BLOCK 3 ISSUES IN INDIAN ECONOMY

You have learnt about Economic Development in Block 1 and Determinants of

Growth in Block 2. This block discusses in detail about the major themes of
poverty, its causes, difference between poverty and inequality, unemployment
nature, types and causes, causes and indicators of inequality in income
distribution and need for balanced regional development in India. This block has
four units.
Unit 7 deals with Poverty and inequality. The unit begins with the concepts
ofpoverty, its types (absolute & relative), measurement, difference
betweenpoverty and inequality is then explained,the needfor studying gender
equality and poverty with economic growth is highlighted, whether economic
growth reduces poverty and gender inequalityare discussed andin the end the
linkages between inequality and poverty are outlined.
Unit 8 deals inUnemployment in India. The unit begins with the concept of
unemployment and its types (rural and urban), measurement, causes and
consequences of unemployment in India are explained, remedial measures for
unemploymentare suggested and in the end the policy measures for employment
generation and labour reforms are highlighted.
Unit 9 deals with the Inequalities in Income Distribution. The unit begins with
the concept of inequality in income distribution, causes of income inequality are
discussed, income inequalities by using different methods are explained and in
the end policy measures taken by the government to reduce income inequality are
highlighted.
Unit 10 deals with Balanced Regional Growth. The unit begins with the
concept of regional imbalance in India, then measurement of regional imbalance
is given, the need for regional balance is highlighted, the factors responsible for
regional imbalance are identified, the impact of regional imbalance is described,
and in the end the policy initiatives by the government to reduce regional
imbalance along with the issues involved in achieving balanced regional growth
are outlined.
Issues in Indian
Economy UNIT 7 POVERTY AND INEQUALITY
7.0 Objectives
7.1 Introduction
7.2 Concepts of Poverty
7.2.1Absolute Poverty
7.2.2 Relative Poverty
7.2.3 Extent of Poverty in India

7.3 Measurement of Poverty in India

7.3.1Headcount ratio
7.3.2 Poverty Line
7.3.3 Multidimensional Poverty Index (MPI)

7.4 Causes of Poverty

7.5 Poverty and Inequality
7.6 Gender Equality, Poverty and Economic Growth
7.6.1 Poverty and Economic Growth
7.6.2 Gender Inequality and Economic Growth

7.7 Poverty Alleviation Strategy in India

7.8 Let Us Sum Up
7.9 Key Words
7.10 Terminal Questions

7.0 OBJECTIVES
After going through this unit, you should be able to:
• describe the concepts of poverty and inequality;
• distinguish between poverty and inequality;
• identify the need for studying gender equality and poverty with economic
growth;
• explain whether economic growth reduces poverty and gender inequality;
and
• describe the linkages between inequality and poverty.

7.1 INTRODUCTION
Human beings have always endeavoured to improve their quality of life. The
advancements made in the field of science and technology, particularly during
past two centuries have impacted human life in the most unusually way. This has
helped societies achieve stupendous economic progress categorically in the
countries of the North America and Europe among others. Lately, economies in
Asia and Africa have also experienced economic growth and development
102
benefitting their people in multiple ways. However, the economic progress has Poverty and
Inequality
not been quite equitable. Certain sections of society, mainly due to social
hierarchy, have been able to reap greater benefits than others, eventually leading
to economic inequalities. People, relatively less equipped with good education,
appropriate training and relevant skill have not been able to contribute
quantitatively and/ or qualitatively, and therefore, have remained economically
poor. Historical exploitation of certain sections of the society by the dominant
and privileged people has widened the gap between haves and have-nots and
thrown the less privileged into absolute poverty. M. K. Gandhi once said,
“Poverty is the worst form of violence.”
According to the World Bank, there were 736 million poor in the world in 2015.
Sub-Saharan Africa and South Asian countries house around three-fourth of the
total poor population in the world. About half (368 million) of the total poor in
the world live in just 5 countries – India (24 per cent), Nigeria (12 per cent),
Democratic Republic of Congo (7 per cent), Ethiopia (4 per cent) and Bangladesh
(3 per cent). With sustained efforts of the World Bank, the United Nations
Development Program (UNDP), national governments and numerous
development agencies, the extent of absolute poverty globally has been steadily
falling. However, the Covid-19 led pandemic is likely to impact this trend in
poverty reduction in the vulnerable countries. Therefore, poverty elimination has
remained a major challenge right before the developing countries.

