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Poverty in India

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Percent of population living below the poverty line, over the final quarter of the 20th century.

Poverty is widespread in India, with the nation estimated to have a third of the world's poor. According to a 2005 World Bank estimate, 41.6% of the total Indian population falls below the international poverty line of US$ 1.25 a day (PPP, in nominal terms ₹ 21.6 a day in urban areas and ₹ 14.3 in rural areas).[1]

This state exists despite India being considered as the largest depositor of black money in Swiss Banks. In a recent example, even as the Enforcement Directorate (ED) of India probes US$8 billion worth transactions allegedly involving suspected money launderer Hasan Ali Khan, evidence available with a news source in India shows that he had transactions of over ₹112,000 crore (US$13 billion) betweeen years 2005 and 2006. This amount is enough to fund the national drinking water project in all the six lakh (600,000) villages in India for the next 10 years.[2]

Poverty estimates

There has been no uniform measure of poverty in India[3][4]. The Planning Commission of India has accepted the Tendulkar Committee report which says that 37% of people in India live below the poverty line.[5]

The Arjun Sengupta Report (from National Commission for Enterprises in the Unorganised Sector) states that 77% of Indians live on less than ₹ 20 a day (about $0.50 per day)[6], also N.C. Saxena Committee report states that 50% of Indians live below the poverty line.

A study by the Oxford Poverty and Human Development Initiative using a Multi-dimensional Poverty Index (MPI) found that there were 645 million[7] poor living under the MPI in India, 421 million of whom are concentrated in eight North Indian and East Indian states of Bihar, Chattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan, Uttar Pradesh and West Bengal. This number is higher than the 410 million poor living in the 26 poorest African nations.[8]

Estimates by NCAER (National Council of Applied Economic Research) show that 48% of the Indian households earn more than ₹90,000 (US$1,078.40) annually (or more than US$ 3 PPP per person). According to NCAER, in 2009, of the 222 million households in India, the absolutely poor households (annual incomes below ₹ 45,000) accounted for only 15.6% of them or about 35 million (about 200 million Indians). Another 80 million households are in income levels of ₹ 45,000– 90,000 per year. These numbers also are more or less in line with the latest World Bank estimates of the “below-the-poverty-line” households that may total about 100 million (or about 456 million individuals)[9]

The World Bank estimates that 80% of India's population lives on less than $2 a day[10][11] which means a higher proportion of its population lives on less than $2 per day as compared with sub-Saharan Africa.[11]

Impact of poverty

Since the 1950s, the Indian government and non-governmental organizations have initiated several programs to alleviate poverty, including subsidizing food and other necessities, increased access to loans, improving agricultural techniques and price supports, and promoting education and family planning. These measures have helped eliminate famines, cut absolute poverty levels by more than half, and reduced illiteracy and malnutrition.[12]

Presence of a massive parallel economy in the form of black (hidden) money stashed in overseas tax havens and underutilisation of foreign aid have also contributed to the slow pace of poverty alleviation in India.[13][14][15]

Although the Indian economy has grown steadily over the last two decades, its growth has been uneven when comparing different social groups, economic groups, geographic regions, and rural and urban areas.[16][12] Between 1999 and 2008, the annualized growth rates for Gujarat (8.8%), Haryana (8.7%), or Delhi (7.4%) were much higher than for Bihar (5.1%), Uttar Pradesh (4.4%), or Madhya Pradesh (3.5%).[17] Poverty rates in rural Orissa (43%) and rural Bihar (41%) are among the world's most extreme.[18]

Despite significant economic progress, one quarter of the nation's population earns less than the government-specified poverty threshold of 12 rupees per day (approximately US$ 0.25).

According to a recently released World Bank report, India is on track to meet its poverty reduction goals. However by 2015, an estimated 53 million people will still live in extreme poverty and 23.6% of the population will still live under US$1.25 per day. This number is expected to reduce to 20.3% or 268 million people by 2020.[19] However, at the same time, the effects of the worldwide recession in 2009 have plunged 100 million more Indians into poverty than there were in 2004, increasing the effective poverty rate from 27.5% to 37.2%.[20]

As per the 2001 census, 35.5% of Indian households availed of banking services, 35.1% owned a radio or transistor, 31.6% a television, 9.1% a phone, 43.7% a bicycle, 11.7% a scooter, motorcycle or a moped, and 2.5% a car, jeep or van; 34.5% of the households had none of these assets.[21] According to Department of Telecommunications of India the phone density has reached 33.23% by December 2008 and has an annual growth of 40%.[22] This tallies with the fact that a family of four with an annual income of 1.37 lakh rupees could afford some of these luxury items.

