SMT DKVC JR. COLLEGE OF COMM. AND SCI.

ECONOMICS
NOTES
CHAPTER 8 - POVERTY IN INDIA
INTRODUCTION:
Meaning of Poverty:
In the conventional sense, poverty refers to a situation in which a major section of the people in the society
are unable to fulfil even the basic needs of life such as food, clothing and shelter due to lack of sufficient
income.
Definition of poverty:
According to Prof. Amartya Sen, “Poverty is not just a lack of money, it is not having the capability to realize
one’s full potential as a human being”. Capabilities refer to economic, social and political freedom.
1) Explain the concept of multi-dimensional poverty?
Answer:
• The Concept of poverty in the conventional sense was limited only to basic needs of life.
• In other words, in conventional sense poverty refers to ‘social exclusion’ of a certain section of people in
the society. Deprivation of basic needs and denial of opportunities has led to social exclusion.
• However, in modern times, the scope of the concept of poverty has been enlarged. As a result, the concept
of multi-dimensional poverty has emerged in the recent period.
• Multi-dimensional poverty refers to deprivation in terms of both material and non-material dimensions.
• The Material dimensions relate to deprivation in terms of food, clothing, shelter, health, education, road
connectivity, electricity, access to safe drinking water and sanitation facilities etc.
• On the other hand, non-material dimensions are associated with social discrimination. For example, lack of
respect for certain religious group, unfair treatment to people of certain gender etc. are examples of
deprivation in terms of non-material dimension.

2) Explain the major concepts or types of poverty?

Answer: The following are the types of poverty which are as follows:
1) Rural poverty:
Rural poverty prevailing in rural areas is called rural poverty. Deprivation of basic needs among certain section
of the people living in the villages is termed as rural poverty. A person who consumes less than 2400 calories
per day is said to be a rural poor. This poverty is mostly found among poor farmers, agricultural labourers,
contractual workers and landless labourers. Low agricultural productivity, drought, poor rural infrastructure,
illiteracy, lack of alternative jobs, rural indebtedness has aggravated the problem of rural poverty.
2) Urban Poverty:
Urban poverty prevailing in urban areas is called urban poverty. Absence of basic needs among certain section
of the population living in towns and cities is termed as urban poverty. A person who consumes less than 2100
calories per day is said to be an urban poor. Urban poverty is largely affected due to the spill over effects of
migration among the rural poor, lack of affordable housing, illiteracy, slow industrial growth, lack of
infrastructure etc. Urban poverty has led to the growth of slums and informal sector as well as it creates law
and order problems in the society.
3) Absolute poverty:
Absolute poverty is a condition in which even the basic needs of a person are not satisfied. Absolute poverty
is measured in terms of minimum calorie intake. A person who is unable to consume 2100 calories per day in
urban area or 2400 calories per day in rural areas, is said to be absolutely poor. On an average, the per capita
daily calorie requirement amounts to 2250 calories. It is found in poor and developing countries of world like
India, Bangladesh, Pakistan etc.
4) Relative poverty:
Relative poverty is based on the comparison of lower income group with higher income group. It is judged on
the basis of per capita income and per capita consumption expenditure of people in a country. It is a universal
phenomenon and found in all countries.
3) Explain the concept of poverty line?
Answer: Poverty line is an imaginary line that divides the poor and non-poor. In simple words, it divides the
economy into two parts i.e., people below poverty line (BPL) and people above poverty line (APL). People
BPL are considered to be poor while those APL are considered to be non-poor. It is determined in terms of
per capita household expenditure. Poverty line differs from country to country.
Definitions of poverty line:
Various Committees and Study Groups have defined poverty line in different ways.
1) Task Force on Eliminating Poverty constituted by the NITI Aayog:
Poverty line is defined as "the threshold expenditure or the amount necessary to purchase a basket of goods
and services that are considered necessary to satisfy basic human needs at socially acceptable levels".
2) World Bank:
"Poverty line was defined at $1.90 per capita per day at 2011 prices on purchasing power parity basis (PPP)".
On this basis, 21.2% of India’s population lived below poverty line.
Objectives:
Poverty line helps to fulfil several objectives. These objectives are as follows:
1) To determine the population living above poverty line (APL) and below poverty line (BPL).
2) To identify the poor on the basis of the household consumption expenditure.
3) To track poverty in a region over a period of time and compare it across regions.
4) To provide an estimate of the required expenditure on poverty alleviation programmes.
4) Sate the effects of poverty?
Answer: Poverty is a socio-economic phenomenon. The widespread poverty results in adverse social and
economic effects.
Some of the effects of poverty are as follows:
A) Economic effects:
1) Poverty slows down the economic progress of a country.
2) It leads to low national income and low per capita income.
3) It results in low savings, investment and capital formation.
4) It leads to concentration of economic power in hands of few and creates unequal opportunities.
5) Rise in subsidies for poor increase the government expenditure on welfare programmes. This results in
misallocation of resources.
B) Social effects:
1) Poverty leads to low standard of living.
2) It results in class conflicts between the rich and poor.
3) There is rise in anti-social and anti-national activities.