7.2 CONCEPT OF POVERTY

An individual, for a healthy living, needs certain basic goods such as food, water
and shelter. Expansion of the existing cities and continuous increase in
population has made it difficult for some sections of society to fulfill their
fundamental needs of life. Poverty is a state or a condition in which an
individual, a family or a community fails to possess the required material wealth.
People living in such situation are called poor. Poverty can be defined as a
condition in which an individual or household lacks the financial resources to afford
certain minimum standard of living.
World Bank provides an international definition of poverty – for the year 2022 it
refers to an income of $1.90 dollar per day (in PPP terms). It means those
individuals, whose income is more than $1.90 per day are said to be living above
poverty line and those who earn less than one dollar a day are said to be living
below poverty line. According to the UNDP, “The way people experience
poverty goes beyond living on less than $1.90 a day. Poverty is not only about
lacking the means to make ends meet or pay the bills for basic services on time.
Poverty is multidimensional and encompasses much more than income.”
In recent years, there is a shift in the definition of poverty. The emphasis now is on
monitoring and addressing deficits in several dimensions; not just income. These
dimensions could be housing, education, health, environment and communication.
There is an increasing perception that poverty is multidimensional, although there
is a tendency to focus on human development outcomes such as health, 103
Issues in Indian education, and nutrition when looking beyond income measures. Thus, the prime
Economy
concern with the material dimensions of poverty alone has expanded to encompass a
more holistic model of the components of well-being, including various non-
material, psycho-social and environmental dimensions.
7.2.1 Absolute Poverty
Any person not in a position to fulfill his basic needs of life is said to be living in
absolute poverty. It is a condition of extreme poverty for an individual person or
a family. Absolute poverty is poverty below a set line of what is required to
access minimum needs for survival. This type of poverty is usually inherited by
children from their poor parents so it can be chronic by nature. Households living
in poverty experience problems such as malnutrition, child labour, lack of education,
child marriage and disease. Poor people are moderately built in their physique,
inadequately fed with nutritive food, and likely to have high infant mortality rate,
high maternal mortality rate and low average life. Poverty can be measured using
poverty line. So, a family may be called Above Poverty Line (APL) or Below
Poverty Line (BPL) family. Literacy rate, life expectancy at birth, maternal
mortality rate and infant mortality rate are very low in such families. Quality of
life of people is of sub-standard. People living in urban slums, hutments and
roadside makeshift arrangements are generally living in absolute poverty. Poor
countries from Asia, Africa and Latin America face the problem of absolute
poverty. Anti-poverty programmes are started by government from time to time
to eradicate this kind of poverty.
7.2.2 Relative Poverty
When distribution of wealth or national income is unevenly distributed among
different sections of society, some people are poorer compared to others. We
describe such situations as relative poverty. Thus relative poverty is a
comparative aspect of income distribution. Presence of relative poverty shows
economic inequality in the society. Inequality is measured by ‘Gini Coefficient’
and ‘Lorenzo Curve’. A higher value of the Gini coefficient implies greater
inequality. Literacy rate, life expectancy at birth, maternal mortality rate and
infant mortality rate may not be very low in such families. Relative poverty is
found everywhere, but it is an economic problem found more in the developed
countries. Quality of life is not equal for all. Some people live a better quality of
life than others. This problem can be corrected to some extent if the government
adopts fiscal measures including high tax rates on income and expenditure of rich
people.
7.2.3 Extent of Poverty in India
The United Nations estimated the number of poor in India to be 364 million in
2019, or 28 per cent of the population. According to a study of the Health
Ministry, Government of India, half of Indians above 45 years are either
undernourished or overweight. As mentioned earlier India has the highest number
of poor in the world. Around 68.8 per cent of the Indian population lives on less
104 than US$ 2 a day. Over 30 per cent even have less than US$ 1.25 per day
available – they are considered extremely poor. Poverty in India is deeply rooted Poverty and
Inequality
and widely present all over the country.
Poor are found principally working as agricultural labour in villages or as
workers in the unorganized sector in the towns and cities of India. The most
underprivileged sections of society, viz., Scheduled Castes (SCs) and Scheduled
Tribes (STs) are living in abject poverty. From the table, it is evident that the
percentage share of SC and ST people living below poverty line is much higher
than other sections of the society. Urban slums have become new places of
dwellings for the poor migrants from rural India. India is a country of mass
poverty, i.e., numerous people are homeless and jobless.
The first Millennium Development Goal (MDG) is to reduce extreme poverty.
Since the 2000s, India has made remarkable progress in reducing absolute
poverty. Between 2011 and 2015, more than 90 million people were lifted out of
extreme poverty. The economic slowdown triggered by the outbreak of Covid-19
pandemic is expected to have a significant impact on poor and vulnerable
households. The following section, describes the important reasons behind
poverty in India.
Self-Assessment Exercise A
1) Define the concept of poverty.
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2) What is meant by inequality?
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3) Distinguish between the concepts of absolute poverty and relative poverty.
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4) Discuss the extent of poverty in India.
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Issues in Indian
Economy 7.3 MEASUREMENT OF POVERTY IN INDIA
There are several methods of measurement of poverty. We discuss these methods
below.
7.3.1 Headcount Ratio
This is the simplest method of poverty measurement. We count the number of
poor persons in this method. Suppose in a locality, the population size is 1000.
Out of these, suppose 235 persons are poor. The percentage of poor in the
locality is
𝐻 100 23.5