Causes of poverty in India

Caste system

Further information: Caste system in India

According to S. M. Michael, Dalits constitute the bulk of poor and unemployed.[23]

According to William A. Haviland, casteism is widespread in rural areas, and continues to segregate Dalits.[24] Others, however, have noted the steady rise and empowerment of the Dalits through social reforms and the implementation of reservations in employment and benefits.[25][26]

Caste explanations of poverty fail to account for the urban/rural divide. Using the UN definition of poverty, 65% of rural forward castes are below the poverty line.[27]

British era

The Mughal era ended at about 1760. Jawaharlal Nehru claimed "A significant fact which stands out is that those parts of India which have been longest under British rule are the poorest today."[28] The Indian economy was purposely and severely deindustrialized, especially in the areas of textiles and metal-working, through colonial privatizations, regulations, tariffs on manufactured or refined Indian goods, taxes, and direct seizures.[28]

India's economic policies

A rural worker drying cow dung in Bihar.

In 1947, the average annual income in India was US$439, compared with US$619 for China, US$770 for South Korea, and US$936 for Taiwan. By 1999, the numbers were US$1,818; US$3,259; US$13,317; and US$15,720, respectively.[29] (numbers are in 1990 international Maddison dollars) In other words, the average income in India was not much different from South Korea in 1947, but South Korea became a developed country by 2000s. At the same time, India was left as one of the world's poorer countries.

License Raj refers to the elaborate licenses, regulations and the accompanying red tape that were required to set up and run business in India between 1947 and 1990.[30] The License Raj was a result of India's decision to have a planned economy, where all aspects of the economy are controlled by the state and licenses were given to a select few. Corruption flourished under this system.[31]

The labyrinthine bureaucracy often led to absurd restrictions - up to 80 agencies had to be satisfied before a firm could be granted a licence to produce and the state would decide what was produced, how much, at what price and what sources of capital were used.

— BBC[32]

India had started out in the 1950s with:[33] high growth rates, openness to trade and investment, a promotional state, social expenditure awareness and macro stability but ended the 1980s with:[33] low growth rates, closure to trade and investment, a license-obsessed, restrictive state (License Raj), inability to sustain social expenditures and macro instability, indeed crisis.

Poverty has decreased significantly since reforms were started in the 1980s.[34][35]

Also:

  • Over-reliance on agriculture. There is a surplus of labour in agriculture. Farmers are a large vote bank and use their votes to resist reallocation of land for higher-income industrial projects. While services and industry have grown at double digit figures, agriculture growth rate has dropped from 4.8% to 2%. About 60% of the population depends on agriculture whereas the contribution of agriculture to the GDP is about 18%.[36]
  • High population growth rate, although demographers generally agree that this is a symptom rather than cause of poverty.

Liberalization policies and their effects

Other points of view hold that the economic reforms[clarification needed] initiated in the early 1990s are responsible for the collapse of rural economies and the agrarian crisis currently underway. As journalist and the Rural Affairs editor for The Hindu, P Sainath describes in his reports on the rural economy in India, the level of inequality has risen to extraordinary levels, when at the same time, hunger in India has reached its highest level in decades. He also points out that rural economies across India have collapsed, or on the verge of collapse due to the neo-liberal policies of the government of India since the 1990s.[37] The human cost of the "liberalisation" has been very high.[clarification needed] The huge wave of farm suicides in Indian rural population from 1997 to 2007 totaled close to 200,000, according to official statistics.[38] That number remains disputed, with some saying the true number is much higher. Commentators have faulted the policies pursued by the government which, according to Sainath, resulted in a very high portion of rural households getting into the debt cycle, resulting in a very high number of farm suicides. As professor Utsa Patnaik, India’s top economist on agriculture, has pointed out, the average poor family in 2007 has about 100 kg less food per year than it did in 1997.[38]

Government policies encouraging farmers to switch to cash crops, in place of traditional food crops, has resulted in an extraordinary increase in farm input costs, while market forces determined the price of the cash crop.[39] Sainath points out that a disproportionately large number of affected farm suicides have occurred with cash crops, because with food crops such as rice, even if the price falls, there is food left to survive on. He also points out that inequality has reached one of the highest rates India has ever seen. In a report by Chetan Ahya, Executive Director at Morgan Stanley, it is pointed out that there has been a wealth increase of close to US$1 Trillion in the time frame of 2003-2007 in the Indian stock market, while only 4-7% of the Indian population hold any equity.[40] During the time when Public investment in agriculture shrank to 2% of the GDP, the nation suffered the worst agrarian crisis in decades, the same time as India became the nation of second highest number of dollar billionaires.[41] Sainath argues that

