planning Commission constituted a working group to estimate poverty

nationally, and it formulated separate poverty lines for rural and urban areas – of Rs
20 and Rs 25 per capita per year respectively.
 VM Dandekar and N Rath made the first systematic assessment of poverty in India in
1971, based on National Sample Survey (NSS) data from 1960-61.
 They argued that the poverty line must be derived from the expenditure that was
adequate to provide 2250 calories per day in both rural and urban areas.
 This generated debate on minimum calorie consumption norms while estimating
poverty and variations in these norms based on age and sex.

3.2.1 Alagh Committee (1979):

 In 1979, a task force constituted by the Planning Commission for the purpose of
poverty estimation, chaired by YK Alagh, constructed a poverty line for rural and
urban areas on the basis of nutritional requirements.
 Table 1 shows the nutritional requirements and related consumption expenditure
based on 1973-74 price levels recommended by the task force. Poverty estimates for
subsequent years were to be calculated by adjusting the price level for inflation.

Table 1: Minimum calorie consumption and per capita consumption expenditure as per
the 1979 Planning Commission task force on poverty estimation

Area Calories Minimum consumption expenditure (Rs per capita

per month)

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Rural 2400 49.1
Urban 2100 56.7

Source: Report of the Expert Group on Estimation of Proportion and Number of Poor, 1993,
Perspective Planning Division, Planning Commission

3.2.2 Lakdawala Committee (1993):

 In 1993, an expert group constituted to review methodology for poverty estimation,

chaired by DT Lakdawala, made the following suggestions:
 (i) consumption expenditure should be calculated based on calorie consumption as
earlier; (ii) state specific poverty lines should be constructed and these should be
updated using the Consumer Price Index of Industrial Workers (CPI-IW) in urban areas
and Consumer Price Index of Agricultural Labour (CPI-AL) in rural areas; and (iii)
discontinuation of ‘scaling’ of poverty estimates based on National Accounts
Statistics. This assumes that the basket of goods and services used to calculate CPI-
IW and CPI-AL reflect the consumption patterns of the poor.

3.2.3 Tendulkar Committee (2009):

 In 2005, another expert group to review methodology for poverty estimation, chaired
by Suresh Tendulkar, was constituted by the Planning Commission to address the
following three shortcomings of the previous methods:
 (i) consumption patterns were linked to the 1973-74 poverty line baskets (PLBs) of
goods and services, whereas there were significant changes in the consumption
patterns of the poor since that time, which were not reflected in the poverty
estimates; (ii) there were issues with the adjustment of prices for inflation, both
spatially (across regions) and temporally (across time); and (iii) earlier poverty lines
assumed that health and education would be provided by the State and formulated
poverty lines accordingly.
 It recommended four major changes: (i) a shift away from calorie consumption based
poverty estimation; (ii) a uniform poverty line basket (PLB) across rural and urban
India; (iii) a change in the price adjustment procedure to correct spatial and temporal
issues with price adjustment; and (iv) incorporation of private expenditure on health
and education while estimating poverty. The Committee recommended using Mixed
Reference Period (MRP) based estimates, as opposed to Uniform Reference Period
(URP) based estimates that were used in earlier methods for estimating poverty.

It based its calculations on the consumption of the following items: cereal, pulses, milk,
edible oil, non-vegetarian items, vegetables, fresh fruits, dry fruits, sugar, salt & spices,
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other food, intoxicants, fuel, clothing, footwear, education, medical (non-institutional and
institutional), entertainment, personal & toilet goods, other goods, other services and
durables.

The Committee computed new poverty lines for rural and urban areas of each state. To do
this, it used data on value and quantity consumed of the items mentioned above by the
population that was classified as poor by the previous urban poverty line. It concluded that
the all India poverty line was Rs 446.68 per capita per month in rural areas and Rs 578.80
per capita per month in urban areas in 2004-05.