Thus, we can say that 23.5 per cent people in the locality are poor. A major
limitation of this approach is that it does not take into account the intensity of
poverty, that is, how severe is poverty among people.
7.3.2 Poverty Line
In India poverty was defined initially in terms of energy requirement to enable a
person lead an active and healthy life. The energy norm during the 1950s was
2900 kilo calorie (Kcal) per day for rural areas and 2400 kilo calorie per day for
urban areas. Based on this norm, it was estimated that Rs. 20 per person per
month (1961-62 prices) was required for a person in rural area. The
corresponding figure for urban areas was Rs. 25 per person per month. These
figures defined the poverty line. Thus, if a person in rural areas earned less than
Rs. 20 per month (below Rs. 25 per month for urban areas), he was considered to
be below the poverty line.
Later, during the 1980s, the calorie requirement was reduced to 2400 Kcal per
day for rural areas and 2100 Kcal for urban areas. Due to inflation in the
economy, the poverty line figures were revised to Rs. 49 per capita per month for
rural areas and Rs. 57 per capita per month for urban areas. The poverty line was
estimated on the basis of consumption requirements. It did not include other
essential items required for an active and healthy life.
During 2004-05, apart from energy requirement, five non-food items were also
taken into consideration for estimation of poverty line. Accordingly, poverty line
was defined as Rs. 720 per capita per month for rural areas Rs. 840 per capita per
month for urban areas. Such estimates of poverty line continued for many years.
Percentage of population below poverty line was also estimated on the basis of
such poverty lines. The Planning Commission of India released the estimates of
persons below poverty line till 2011-12, after which the practice was
discontinued.
7.3.3 Multidimensional Poverty Index (MPI)
Over time it was perceived that poverty is strongly linked with many other
economic and social variables. A poor person is deprived of not only food, but
also of education, health, housing and durable assets. Thus poverty is
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multidimensional in nature. In order to measure poverty a comprehensive index Poverty and
Inequality
is required, which will measure deprivation of people from consumption of
essential goods and services. Such thoughts gave rise to the concept of
Multidimensional Poverty Index (MPI).
MPI was first released by the Oxford Poverty and Human Development Initiative
(OPHI) and the United Nations Development Programme (UNDP) in 2010. Since
then the OPHI has been bringing out MPI which gives the poverty index for India
as a whole. Recently, in 2021, the NITI Aayog has brought out the baseline
report on multidimensional poverty index in India. This report presents the
multidimensional poverty index for the states and union territories of India.
As per the MPI, there are three important dimensions of poverty: (i) Health, (ii)
Education and (iii) Standard of Living. Under the category ‘health’, we consider
nutrition, child mortality and antenatal care. Under the category ‘education’ we
consider years of schooling and school attendance. For determination of the
standard of living, we consider seven criteria: (i) cooking fuel, (ii) sanitation, (iii)
drinking water, (iv) electricity, (v) housing, (vi) assets, and (vii) bank account.
According to the MPI report, the percentage of poor in certain states is very high
in 2021. For example: Bihar (51.91%), Jharkhand (42.16%), Uttar Pradesh
(37.79%) and Madhya Pradesh (36.65%). On the other hand, certain states have
relatively low levels of poverty. For example: Kerala (0.71%), Goa (3.76%),
Sikkim (3.82%), Tamil Nadu (4.89%) and Punjab (5.59%).

7.4 CAUSES OF POVERTY

Several factors are responsible for the prevalence of poverty and inequality in
India. We discuss some of these factors below.
(i) Weak Asset Base
An individual in India is poor because he has a weak asset base. He is born in a
family that hardly owns an ancestral profitable farm land and a big house or
possesses previous metals or a professional degree. The poor in India inherit
poverty and debt. Exactly in the same way, wealth of a family is passed on from
one generation to another. The disadvantaged groups receive very limited assets
in inheritance. Therefore, we observe rampant poverty among the disadvantaged
groups.
Table 7.1: Poverty Ratio among Social Groups (2011-12)
Category Rural (in per cent) Urban (in per cent)
SC 31.5 21.7
ST 45.3 24.1
OBC 22.6 15.4
Others 15.5 8.2
Total Population 25.7 13.7
Source: Planning Commission of India