Farm incomes have collapsed. Hunger has grown very fast. Public investment in agriculture shrank to nothing a long time ago. Employment has collapsed. Non-farm employment has stagnated. (Only the National Rural Employment Guarantee Act has brought some limited relief in recent times.) Millions move towards towns and cities where, too, there are few jobs to be found.

In one estimate, over 85 per cent of rural households are either landless, sub-marginal, marginal or small farmers. Nothing has happened in 15 years that has changed that situation for the better. Much has happened to make it a lot worse.

Those who have taken their lives were deep in debt – peasant households in debt doubled in the first decade of the neoliberal “economic reforms,” from 26 per cent of farm households to 48.6 per cent. Meanwhile, all along, India kept reducing investment in agriculture (standard neoliberal procedure). Life was being made more and more impossible for small farmers.

As of 2006, the government spends less than 0.2% of GDP on agriculture and less than 3% of GDP on education.[42] However, some government schemes such as the mid-day meal scheme, and the NREGA have been partially successful in providing a lifeline for the rural economy and curbing the further rise of poverty.

Reduction in Poverty

Despite all the causes, India currently adds 40 million people to its middle class every year.[citation needed] Analysts such as the founder of "Forecasting International", Marvin J. Cetron writes that an estimated 300 million Indians now belong to the middle class; one-third of them have emerged from poverty in the last ten years. At the current rate of growth, a majority of Indians will be middle-class by 2025.

Despite government initiatives, corporate social responsibility (CSR) remains low on the agenda of corporate sector. Only 10 percent of funding comes from individuals and corporates, and "a large part of CSR initiatives are artfully masqueraded and make it back to the balancesheet". The widening income gap between the rich and the poor over the years, has raised fears of a social backlash. [43]

Efforts to alleviate poverty

Since the early 1950s, govt has initiated, sustained, and refined various planning schemes to help the poor attain self sufficiency in food production. Probably the most important initiative has been the supply of basic commodities, particularly food at controlled prices, available throughout the country as poor spend about 80 percent of their income on food.

Outlook for poverty alleviation

Eradication of poverty in India is generally only considered to be a long-term goal. Poverty alleviation is expected to make better progress in the next 50 years than in the past, as a trickle-down effect of the growing middle class. Increasing stress on education, reservation of seats in government jobs and the increasing empowerment of women and the economically weaker sections of society, are also expected to contribute to the alleviation of poverty. It is incorrect to say that all poverty reduction programmes have failed. The growth of the middle class (which was virtually non-existent when India became a free nation in August 1947) indicates that economic prosperity has indeed been very impressive in India, but the distribution of wealth is not at all even.

After the liberalization process and moving away from the socialist model, India is adding 60 to 70 million people to its middle class every year. Analysts such as the founder of "Forecasting International", Marvin J. Cetron writes that an estimated 390 million Indians now belong to the middle class; one-third of them have emerged from poverty in the last ten years. At the current rate of growth, a majority of Indians will be middle-class by 2025. Literacy rates have risen from 52 percent to 65 percent during the initial decade of liberalization (1991–2001).[citation needed]

Controversy over extent of poverty reduction

The definition of poverty in India has been called into question by the UN World Food Programme. In its report on global hunger index, it questioned the government of India's definition of poverty saying:

The fact that calorie deprivation is increasing during a period when the proportion of rural population below the poverty line is said to be declining rapidly, highlights the increasing disconnect between official poverty estimates and calorie deprivation.[44]

While total overall poverty in India has declined, the extent of poverty reduction is often debated. While there is a consensus that there has not been increase in poverty between 1993–94 and 2004–05, the picture is not so clear if one considers other non-pecuniary dimensions (such as health, education, crime and access to infrastructure). With the rapid economic growth that India is experiencing, it is likely that a significant fraction of the rural population will continue to migrate toward cities, making the issue of urban poverty more significant in the long run.[45]