Table 2: Percentage of population below poverty line calculated by the Lakdawala

Committee and the Tendulkar Committee for the year 2004-05

Committee Rural Urban Total

Lakdawala 28.3 25.7 27.5
Committee
Tendulkar 41.8 27.5 37.2
Committee

Source: Report of the Expert Group on Estimation of Proportion and Number of Poor, 1993,
Perspective Planning Division, Planning Commission; Report of the Expert Group to Review
the Methodology for Estimation of Poverty, 2009, Planning Commission

The Committee also recommended a new method of updating poverty lines, adjusting for
changes in prices and patterns of consumption, using the consumption basket of people
close to the poverty line. Thus, the estimates released in 2009-10 and 2011-12 use this
method instead of using indices derived from the CPI-AL for rural areas and CPI-IW for
urban areas as was done earlier. Table 3 outlines the poverty lines computed using the
Tendulkar Committee methodology for the years 2004-05, 2009-10 and 2011-12.

Table 3: National poverty lines (in Rs per capita per month) for the years 2004-05, 2009-10
and 2011-12

Year Rural Urban

2004-05 446.7 578.8
2009-10 672.8 859.6
2011-12 816.0 1000.0

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Source: Report of the Expert Group to Review the Methodology for Estimation of Poverty
(2009) Planning Commission; Poverty Estimates 2009-10 and Poverty Estimates 2011-12,
Planning Commission

3.2.4 Rangarajan Committee:

In 2012, the Planning Commission constituted a new expert panel on poverty estimation,
chaired by C Rangarajan with the following key objectives: (i) to provide an alternate
method to estimate poverty levels and examine whether poverty lines should be fixed solely
in terms of a consumption basket or if other criteria are also relevant; (ii) to examine
divergence between the consumption estimates based on the NSSO methodology and those
emerging from the National Accounts aggregates; (iii) to review international poverty
estimation methods and indicate whether based on these, a particular method for empirical
poverty estimation can be developed in India, and (iv) to recommend how these estimates
of poverty can be linked to eligibility and entitlements under the various schemes of the
Government of India.

It not only takes normative levels for adequate nourishment, clothing, house rent,
conveyance and education, but also considers behaviourally-determined levels of other
non-food expenses.

The committee has estimated that almost 30 per cent of us were poor in 2011-12.It uses
separate data sets for rural and urban parts.
The panel computed the average requirements of calories, proteins and fats on the norms
set by the Indian Council for Medical Research in 2010. These are differentiated by age,
gender and activity for all-India rural and urban regions.
Accordingly, the energy requirement as calculated by Rangarajan is 2,155 kcal per person
per day in rural areas and 2,090 kcal per person per day in urban areas. This is significantly
lower than the 2,400 kcal in rural areas and slightly less than 2,100 kcal in urban areas used
by the earlier Lakdawala panel. The reason given is that the age profile and working
conditions have changed with time.
The protein and fat requirements have been estimated on the same lines. These are 48g
and 28g per capita per day, respectively, in rural India and 50g and 26g per capita per day in
urban areas.
Levels
The average monthly per capita consumption expenditure on food in these fractal classes is
Rs 554 in rural areas and Rs 656 in urban areas, according to theNSSOreport.
The non-food component of the poverty line basket has both a normative component and
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one given by the observed consumption pattern of households in the fractal group in which
the food component is located.
The normative component relates to private consumption expenditure on education,
clothing, shelter (rent) and mobility (conveyance). Since it is difficult to set minimum norms
for these essential non-food items, the panel recommended that observed expenditures on
these items by households located in the median fractal (45-50 percentile) be treated as the
normative minimum private consumption expenditure on these items.
This works out to be Rs 141 per capita per month in rural areas and Rs 407 in urban areas,
according to the NSSO report referred to.
For all other non-food goods and services, the observed expenditure of that fractal class
which meets the nutrient norms (the 25-30 percentile in rural India and 15-20 percentile in
urban India) is taken to define the poverty line in respect of these items. This works out to
Rs 277 per capita per month in rural areas and Rs 344 in urban areas, on the basis of the
NSSO survey of 2011-12.

The new poverty line, thus, translates to a monthly per capita consumption expenditure of
Rs 972 in rural areas and Rs 1,407 in urban areas in 2011-12. Or, Rs 32 in rural areas and Rs
47 in urban areas on a per capita daily basis. However, Rangarajan says the best way is to
take it on a monthly household consumption basis. Taking a household as five members,
this would mean Rs 4,860 in rural India and Rs 7,035 in urban parts.

In July 2014, the expert committee set up by the Planning Commission under C Rangarajan,
former chairperson of of Prime Minister's Economic Advisory Council redefined the poverty
line.