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Issues in Indian (ii) Social Factors
Economy
Indian society is hierarchical in nature. It is dominated by caste system,
discriminatory inheritance laws, and rigid traditions have directly or indirectly
aggravated the problem of poverty in the country. Caste-based occupational
reservation in India has discouraged people from learning skill sets and venture
into the labour market on the basis of efficiency. There is discrimination against
women in Indian society. Education of girl child is an important factor in this
context. Further, there is a need to change our mindset, as certain families do not
allow women to work outside.
(iii) High Population Growth
As per the Population Census of India, population in India was around 36 crores
in 1951 but increased to around 121 crores in 2011. India is the second most
populous country in the world after China. Population in India has increased over
two per cent per annum during the last half a decade. On an average, about 17
million people are added every year to the population of the country. In 2011,
population of India at 1210.8 millions, was almost equal to combined population
of the United States, Indonesia, Brazil, Pakistan, Bangladesh and Japan put
together. The population of India increased by more than 181 million during the
decade 2001-11. The estimated population of India in 2022 is 135 crores.
High population growth has increased the burden on the natural resources.
Population growth increases demographic pressure on land, resulting into
fragmentation of landholding, and ‘disguised unemployment’. It leads to reduced
agricultural productivity and fall in income of farmers. Marginal farmers,
particularly with large family size, use traditional methods of cultivation on their
fragmented land holdings. Indian cities and towns have neither been able to
provide enough jobs nor a decent living for the migrant workers. During 2001-
11, certain states registered low population growth (for example, Kerala, Andhra
Pradesh, Odisha, West Bengal, Punjab and Himachal Pradesh) while certain
states (such as Bihar, Chhattisgarh, Jharkhand, Rajasthan, Uttar Pradesh and
Madhya Pradesh) recorded high population growth rate.
(iv) Low Level Literacy
Illiteracy is a major cause of poverty. According to the United Nations Children’s
Fund (UNICEF), “About 25 per cent of children in India have no access to
education”. According to a study in the medical journal The Lancet, “44.5 per
cent of girls are still married in India before they are of legal age”. The illiterate
people – for not possessing relevant skill and education – are trapped in a vicious
cycle of poverty. The illiterate people end up with petty jobs, usually employed
in informal sector, and are paid poorly. As per Census 2011, literacy rate at all
India level was 72.98 per cent. There is a wide gap in the literacy rate for females
(64.63 per cent) and males (80.9 per cent). Education of the girl child again is the
need of the hour.
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(v) Inflationary Pressure Poverty and
Inequality
High rate of inflation adversely affect the purchasing power of people. The
annual inflation rate in India has remained over 5 per cent. The lower economic
stratum of people is hit hard when prices of food grains, fuel and edible oil
exceed the rise in income levels. They find it difficult to get their minimum needs
fulfilled. For example, India, after Green Revolution, has become self-sufficient
and self-reliant in food grain production. The increase in food production
however has not increased the food availability for the poor in the country.
(vi) Unemployment
Indian economy has structural bottlenecks that hinder economic development.
This results in structural unemployment, seasonal unemployment as well as
disguised unemployment. Half of India’s population still depend on agriculture
and allied activities for livelihood. Employment opportunities are limited in
urban areas as well. Non-agricultural sector (industries and services) has not been
able to absorb the unemployed people.
(vii) Lack of Investment
India is a capital scare and labour abundant country. Lack of capital reduces the
extent of investment. During the early years after independence, the Government
used to invest heavily in key sectors including minerals and metals, transport and
communication, health and education, among others. Unfortunately, Foreign
Exchange Regulation Act (FERA), Monopolistic and Restrictive Trade Practices
(MRTP) Act, Industrial Licensing and high tax regime kept the private sector
from participating in the industrial development of the country. So, whatever
little investment was seen in the country, it prioritized select industrial and/urban
clusters. Restricted or limited availability of credit/capital for investment in
industries discouraged entrepreneurship in the country. The shortage of supply of
capital made it difficult for production and reduced employment opportunities in
the private sector particularly for the poor.
(viii) Regional Imbalance
There is regional imbalance in distribution of income and wealth in India. We
observe disparities across states in per capita income in India. Two major features
are observed so far as regional disparities is concerned. One, there is wide
disparity across states in per capita income. Sates such as Punjab, Haryana, Goa
and Karnataka have very high per capita income while states such as Bihar, Uttar
Pradesh, Jharkhand, Manipur and Madhya Pradesh have very low per capita
income. Second, the gap between rich and poor states is widening over time.
While rich states are getting richer, poor states are getting poorer.
The north-eastern states in India, popularly known as the Seven Sisters, despite
being endowed with abundant natural resources, do not contribute much to the
GDP of the country. States such as Chhattisgarh, Jharkhand, Odisha, Madhya
Pradesh and Rajasthan are rich in minerals and metals, but due to lack of