Some, like journalist P Sainath, hold the view that while absolute poverty may not have increased, India remains at a abysmal rank in the UN Human Development Index. India is positioned at 132ond place in the 2007-08 UN HDI index. It is the lowest rank for the country in over 10 years. In 1992, India was at 122ond place in the same index. It can even be argued that the situation has become worse on critical indicators of overall well-being such as the number of people who are undernourished (India has the highest number of malnourished people, at 230 million, and is 94th of 119 in the world hunger index), and the number of malnourished children (43% of India's children under 5 are underweight (BMI<18.5), the highest in the world) as of 2008.[44]

Economist Pravin Visaria has defended the validity of many of the statistics that demonstrated the reduction in overall poverty in India, as well as the declaration made by India's former Finance Minister Yashwant Sinha that poverty in India has reduced significantly. He insisted that the 1999-2000 survey was well designed and supervised and felt that just because they did not appear to fit preconceived notions about poverty in India, they should not be dismissed outright.[46] Nicholas Stern, vice president of the World Bank, has published defenses of the poverty reduction statistics. He argues that increasing globalization and investment opportunities have contributed significantly to the reduction of poverty in the country. India, together with China, have shown the clearest trends of globalization with the accelerated rise in per-capita income.[47]

A 2007 report by the state-run National Commission for Enterprises in the Unorganised Sector (NCEUS) found that 77% of Indians, or 836 million people, lived on less than 20 rupees per day (USD 0.50 nominal, USD 2.0 in PPP), with most working in "informal labour sector with no job or social security, living in abject poverty."[48][49] However, a new report from the UN disputes this, finding that the number of people living on US$1.25 a day is expected to go down from 435 million or 51.3 percent in 1990 to 295 million or 23.6 percent by 2015 and 268 million or 20.3 percent by 2020.[50]

A study by the McKinsey Global Institute found that in 1985, 93% of the Indian population lived on a household income of less than 90,000 rupees a year, or about a dollar per person per day; by 2005 that proportion had been cut nearly in half, to 54%. More than 103 million people have moved out of desperate poverty in the course of one generation in urban and rural areas as well. They project that if India can achieve 7.3% annual growth over the next 20 years, 465 million more people will be lifted out of poverty. Contrary to popular perceptions, rural India has benefited from this growth: extreme rural poverty has declined from 94% in 1985 to 61% in 2005, and they project that it will drop to 26% by 2025. Report concludes that India's economic reforms and the increased growth that has resulted have been the most successful anti-poverty programmes in the country.[51][52][53]

Persistence of malnutrition among children

According to the New York Times, is estimated that about 42.5% of the children in India suffer from malnutrition.[54] The World Bank, citing estimates made by the World Health Organization, states that "About 49 per cent of the world's underweight children, 34 per cent of the world's stunted children and 46 per cent of the world's wasted children, live in India." The World Bank also noted that "while poverty is often the underlying cause of malnutrition in children, the superior economic growth experienced by South Asian countries compared to those in Sub-Saharan Africa, has not translated into superior nutritional status for the South Asian child."[55]

A special commission to the Indian Supreme court has noted that the child malnutrition rate in India is twice as great as sub-Saharan Africa [56]