According to the report of the committee, the new poverty line should be Rs 32 in rural
areas and Rs 47 in urban areas. The earlier poverty line figure was Rs 27 for rural India and
Rs 33 for Urban India (see table).

No. of Rural poor No. of urban poor Total Percent of poor

Rangarajan Committee 260.5 million 102.5 million 363 million 29.5

Tendulkar committee 216.5 million 52.8 million 269 million 21.9%

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Difference 44 million 49.7 million 93.7 million

The Rangarajan report has added 93.7 million more to the list of the poor assessed last year
as per the Suresh Tendulkar committee formula.
Now the total number of poor has reached 363 million from 269 million in 2011-12.
3.3 So, which poverty line should we adopt?
To answer this question, NITI Aayog, the government’s premier think-tank, has finally
decided that the country needs a freshly defined poverty line to help track the success and
outreach of its poverty alleviation measures.
It will soon set up an expert committee to narrowly look at the poverty line issue only, as
most states are politically not in sync with each other.
The government has yet not finalised the constitution of the committee, but as and when
it is formed, its sole responsibility will be to arrive at the number of poor in the country.
In 2015, Niti Aayog had constituted a task force on poverty, which was not able to define
the poverty line.
It had made following observations on measurement of poverty line: -
 There are four options for tracking the poor:
1. Continue with the Tendulkar poverty line;
2. Switch to the Rangarajan or other higher rural and urban poverty lines;
3. Track progress over time of the bottom 30% of the population; or
4. Track progress along specific components of poverty such as nutrition, housing,
drinking water, sanitation, electricity and connectivity.
 While options (iii) and (iv) can complement the measurement of poverty using a
poverty line, they cannot substitute for it. Tracking reduction in poverty requires a
direct measure of poverty. In turn, this requires us to choose between (i) and (ii).
 The main criticism of the Tendulkar line (also applicable to the $1.25 line adopted by
the United Nations Sustainable Development Goals) has been that it is too low. The
counterargument, however, is that if our objective is to assess whether we are
making progress in bringing households out of extreme poverty, it makes sense to set
the poverty line at a level that allows households to get two square meals a day and
other basic necessities of life. It is the households below this bare subsistence level
whose welfare should concern us the most and whose progress we must monitor.
Put differently, if we set the poverty line at too high a level, we would be tracking
how many people who had already achieved a certain level of comfort have been

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 made yet further comfortable. It will tell us little about what is happening to
households in abject poverty.
 The key source of public dissatisfaction with the Tendulkar line was that it would
deprive many households in need of government assistance from such assistance by
classifying them as above poverty line (APL) households. But as just noted, poverty
line is not the basis of identification of the poor in India. Instead, it is the BPL Census.
This fact weakens the case against the Tendulkar line.
 At the same time, it must be recognized that judgments on what represents a basic
necessity of life would vary from person to person and this is what makes the
choice of a poverty line difficult. Therefore, the final decision on this question needs
to be informed by further deliberations that pay adequate attention to the fact that
the objective behind an official poverty line is to track progress in combating
extreme poverty and not identification of the poor for purposes of distributing
government benefits.

4 Reducing poverty in India

 India has made tremendous progress in reducing absolute poverty in the past two
decades. The standard way to determine whether a household is poor is to compare
its daily expenditure per capita to a minimum consumption threshold, or poverty
line. Based on India’s official line, the share of the population living in poverty was
halved between 1994 and 2012, falling from 45 percent to 22 percent (figure). During
this period, an astonishing 133 million people were lifted out of poverty. Moreover,
the pace of poverty reduction accelerated over time and was three times faster
between 2005 and 2012 - the years for which the latest set of government data are
available - than in the previous decade. At this pace, the fall in extreme poverty in
India since 2005, pegged at $1.90 a day, 2011 PPP, matched or exceeded the
average rate of decline for the developing world as a whole and the middle-income
countries as a group.