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Issues in Indian conducive business environment, many people migrate to other states in search of
Economy
jobs.
(ix) Populist Measures
Political parties have learnt the skill of pursuing populist policy measures so as to
create vote banks. Provision of subsidies eats away a substantial portion of our
budgets. Free electricity to farmers and all households in certain states are major
heads of expenditure. In the process there is little resources left for investment in
capital formation. If productive capacity of the economy does not increase,
employment generation and output growth will be slower. Such populist
measures are not always meant to reduce poverty.
Self-assessment Exercise B
1) Describe the major causes of poverty in India.
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2) Why is inflation an important cause of poverty in India?
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3) Comment on the statement that high population growth and illiteracy are the
main causes of poverty in India.
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7.5 POVERTY AND INEQUALITY

Inequality needs to be distinguished from poverty. Inequality refers to the degree
of dispersion in the distribution of assets, income or consumption. Inequality
shows the classification of people into economically well off class, middle class
and poor class. It shows whether assets of the country are fairly distributed or
not. Poverty, on the other hand, refers to assets, income or consumption of those
at the bottom of the distribution. Poverty could be conceptualised in relative
terms or in absolute terms. Inequality indicates power balance in the society.
Since industrial revolution, there has been tremendous growth achieved by
countries across the world. With passage of time, the role of state has
significantly changed. The modern states –particularly those practicing
democracy – have become welfare states. However, there is widespread concern
110 that economic growth has not been fairly shared, and that the economic crisis has
only widened the gap between rich and poor. For instance, during the post- Poverty and
Inequality
independence period, the distribution of agricultural land is highly skewed in
favour of the so called upper castes of the Indian society while the farmers of the
SC and ST communities are either small and marginal farmers or landless
labourers. Concentration of economic power in India has been skewed and in
favour of the trading or business communities, interestingly these communities
are predominantly non-SC and non-ST castes. There exists relationship between
inequality and poverty described below.
Inequality and poverty are linked with each other.
a) In poor countries, there exists a wide difference between health and
education parameters of the rich and the poor. India’s pharmaceutical
industry is one of the largest in the world. However, due to their inability
to pay for medical treatment, the poor have very high infant mortality rate
and maternal mortality rate.
b) Gender-based discrimination is rampant and gender inequalities are much
deeper in poor countries compared to developed and rich countries. The
asset ownership among women in rural India is very low compared to
men.
c) There exist major differences in job quality, wage rate and extent of
economic security of workers in advanced countries and in their
counterparts in Asia, Africa and Latin America. Despite implementation
of important labour laws, exploitation of labour has continued leading to
persistent inequalities.
Poverty is related to non-availability of resources for a household. Poverty is seen
in people whose income and/or asset base is so low that it is difficult to maintain
certain quality of life. Inequality refers to disparities among people based on
income, wealth, education, health, nutrition, living space, and social indicators.
Poor people are unable to fulfill their basic needs such as food, health facilities,
education and shelter. Poverty leads to capability deprivation; that means poor
people are not capable of doing certain activities at par with others. Poor do not
have access to quality education, as a result of which they have low employment
opportunities. Poor people do not have access to health services, as a result of
which their productivity is low. Inequalities are ‘fundamentally about relational
disparities, denial of fair and equivalent enjoyment of rights, and the persistence
of arbitrary discrepancies in the worth, status, dignity and freedoms of different
people’ (UNICEF & UN Women, 2013). Inequality can exist in a variety of
different spheres such as income, wealth, education, health and nutrition.
Inequality is can be of two types: (i) vertical inequality, and (ii) horizontal
inequality. Vertical inequality refers to the inequality among individuals and
households (for example, inequality among households in income or
consumption). Horizontal inequality refers to inequality among groups of
individuals who share a common identity. Thus inequality is not due differences
in intelligence or skill among people. Horizontal inequality could be due social 111
Issues in Indian dimensions such as gender, disability, race, ethnicity, caste, religion or language.
Economy
As you may have observed, there is a strong linkage between poverty and caste in
India. Further, there are discriminations in society in the sense that some groups
of people not have access to certain facilities (for example, in rural areas). These
socially excluded groups often suffer from spatial inequalities as they tend to be
concentrated in disadvantaged locations.