5) What are the causes of poverty in India?

Answer: Poverty in India has a long history. The mass poverty among the people during the British period
can be attributed economic drain of resources, decline of handicraft and cottage industries, oppressive
economic policies, recurrence of famines etc. Poverty is one of the major challenges faced by Indian economy.
Following are the major causes of poverty in India:
1) Population explosion: Due to rapid growth of population and lesser growth in employment, poverty is
increasing.
2) Slow Economic Growth: Agricultural and industrial growth, is happening at lower pace. This has resulted
in poverty and low standard of living among the people.
3) Unemployment and Underemployment: Unemployment is major cause of poverty because of which poor
people are not able to get job as well as income. Poverty in the rural and urban areas has also the increased
unemployment and underemployment.
4) Economic inequalities: Larger percentage of national income is in few rich people’s hands, who exploit
poor people, which in turn causes poverty.
5) Inaccessibility to infrastructural facilities: Due to lack of insufficient income, purchasing power is less.
This leads to inaccessibility of infrastructure facilities such as energy, transport, communication, health and
education.
6) Inflation: Inflation is the major cause of poverty where prices are increased on basic food and commodity.
to a continuous. This results in low purchasing power making the poor still poorer. Food crisis has led to
malnutrition, hunger and starvation among the people.
7) Regional imbalance: Regional imbalance is also one of the causes of poverty. Some states in India are
having lesser economic growth as compared to other states. States such as Orissa, Bihar, Madhya Pradesh,
Chhattisgarh, Jharkhand, Sikkim, Arunachal Pradesh, Assam etc.
8) Vicious Circle of Poverty: This concept is given by Prof. Ragnar Nurkse. Vicious circle of poverty can be
explained, where all factors are interrelated with each other like low national income, low per capita income,
low capital formation, low-savings, low production, less employment.
4) Assess various measures undertaken to eradicate poverty?
Answer: Various measures undertaken to eradicate poverty are as follows:
1) Control of population: Government of India has introduced the Family Welfare Programme and
population policies to keep a check over the population growth. This, in turn, helps in controlling poverty.
2) Agriculture: Government provides financial assistance to farmers to purchase agricultural inputs. The
Government also announces Minimum Support Prices for selected crops to ensure stable agricultural
income to farmers.

3) Rural works: Through various schemes. the employment opportunities are providing to the poor through
the construction of rural roads, irrigation projects. rural electrification, etc.
4) Rural industrialization: To promote employment in rural areas. the government encourages setting up of
small scale and cottage industries.

5) Minimum Wages: Minimum Wages Act was passed in 1948 to provide fair wages to agricultural and
industrial workers. It has been revised from time to time. This has helped in the reduction of poverty.
6) Public Distribution System: The government has also taken efforts to ensure food security to the poor.
Food gain is made available to the poor people at highly subsidized rates through ration shops under the
Public Distribution System.

7) Nationalization of banks: To ensure financial aid. credit facilities are made available to the poor people
at low rates of interest. For this purpose, nationalization of banks was undertaken by the government of
India in 1969 and 1980.

8) Progressive tax measures: To reduce Inequalities in the distribution of income. the progressive income
tax system has been introduced in India.
Distinguished Between:
1) Rural poverty and Urban poverty

Rural Poverty Urban Poverty

Poverty found in rural areas is called rural poverty. Poverty found in urban areas is called urban poverty.

A person who is unable to consumes more than 2400 A person who is unable to consumes more than 2100
calories experiences poverty. calories experiences poverty.

It is mostly found among poor farmers, agricultural It is mostly found among the rural migrate in the urban
labourers, contractual workers and landless areas, who lives in slums, illiteracy, lack of
labourers. infrastructure, unemployed people etc.

2) Absolute poverty and Relative poverty

Absolute Poverty Relative Poverty

Absolute poverty is a situation where an individual Relative poverty is a situation where there is
is not able to consume minimum calories intake. comparison of income or living standard of different
income groups.

It exists in developing and under developed countries It is universal phenomenon and found in all countries
like India etc. of the world.

Absolute poverty can be eradicated with the help of Relative poverty cannot eradicated completely.
effective anti-poverty programmes.