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 However, poverty reduction did not benefit all segments of the population equally.
The fall in poverty levels could have been much higher if growth had been more
inclusive. Notably, while consumption levels have increased rapidly in recent years,
the poorest 40 percent of households have seen their incomes grow at a slower pace
than the population as a whole. On this measure of ‘shared prosperity’ – or equitable
improvement among all people - India lags behind countries at a similar stage of
development. Although India ranked 16th among 51 middle income countries in
average consumption growth during 2005-2012, it ranked much lower - 27th - in
consumption growth for the poorest 40 percent during this period.
 In many cases, when a country experiences high growth, rapid poverty reduction
quickly follows. In India’s case, however, high growth did not lead to as quick a
decline in poverty as we would have expected. The responsiveness of poverty to per
capita GDP growth in India is lower than the average for developing countries. A few
telling indicators reveal the extent of this divergence: while India ranked in the top 10
percent of developing countries in per capita GDP growth during 2005-2012, it
featured just above the 60th percentile in the rate of poverty reduction during this
period. And, in general, this relationship between growth and poverty reduction
varied widely between states.
 The sheer scale of poverty in the country remains sobering. In 2012, India was home
to 262 million poor (as defined by the $1.90 per day international poverty line). Put
differently, one in four people living in extreme poverty across the world are Indians.
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 Poverty is closely inter-twined with geography. The poor are still far more likely to
be found in India’s villages which are home to 80 percent of the country’s poor.
Moreover, the poorer states are not catching up with their more prosperous
counterparts. If the current trend of slower poverty reduction in the poorer states
persists, poverty will become increasingly concentrated in a handful of lower income
states. It is worth noting that in 2012, three large lower income states alone (Uttar
Pradesh, Bihar and Madhya Pradesh) accounted for 44 percent of India’s poor. And,
when we look beyond consumption poverty to other measures of deprivation, India’s
picture looks more challenging.
 India’s strides in reducing poverty over the last two decades have received a lot of
attention, including in this series. Between 1994 and 2012, the share of India’s
population living in poverty was halved, falling from 45 percent to 22 percent.
 Let’s now try to look at patterns that show how individuals transition into and out of
poverty. We focus on how households transitioned into and out of poverty between
2005 and 2012 - the years for which the latest set of government data are available.
 In 2005, 37 percent of individuals in India were poor. By 2012, this had fallen to only
one in five. In other words, roughly 15 percent of the population that was poor in

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 2005 was no longer poor by 2012. It is, however, plausible that while some
individuals escaped poverty, others fell into it.
 The good news is that upward mobility has been the dominant trend. As one would
expect, more people have moved up – out of poverty – than the other way around.
Nearly one-third of all households changed their poverty status between 2005 and
2012; this includes 27 percent who moved out of poverty and 7 percent who fell into
it.
 Less reassuringly, we find that many households that escaped poverty after 2005 still
had consumption levels that were dangerously close to the poverty line in 2012. In
other words, large numbers of those who managed to move out of poverty by 2012
are still vulnerable to slipping back; in fact they face a high risk of doing so.
 A simple approach to defining vulnerability is by doubling the poverty line: all
individuals who are above the regular poverty line but below this “double” line are
defined as vulnerable. By using this approach, we observe that about half of India’s
population was vulnerable in 2012, stuck between poverty and the relative stability of
the middle class. Indeed, the vulnerable continued to be the largest population group
over the period. Their new-found position is precarious.

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 What makes it more likely for some poor families to move out of poverty while
others are unable to do so? Where people live seems to matter, as living in urban
areas is more likely to be associated with moving out of poverty. Characteristics such
as educational attainment and engagement in salaried work are both positively
correlated with higher-than-average chances of upward mobility and lower-than-
average chances of moving downwards.
 However, a worrisome finding is that Scheduled Tribes are harder to reach—they are
less likely to move out of poverty and more likely to stay poor or fall into poverty.
These differences between social groups cannot be fully explained by differences in
household characteristics. Looking forward, poverty and vulnerability among ethnic
minorities will remain a challenge for poverty reduction in India.

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 On a positive note, India has made appreciable gains on several fronts. Infant and
child mortality rates were more than halved between 1994 and 2014, and the
maternal mortality ratio fell by over 60 percent. Students are now staying longer in
school, as evidenced by an increase in secondary school completion rates. And
children are 34 percent less likely to be underweight in 2014 than they were in 2005.