7.6 GENDER EQUALITY, POVERTY AND

ECONOMIC GROWTH
Economic growth should ideally reduce gender inequalities and the extent of
extreme poverty. In India, too, the monumental progress made in all spheres of
life during post-economic reforms, have been accompanied by increased
participation of women in economic activities and reduction in the extent of the
most brutal forms of poverty. Gender inequalities are systematically greater in
poor countries than in rich countries. The reasons behind wider gender gaps are
more structural and/or systemic. For instance, the systems of patrilineality
(inheritance through male descendants) and patrilocality (married couples living
with or near the husband’s parents) play a central role in perpetuating gender
inequality in India’s male dominated society.
7.6.1 Poverty and Economic Growth
Economic growth is a result of the increase in investment leading to greater
employment opportunities and expansion of the GDP of the economy. Higher
economic growth benefits the society at large. It is important to note here that
economic growth has an impact on poverty and inequality. Higher economic
growth, however, may lead to reduction in the extent of poverty but it may not
necessarily reduce the extent of economic inequality. The reason is that faster
economic growth increases earnings of well-educated, well-trained people and
those who have better access to resources and opportunities. The poorer sections
of society however are not fortunate enough in this regard; their earnings may not
increase at the same pace the economy is growing. Therefore, the gap between
the rich and the poor is widening. In this regard, appropriate policy measures are
very important. In order to reduce inequality, a just and more equitable
redistribution of national income and factor rewards need to be a part of the
policy. If economic inequality persists, or accentuates over time, then there is
always a high probability of recurrence of poverty for the low income groups.
Globalization has transformed the way businesses operate. Opening up of the
Indian economy has led to increased exposure of the country to the rest of the
world. This has expanded the size of the market and led to higher level of output.
India now ranks among the fastest growing economies of the world.
You should note that higher economic growth is not the only objective for any
economic policy. Benefits of economic growth should percolate down to all
sections of society including the lower strata. In developing countries including
India, the poor strive hard to fulfil their minimum consumption needs of food and
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non-food items. Therefore, the government has been continuously increasing its Poverty and
Inequality
expenditure on social sectors such as health, education, sanitation, etc.
7.6.2 Gender Equality and Economic Growth
Gender-based discrimination is defined as the difference in opportunities and
rewards available to people solely on the basis of gender. It is a social process by
which men and women are not treated equally. There can be numerous cases of
gender inequality practiced in India. For the same nature and quantum of work,
there is unequal payment of wages for men and women. Ownership of assets is
usually in the name of the male members of the family. A woman’s viewpoint is
not considered as important on critical issues in the family.
In many developed countries there is greater equality between man and woman.
Women in the industrially developed countries are mostly educationally
qualified, economically secure and socially empowered. The developed countries
rank high on the Gender Development Index (GDI). In developing countries, on
the other hand, women are not privileged enough. Despite higher economic
growth, gender inequality continues in Third World countries.
Women in India are discriminated both at home and outside. According to the
UNICEF, “India is the only large country where more girls die than boys and
school dropout rate is higher among girls compared to boys”. Crime against
women is rampant in India. A survey conducted by the Thomson Reuters
Foundation has ranked India as the world's most dangerous country for women,
ahead of Afghanistan, Syria and Saudi Arabia. Equal representation of women in
the state legislative assemblies and India Parliament is far from near. For
instance, there are 78 women members of parliament (14 per cent), the highest
since independence. As per the Human Development Report 2020, the gender
development index (GDI) value of India is 0.820, with the GDI value for females
at 0.573 and that for males at 0.699. This indicates the sharp contrast in
empowerment between man and woman. In this measure, India is behind
Bangladesh, with a GDI value of 0.904, while it stayed ahead of Pakistan (0.745).
The average GDI for the South Asian region stood at 0.824, while that for
medium HDI countries was 0.835, with India’s value being lower than both.
Despite rapid economic growth, the growth of microcredit programme and self-
help groups, and laudable efforts to increase women’s political participation,
gender disparities have remained deep and persistent in India. Gender inequality
prevails in all sectors of the economy such as education, health, politics, and
business among others. The UN Gender Inequality Index has ranked India below
several Sub-Saharan African countries. Women participation in non-agricultural
and white collar economic activities has increased in recent times. However, the
number of women in power hierarchy in business enterprises is far less than men.
India ranks 136th among 144 countries in women’s labour force participation rate
and the situation is worsening over time (Economic Survey 2017-18). For the
same work, males are paid higher wages compared to females particularly in the
unorganized sector. Despite recent economic advances, India’s gender balance
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Issues in Indian for entrepreneurship remains among the lowest in the world. The labour market
Economy
participation of women in economic activity in India stood at 76.1 per cent for
males and at 20.5 per cent for females. The Human Development Report 2020
estimated gross national income per capita for males as $10,702 and for females
as $2,331.
Women empowerment and economic development are closely related. There is
two-way relationship between economic development and gender equality. While
economic development can play a major role in reducing gender inequality,
empowering women will lead to faster economic development. According some
studies, gender inequality in labour market earnings often implies power
asymmetries within the household, with men having more bargaining power than
women. Despite the sharp increase in investment, output and exports in India,
women in general and from the disadvantaged sections in particular, are the most
discriminated. India’s economic power would be greatly enhanced if women are
given proper healthcare, education, and economic opportunities.