See also

References

  1. ^ "New Global Poverty Estimates — What it means for India". World Bank.
  2. ^ http://indiatoday.intoday.in/site/story/did-ed-undervalue-hasan-alis-transactions/1/135390.html
  3. ^ India: Poverty estimates vs food entitlements
  4. ^ Rethinking Poverty: The Disputed Dividing Line
  5. ^ It's official: 37 pc live below poverty line
  6. ^ ""Report on Condition of Work and Promotion of Livelihoods in the unorganized sector."" (PDF).
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  8. ^ "8 Indian states have more poor than 26 poorest African nations". Times of India. July 12, 2010.
  9. ^ http://www.ncaer.org/downloads/MediaClips/Press/businesstandard-arvindsingal.pdf
  10. ^ ""80% of Indians live on less than 2$ a day"".
  11. ^ a b ""One-third of world's poor in India"". The Times Of India.
  12. ^ a b "Inclusive Growth and Service delivery: Building on India's Success" (PDF). World Bank. 2006. Retrieved 2007-04-28.
  13. ^ "India sitting over Rs. 1 lakh cr of unused external aid: CAG". The Hindu. Chennai, India. March 18, 2011.
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  16. ^ Luis Flores Ballesteros. "How lack or poor infrastructure shapes inequality and poverty in supernations. A lesson from India" 54 Pesos Sep. 2010:54 Pesos 28 Sep 2010. <http://54pesos.org/2010/09/28/how-lack-or-poor-infrastructure-shapes-inequality-and-poverty-in-supernations-a-lesson-from-india/>
  17. ^ A special report on India: Ruled by Lakshmi Dec 11th 2008 From The Economist print edition
  18. ^ "Development Policy Review". World Bank.
  19. ^ "India on track to meet poverty reduction goal: World Bank". Economic Times. April 23, 2010.
  20. ^ Bappa Majumdar, Abhijit Neogy (April 18, 2010). Giles Elgood (ed.). "100 million more Indians now living in poverty". Reuters India.
  21. ^ "Households Availing Banking Services with Households in India" (PDF). Town and Country Planning Organisation, Ministry of Urban Affairs. 2001. Retrieved 2009-07-31.
  22. ^ "Department of Telecom, memo Feb 2009" (PDF). Department of Telecommunication of India. 2009.
  23. ^ Untouchable By S. M. Michael
  24. ^ William A. Haviland, Anthropology: The Human Challenge, 10th edition, Thomson Wadsworth, 2005, ISBN 0-534-62361-1, p. 575.
  25. ^ Mendelsohn, Oliver & Vicziany, Maria, "The Untouchables, Subordination, Poverty and the State in Modern India", Cambridge University Press, 1998
  26. ^ Kevin Reilly, Stephen Kaufman, Angela Bodino, Racism: A Global Reader P21, M.E. Sharpe, 2003 ISBN 0-7656-1060-4.
  27. ^ http://en.wikipedia.org/wiki/Forward_caste
  28. ^ a b [2]
  29. ^ MEGHNAD DESAI (2003). "INDIA and CHINA: AN ESSAY IN COMPARATIVE POLITICAL ECONOMY" (PDF). IMF.
  30. ^ Street Hawking Promise Jobs in Future, The Times of India, 2001-11-25
  31. ^ The India Report. Astaire Research
  32. ^ India: the economy. Published in 1998 by BBC.
  33. ^ a b "What Went Wrong: Derailing after the 1950s".
  34. ^ Datt, Ruddar & Sundharam, K.P.M. "22". Indian Economy. pp. 367, 369, 370.{{cite book}}: CS1 maint: multiple names: authors list (link)
  35. ^ Sarkaritel.com : Corporate News & Features : Highlights of Economic Survey 2004-2005
  36. ^ India CIA World Fact Book. August 7, 2008. Retrieved August 20, 2008.
  37. ^ thehindu.com/2009/04/03/stories
  38. ^ a b counterpunch.org
  39. ^ thehindu.com/2007/08/09/stories
  40. ^ economictimes.indiatimes.com
  41. ^ thehindu.com/2009/03/18/stories
  42. ^ rupe-india.org/39/shaping.html
  43. ^ "The tough act of being good". Tehelka Magazine. Vol 8, Issue 14, Dated 09 Apr 2011. {{cite news}}: Check date values in: |date= (help); Italic or bold markup not allowed in: |publisher= (help)
  44. ^ a b Sinha, Kounteya (February 27, 2009). "India tops world hunger chart". The Times Of India.
  45. ^ The Multidimensions of Urban Poverty in India, Centre de Sciences Humaines - New Delhi
  46. ^ Lifting The Poverty Veil J. Ramesh, India Today
  47. ^ World Bank ICRIER
  48. ^ Nearly 80 pct of India lives on half dollar a day, Reuters, August 10, 2007. Accessed: August 15, 2007
  49. ^ "Report on Conditions of Work and Promotion of Livelihoods in the Unorganised Sector" [3] ], National Commission for Enterprises in the Unorganised Sector, Government of India, August, 2007. Accessed: August 25, 2007.
  50. ^ [4], The Economic Times, April 23, 2010. Accessed: May 27, 2007]
  51. ^ [5]
  52. ^ India's middle class - Tracking the growth of India’s middle class - Economic Studies - Country Reports - The McKinsey Quarterly
  53. ^ The Tribune, Chandigarh, India - Business
  54. ^ Sengupta, Somini (March 13, 2009). "As Indian Growth Soars, Child Hunger Persists". The New York Times. Retrieved May 22, 2010.
  55. ^ "'India has highest number of underweight children :-)". The Indian Express. 2009-04-14. Retrieved 2009-04-28.
  56. ^ http://www.medindia.net/news/Malnutrition-Among-Indian-Children-Worse-Than-in-Sub-Saharan-Africa-30955-1.htm

Further reading

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