 However, these bright spots coexist with slow progress on other important fronts. For
instance, less than a third of India’s households have convenient access to piped
water, showing very little improvement since 2005. Only 2 out of 5 households have
access to improved sanitation facilities and an overwhelming 44 percent of the
population practices open defecation. In fact, India lags behind neighbouring
countries like Bangladesh, Nepal and Pakistan in improving access to sanitation and
eradicating open defecation. The Swachh Bharat Mission is thus a timely initiative to

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 improve an aspect of well-being in which India has not only fallen behind its
neighbours, but has also not kept pace with its own record of progress in other
dimensions.

 Importantly, child under-nutrition remains high and endemic. Roughly 2 in 5 children

under the age of 5 are ‘stunted’ - that is they are shorter than the desired height for
their age. While child under-nutrition in India is similar to comparable countries in
South Asia, nationwide estimates hide wide disparities between states. In Bihar,
Jharkhand, and Uttar Pradesh for instance, roughly half of all children under 5 are
stunted. Even relatively prosperous states like Andhra Pradesh, Gujarat, Haryana, and
Maharashtra fare poorly in this regard.
 India’s progress on these non-monetary dimensions of well-being is also
disappointing when compared to countries at similar stages of development. For
example, India’s infant and child mortality rates are higher than countries at
comparable, or even lower, levels of per capita income. In fact, not only do
Cambodia, Nicaragua and Vietnam perform better on infant and child mortality than
India, but neighboring Bangladesh and Nepal do so too.
 India’s progress on reducing consumption poverty is certainly a cause for
celebration. However, the persistence of a range of other deprivations presents
important development challenges. Apart from their intrinsic value as markers of
welfare and equity, progress on stunting, nutrition, sanitation, and other key
aspects of well-being will enable households to chart a path out of poverty. Better
health, sanitation and education will not only help raise the productivity of millions,

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 they will also empower the people to meet their aspirations, and provide the
country with new drivers of economic growth.

5 Poverty Indexes and India’s performance

5.1 Human Development Index

 The Human Development Index (HDI) is a composite statistic of life expectancy,
education, and per capita income indicators, which are used to rank countries into
four tiers of human development. A country scores higher HDI when the lifespan is
higher, the education level is higher, and the GDP per capita is higher. The HDI was
developed by the Pakistani economist Mahbub ul Haq working alongside Indian
economist Amartya Sen, often framed in terms of whether people are able to "be"
and "do" desirable things in their life, and was published by the United Nations
Development Programme.
 The 2010 Human Development Report introduced an Inequality-adjusted Human
Development Index (IHDI). While the simple HDI remains useful, it stated that "the
IHDI is the actual level of human development (accounting for inequality)," and "the
HDI can be viewed as an index of 'potential' human development (or the maximum
IHDI that could be achieved if there were no inequality)."
 In the recently published Human Development Report 2015, it was unveiled that
India has been placed at 130th position in the 2015 Human Development Index (HDI)
among the 188 countries.
 The report was released by the United Nations Development Programme (UNDP).
 Here are some interesting facts about the report and India's current status of basic
human development achievements:
 In 2015, India has been placed at 130th position with 0.609 score in the medium
human development category. Country's rank was 135 with 0.586 score in the 2014
report.
 India is ranked in the medium human development category. The country continued
to rank low in the HDI, but has climbed five notches to the 130th rank in the latest
UNDP report on account of rise in life expectancy and per capita income.
 Life expectancy at birth: It increased to 68 years in 2014 from 67.6 in the previous
year and 53.9 in 1980.

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  Gross National Income (GNI) per capita: It was 5,497 US Dollars in 2014, up from
5,180 US Dollars in 2013 and 1,255 US Dollars in 1980. India's GNI per capita
increased by about 338 per cent between 1980 and 2014.

5.2 Gender Development Index (GDI):

 On India's GDI, the report said the 2014 female HDI value for India is 0.525 in
contrast to 0.660 for males, resulting in a GDI value of 0.795 in the year 2014.

5.3 Gender Inequality Index (GII):

India has a GII value of 0.563.
 The top three nations in the 2015 HDI are Norway (1st), Australia (2nd) and
Switzerland (3rd).

