Unit – I: Understanding Poverty and Development

(a) Poverty

i. Meaning and Concept-

Poverty is an economic state where people are experiencing scarcity or the lack of certain
commodities that are required for the lives of human beings like money and material things.
Therefore, poverty is a multifaceted concept inclusive of social, economic and political elements.

The word poverty comes from French word ​“poverté” ​which means ​poor.

It is complex to define poverty. Because it is depend on multifaceted and multidimensional

elements like region, era, geographical condition, circumstances and many more.

On the basis of ​social, economical and political aspects, there are different ways to identify the

type of Poverty​:

1. Absolute poverty.

2. Relative Poverty.

3. Situational Poverty.

4. Generational Poverty.

5. Rural Poverty.

6. Urban Poverty.

Now let us understand them one by one:

1. Absolute poverty: Also known as extreme poverty or abject poverty, it involves the scarcity

of basic food, clean water, health, shelter, education and information. Those who belong to

absolute poverty tend to struggle to live and experience a lot of child deaths from preventable
diseases like malaria, cholera and water-contamination related diseases. Absolute Poverty is

usually uncommon in developed countries.

It was first introduced in 1990, the “dollar a day” poverty line measured absolute poverty by the

standards of the world's poorest countries. In October 2015, the World Bank reset it to $1.90 a

day. This number is controversial; therefore each nation has its own threshold for absolute

poverty line.

"It is a condition so limited by malnutrition, illiteracy, disease, squalid surroundings, high infant

mortality, and low life expectancy as to be beneath any reasonable definition of human decency."

Said by Robert McNamara, the former president of the World Bank.

2. Relative Poverty​: It is defined from the social perspective that is living standard compared to

the economic standards of population living in surroundings. Hence it is a measure of income

inequality. For example, a family can be considered poor if it cannot afford vacations, or cannot

buy presents for children at Christmas, or cannot send its young to the university.

Usually, relative poverty is measured as the percentage of the population with income less than

some fixed proportion of median income.

It is a widely used measure to ascertain poverty rates in wealthy developed nations.

In European Union the "relative poverty measure is the ​most prominent and most–quoted of

the EU social inclusion indicators".

3. Situational Poverty: It is a temporary type of poverty based on occurrence of an adverse

event like environmental disaster, job loss and severe health problem.

People can help themselves even with a small assistance, as the poverty comes because of

unfortunate event.
4. Generational Poverty: It is handed over to individual and families from one generation to the

one. This is more complicated as there is no escape because the people are trapped in its cause

and unable to access the tools required to get out of it.

“Occurs in families where at least two generations have been born into poverty. Families living

in this type of poverty are not equipped with the tools to move out of their situation” (Jensen,

2009).

5. Rural Poverty: It occurs in rural areas with population below 50,000. It is the area where

there are less job opportunities, less access to services, less support for disabilities and quality

education opportunities. People are tending to live mostly on the farming and other menial work

available to the surroundings.

The rural poverty rate is growing and has exceeded the urban rate every year since data

collection began in the 1960s. The difference between the two poverty rates has averaged about 5

percent for the last 30 years, with urban rates near 10–15 percent and rural rates near 15–20

percent.

6. Urban Poverty: It occurs in the metropolitan areas with population over 50,000. These are

some major challenges faced by the Urban Poor:

• Limited access to health and education.

• Inadequate housing and services.

• Violent and unhealthy environment because of overcrowding.

• Little or no social protection mechanism.

ii. Relative Dimensions

The different dimensions of poverty are:

Poverty can have two broad categories like ​absolute poverty​ and ​relative poverty​.

Absolute Poverty is a condition in which people do not even get a minimum income needed to
maintain their lives. India has higher prevailing rates of malnutrition, hunger, homelessness,
unemployment and hence its absolute poverty also remains high.

Relative poverty refers to a comparative perspective where a section of population is relatively

deprived compared to another better off section of population. This definition is more broader
and includes amenities like a well sanitised pucca house, access to education, healthcare, social
security benefits, leisure, comfort etc.,

While poverty is considered as a single dimensional measure, the term ​Social Exclusion is even
more broader and multidimensional. It indicates that a section of population is not able to
participate effectively in social life. I.e, taking part in activities of society like festivals, getting
an employment or indulging in leisure activities. From an Indian point of view it includes the
weaker sections like SC/STs, disabled, women, etc.,

Inequality refers to the social and economic divide between the rich and poor. In India the
inequality between well off sections of the society and the rest of the population is increasing.
According to Credit Suisse the richest 1% of population in India owns 53% of its total wealth.

In India, there is a ​regional dimension of poverty as some states like Delhi, Punjab, Haryana,
Kerala, Tamil Nadu etc., have significantly reduced their poverty whereas states like Uttar
Pradesh, Bihar, Madhya Pradesh, West Bengal etc., have a higher proportion of poor people.

At another level there is ​Rural-Urban disparity as generally the Urban areas have less poverty
indices than compared to rural areas because of the availability of jobs in manufacturing, service
sector etc., Even informal employment that pays a meagre wage is mostly concentrated in urban
areas, also the agricultural sector is not much profitable in rural areas due to crop failures,
fragmentation of land holdings etc.,. As a result there is widespread rural- urban migration for
search of better jobs and livelihood.