7.7 POVERTY ALLEVIATION STRATEGY IN

INDIA
The government of India has made concerted efforts to reduce the extent of
poverty. In this initiative, we observe certain policy shifts over time. There have
been at least three policy shifts in the past.
(i) Trickle-Down Theory: During the 1950s and 1960s it was believed
that economic growth will take care of poverty and inequality. When
economic growth takes place, the benefits percolate downwards.
Income of people increase. Thus, there will be an increase in the
income of poor households also. With an increase in income, poor
households will be able to elevate themselves above the poverty line.
Thus the objective of the government was to achieve higher economic
growth.
The trickle-down theory however was not found to have a positive
effect on poor households. The benefit of economic growth was
cornered by the rich sections of society. Poor households continued to
remain poor, while economic inequality increased in the country (as
the rich became richer). Such developments compelled the
government to change its strategy regarding poverty alleviation.
(ii) Public Distribution System: The failure of the trickle-down approach
led the government to make special provisions for the poor
households. During the 1970s the ‘Public Distribution System (PDS)’
was strengthened. The PDS served two purposes – it procured food
grains from farmers during harvest season. During the harvest season
the price of agricultural commodities decreases sharply due to excess
supply. Government purchase of food grains helped in maintaining
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 Poverty and
remunerative prices in the market. This ben3efitted the farmers. The Inequality
procured food grains were sold to poor households at subsidized
prices. Thus poor households could obtain essential commodities such
as rice, wheat, sugar and oil at a cheaper price. Procurement of food
grains continues these days also.
(iii) Direct Attack on Poverty: During the 1980s the government extended
cheaper credit to poor households. Not only the rate of interest was
very low on the loans extended to poor households, there was a
substantial amount of subsidy on repayment of the principal amount.
The objective of the programmes was to provide self-employment to
poor households. It was envisaged that poor households would carry
out small business, goat-rearing, milch cow, weaving, etc. with the
help of the credit given to them.
Self-employment programmes for poor households, however, did not
succeed as there was a lack of entrepreneurial skill among the poor.
The beneficiaries could not manage the activities. Income generated
from such activities was also very low, as a result of which the
beneficiaries could not repay the loan. This called for a new strategy
for poverty alleviation.
(iv) Wage Employment Programmes: With the failure of self-employment
programmes, the government continued with the employment
generation schemes during the 1990s. The focus was on creation of
infrastructure and community assets (such as road, houses, water
reservoir, etc.) which would generate additional wage employment for
people. Many small projects were completed under such schemes.
There were doubts on the quality of the assets created under such
schemes. There were also complaints of workers not getting their
wages.
The wage employment generation approach has continued under
different nomenclature. Employment generation under the Mahatma
Gandhi National Rural Employment Guarantee Act (MGNREGA) is
one such measure. In order to remove the irregularities in payments,
government has emphasized on financial inclusion and direct benefit
transfer to poor households. Under the MGNREGA, there is assured
wage employment up to 100 days in a year for each household.
(v) Social Security Measures: Apart from employment generation, the
government has made provisions of certain social security measures
that supplement the income of poor households. There is provision for
subsidized food, subsidized cooking gas, subsidized housing, pension
for the aged and widows, health insurance, etc. under various
schemes. 115
Issues in Indian Self-assessment Exercise C
Economy
1) Do you think, high economic growth can reduce poverty but not inequality?
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2) India has made remarkable economic progress but poverty continues to
prevail. Explain.
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3) Discuss the various measures taken by the government for alleviation of
poverty.
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4) Gender empowerment may help India achieve higher economic growth.
Comment.
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7.8 LET US SUM UP

The advancements made in the field of science and technology, particularly
during the past couple of centuries have impacted human life in the most
favourable manner. The economic progress made by mankind has not been quite
equitable. Certain sections of society, due to prevalence of unequal privileges
among individuals, have been able to economically benefit more than others.
Such unequal benefits eventually have led to poverty and inequalities. The
disadvantaged sections of society have remained economically poor.
Poverty is of two types: absolute poverty and relative poverty. A person not in a
position to fulfil his basic needs of life is said to be living in absolute poverty.
When distribution of wealth or national income is unevenly distributed among
116
households, we can say that there is relative poverty among the poorer Poverty and
Inequality
households. The United Nations estimated the number of poor in India to be 364
million in 2019, or 28 per cent of the population. Poverty in India is deeply
rooted and widespread.
There are many reasons behind poverty in India such as weak asset base, unequal
distribution of national income, high population growth, populist policy
measures, inflationary pressure, illiteracy, and lack of investments. Poverty is
related to non-availability of resources for an individual or a family. Inequality
refers to disparities and discrepancies among people based on income, wealth,
education, health, nutrition, space, politics and social identity among others.
Gender inequalities are systematically greater in poor countries than in rich
countries. The reasons behind wider gender gaps are more structural and/or
systemic.
The developed countries rank high on the Gender Development Index (GDI).
Women of the Global South –that included India- are not privileged enough.
Despite notable economic progress made by India in various fields, gender
inequality has not reduced as desired.
Concentration of economic power in India has been skewed and in favour of the
trading or business communities, interestingly these communities are
predominantly non-SC and non-ST castes.