6 Strategy for Combating Poverty

At the national level, 45 percent of India’s poor are illiterate, whereas another 25 percent
have a primary education at most. Further down several Indian states, including a few high-
income ones, show stunting and underweight rates that are worse than the averages for

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sub-Saharan Africa. While multiple factors lie at the root of the nutrition challenge, the
prevalence of diarrheal disease is thought to be one of the main culprits, and diarrhoea is
triggered by poor hygiene. Only 6 percent of India’s poor have tap water at home, and a
little more than a fifth has a latrine or some form of improved sanitation.

From this perspective, investing in education, health and the delivery of basic services for
India’s most disadvantaged people remains a key priority. Investments of this sort would
enhance the human capital of the poor, hence increase their chances to prosper.

A World Bank research highlights five key requirements for sustainable poverty reduction
and shared prosperity in India going forward:

1. Accelerating rural poverty reduction: with four out of every five of India’s poor
people living in rural areas, progress will need to focus on the rural poor. Our
research shows that it’s not just about agricultural growth, which has long been
considered the key driver of poverty reduction. In fact, rural India is not
predominantly agricultural and shares many of the economic conditions of smaller
urban areas. Capitalizing on growing connectivity between rural and urban areas, and
between the agriculture, industry and services sectors, has been effective in the past
two decades and holds promise for the future.
2. Creating more and better jobs: the road out of poverty in India has been built on the
performance of the labour market, but also benefitted from rising transfers and
remittances, and favorable demographics among other factors. Labour earnings have
risen enough to move people out of poverty, but not into the middle class – more
could be done. Future efforts will need to address job creation in more productive
sectors, which has until now been tepid and has yielded few salaried jobs that offer
stability and security.
3. Focusing on women and Scheduled Tribes: two of the most worrying trends are the
low participation of women in the labour market and the slow progress among
scheduled tribes. India’s women have been withdrawing from the labour force since
2005 and less than one-third of working age women are now in the labour force. As a
result, India today ranks last among BRICS countries, and close to the bottom in South
Asia in female labour force participation. Scheduled Tribes started with the highest
poverty rates of all of India’s social groups, and have progressed more slowly than the
rest. Both are at risk of being locked out of India’s growth and prosperity.
4. Creating more “good” locations: where people live largely shapes their prospects in
life. India’s states continue to see large and growing differences in poverty levels and
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 basic opportunities. More and more of India’s poor are concentrated in the poorest
states, and even within relatively prosperous states, certain pockets of deprivation
persist where people are unable to share in the state’s successes.
5. Improving human development outcomes for the poor: this is central to improving
their quality of life and income earning opportunities. We cannot continue to assume
that rapid economic growth will automatically translate into better human
development outcomes. The recent past shows that some problems, such as under
nutrition and open defecation, are endemic and not confined to the poor, and have
not improved with economic growth.
The strategy for combating poverty must rest on two legs:

1. sustained rapid growth that is also employment intensive and

2. making anti-poverty programs effective.
Employment intensive sustained rapid growth

The poor predominantly reside in rural areas where incomes critically depend on
agricultural growth.

This can be achieved by raising productivity in agriculture, giving remunerative prices to

farmers, need for ‘second green revolution’ in rain fed areas in general and eastern India in
particular, helping small & marginal farmers by reforming tenancy laws, and bringing quick
relief to farmers in times of natural disasters.

But given that historically agriculture has not grown in India at rates exceeding 5 per cent
per annum on a sustained basis while industry and services have seen much higher growth
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rates, in the longer run, the benefits of growth can be share more equally only by creating
gainful employment in the latter sectors. India needs acceleration in the growth of
organized labour-intensive sectors such as apparel, footwear, food processing, electronic
and electrical appliances, other light manufactures, construction and retail trade.

Among other things, this can be achieved through the creation of a handful of Coastal
Economic Zones (CEZs) that can provide the focal point for the location of employment-
intensive industries allowing them to exploit the economies of scale and agglomeration.
With a business-friendly ecosystem, these zones can serve as magnets for the export-
oriented large scale firms in employment-intensive activities that are currently exiting
China in response to high and rising wages and declining size of labour force there. The
presence of these highly efficient large-scale firms will also spawn highly efficient small and
medium firms.

This employment related approach is discussed in greater detail in the Employment report.

Making anti-poverty programs effective.

To make anti poverty programs more effective, we should first know the various anti-
poverty programs being run in the country. First, let’s study them in detail.

Continued in next file i.e. Poverty Part 2

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