Causes:

Committees:

YK Alagh Committee:

In the initial decades after Independence poverty was measured in terms of income levels
of individuals. Alagh Committee is the first to come up with an official poverty line. It
recommended a poverty line based on calorie intake. It considered people who consume
less than 2100 calorie in Urban areas as poor whereas in rural areas it is 2400 calories.
The difference is justified by the fact that rural people do more physical work than their
Urban counterparts. This committee had a drawback because Health and education was
assumed to be provided by State Governments.

Lakdawala Formula:
This formula included the calorific limits of Alagh committee and it also included health
and education components. It considered the total amount of money needed per person in
a house to meet his calorie intake. This method was reported to have methodological
errors as it showed the poverty line as double compared to previous estimates.

Tendulkar methodology:

It suggested a shift away from calorie based model and focused on nutritional outcomes and
included health, education, transport and electricity. It is based on spending per individual over a
fixed period for an essential basket of goods Ie., cost of living. India presently follows this
method for estimation of poverty. It set Rs 27 for rural areas and Rs 33 in urban areas for
consumer spending as the reference limit and based on this they estimated that 21.5% of the
Indian population as poor. This estimation involved criticism from various quarters as it seemed
to be very low and thus Rangarajan committee was constituted.

Rangarajan committee on poverty:

It has taken monthly consumption expenditure per person or per household as a tool for
calculating poverty lines. Based on this 972 INR (Rs 32 per day) in rural areas and 1407 INR (Rs
47 per day) in urban areas is calculated based on 2011 to 2012 prices. According to this
estimate, poverty in India stood at 29.5% in 2011-12 which is significantly higher than the
Tendulkar model. The group went for separate rural and urban poverty lines as there is huge
complexity associated with them.There are two components in this method

iii. Measurement and Determinants

In order to meet the problem of poverty various measures are to be taken. They are discussed
below:

1. Poverty and unemployment are interred related. Therefore, adequate employment

opportunities should be created in rural areas particularly in agricultural sector. In order to
eliminate agricultural unemployment it is necessary to improve agriculture in the country. Good
seeds, good tools, good manure must be arranged for it if the production is to be increased.

2. If conditions for marketing agricultural produce do not favor the cultivator, the increase in
production will not alleviate the problem of agricultural unemployment. The organisation of the
agricultural market will increase the income of the cultivator as well as improve the situation
with regard to unemployment.

3. The total impact of land reform on rural formation has been for less then had been hoped for.
Effort should be made to remove the loop holes in land legislations in order to make land reform
more meaningful and effective additional lands should be redistributed among landless laborers,
the marginal sub marginal farmers, so that they will be able to earn more. Effort should be made
to provide the landless laborers with maximum of land by making barren land fertile.

4. Animal husbandry and cattle breeding have great potential, not only in unemployment but also
in overcoming malnutrition. The government should extent special encouragement for animal
husbandry, poultry and fish farming. Necessary training for poultry and dairy farming should be
imparted.

5. An improvement in agriculture, not supplemented by any other corrective measure cannot

provide employment to the increasing population. Besides the farmer should also get some work
during that period of the year when he is not engaged in cultivation. Some of subsidiary
industry, such cottage industry like furniture making, weaving, spinning, match, barked and
ropes etc, can help to a considerable extent in removing unemployment.

6. In spite of the promise of industrial decentralization which never seems to arrive. There are
some areas of small industries which could, in fact, he located in rural areas. A major element in
creating employment in rural areas must mean a removal of some small industrial estates into
purely rural areas. They will carry their power allocations with them and could then be an
element in small scale industrialization in rural areas.

Eradication of poverty needs a multiplied strategy. But as things stand the most important,
indeed the central one, has to be the creation of massive wage employment opportunities both on
private and public accounts in rural areas. Then other programmes will provide opportunities for
the able and the enterprising. It is time resources organisation and skill is directed to this end, if
poverty is to be tackled in the decade to come.

iv. Issues related to Poverty in India:

Poverty is powerlessness, lack of representation and freedom."Principles of Amartya Sen offer

useful alternative to understand poverty. Capability approach to understanding poverty goes
beyond income and stresses the whole range of means, available to achieve human capabilities
such as literacy, longevity and access to income. From this viewpoint, poverty is seen as the
failure of some basic capabilities to function- a person lacking the opportunity to achieve some
minimally accepted level of these functionings (Sen Amartya and Dreze Jean, 1999).

In bulk of theoretical literature, it is demonstrated that "Individuals, families and groups in

population can be said to be in poverty when they lack the resources to obtain the types of diet,
participate in the activities and how the living conditions and amenities which are customary or
approved in the societies to which they belong" (Peter Townsend, 1979) .There resources are
below those commanded by the average individual or family that they in effect excluded from
the normal living patterns, custom and activities.

According to Galbraith John Kenneth (1970), poverty may itself be a source of poverty. This is
because, it denies the nation from investment, revenues for education or purchasing power for
customer product, which in turn, is an inventive to effort. Therefore, poverty continues itself.
Components of rural and urban poverty: Poverty has multivariate nature for which a single
variant approach is insufficient.

The components that constitutes vector of poverty are in terms of satisfaction and deprivation.
There are nine components of poverty that include occupation and employment, income and
asset, food, shelter, health, education, demographic features, values, interests and activities,
power and politics.