7.9 KEY WORDS

Poverty: Poverty is the inability of a person to get the minimum consumption
requirements for life, health and efficiency. It can be absolute or relative in
nature.
Absolute Poverty: When poverty is measured in the context of per capita intake
of calories and minimum level of per capita consumption expenditure, it is
absolute poverty.
Relative Poverty: When we compare per capita income of different households
or regions, it indicates relative poverty.
Poverty Line: The line which indicates the level of purchasing power required to
satisfy the minimum needs of a person for life, health and efficiency, is called
poverty line. It divides population in terms of ‘poor’ and ‘not poor’.
Inclusive Growth: It means extending the benefits of growth to all sections of
society including small farmers, landless laborers, downtrodden people, etc.
Below the Poverty Line (BPL): Those people who do not have required
minimum purchasing power are considered BPL.
Basic Needs: An individual for a healthy living needs certain basic necessities of
life which include food, water and shelter.
Inequality: The state of not being equal, especially in status, rights and
opportunities. 117
Issues in Indian Gender Inequality: Gender inequality is defined as the prevalence of different
Economy
opportunities solely on basis of gender.
Developing Countries: All those countries that are industrially backward and
they rank low on the human development index (HDI), gender development
index (GDI) and other important parameters of well-being of people.
Economic Growth: It refers to the increase in the aggregate output of an
economy compared to the previous year.

7.10 TERMINAL QUESTIONS

Short questions:
1. Distinguish between the concepts of relative poverty and absolute
poverty.
2. Distinguish between relative poverty and absolute poverty.
3. Define the concept of inequality.
4. What is meant by gender inequality?
Essay type of questions:
1. What is meant by poverty line? Define the term ‘poverty’ in India.
2. Discuss the measures adopted by the government to reduce poverty in
India.
3. Discuss the causes of poverty in developing countries like India.
4. Describe the various measures taken by government for welfare of the
poor and socially disadvantaged groups.
5. Bring out the important causes of poverty.
6. Do you agree that higher economic growth can reduce the extent of
poverty? Substantiate your answer.
7. Describe the linkage between poverty and inequality.
8. Does economic growth always bring in gender equality? Discuss your
answer keeping India in mind.

FURTHER READING
The following textbooks and online resources can be referred for further in-
depth reading on the topics discussed in this unit.
Deaton and Kozel. The Great Indian Poverty Debate, Laxmi Publications, 1
January 2006
Martin Ravallion. The Debate on Globalization, Poverty, and Inequality: Why
Measurement Matters, Policy Research Working Papers, April, 2003.
Nilakantha Rath and V M Dandekar. Poverty in India, Economic and Political
Weekly, Vol. 6, Issue No. 2, 09 January, 1971
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Amartya Sen. Poverty and Inequality, Stanford University Press, 2006 Poverty and
Inequality
Jonathan Haughton, Shahidur R. Khandker. Handbook on Poverty + Inequality,
World Bank Publications, 27 March, 2009
Abhijit Banerjee and Esther Duflo. Poor Economics: A Radical Rethinking of the
Way to Fight Global Poverty, 26 April 2011
Paul Collier. The Bottom Billion: Why the Poorest Countries are Failing and
What Can be Done About it, Oxford University Press, 31 August 2012
Gary S. Fields. Poverty, Inequality, and Development, Cambridge University
Press, October 2009,
P. Sainath. Everybody Loves a Good Drought: Stories from India’s Poorest
Districts, Penguin Books, 14 October 2000
Online references:
https://www.drishtiias.com/to-the-points/paper3/poverty-estimation-in-india
World Bank publication. Poverty and Shared Prosperity 2020: Reversals of
Fortune,https://www.worldbank.org/en/publication/poverty-and-shared-
prosperity
Amitabh Kundu and P. C. Mohanan. Employment and Inequality Outcomes in
India. https://www.oecd.org/employment/emp/42546020.pdf

Note: These questions/ exercise will help you understand the unit better. Try to
write answers of these questions, but do not submit your answers to the
University for assessment. These questions are for your practice only.

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