NPTEL - Humanities and Social Sciences - Indian Society: Issues and Problems

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NPTEL – Humanities and Social Sciences – Indian Society : Issues and Problems

Incidence of Poverty
Incidence of poverty varies widely across social groups. High incidence of poverty
prevails among the scheduled tribe and scheduled caste population, which have suffered
from social and/or economic exclusion for centuries in India. More than 45% of
households among the ST group are poor while the corresponding number is only 15%
among the non-backward households classified under the „others‟ category, Data
suggests that the ¾th of the rural poor belong to the category of landless labourers and
marginal farmers. The incidence of poverty is highest among agricultural labour
households (59%), labour households (38.5%) and among Marginal Farmers (30%).
Factors responsible for poverty are Unemployment or underemployment among rural
labourers. It has been established that incidence of unemployment is highest among the
casual labourers. Even when they are employed, their weak bargaining power results in
low wages being paid to them. The market forces are so strong that the minimum wage
legislation is observed more in breach than in compliance.
Another cause of rural poverty is low asset base of the poor. According to data – worst 10
percent of rural population owns virtually nothing and bottom 30 percent just own 2
percent of total assets. It may also be noted that large number of rural poor remain in
poverty not only because they have very few assets, but also because most of these assets
are in the form of durable consumer goods, rather than assets such as land, implements,
livestock etc. which can increase their productive capacity.
Another major cause is low educational attainment of the poor. These educational
differentials are one of the main factors for relatively lower level of income among poor.
Another popular myth for poverty is rapid increase in population. Population growth puts
pressure on the land base and as a consequence the real per capita income falls. Semi-
feudal agrarian relation is another important cause of poverty. Land reforms initiated
after independence has not brought about substantial changes in agrarian relations.

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NPTEL – Humanities and Social Sciences – Indian Society : Issues and Problems

Trend of Poverty in India


The proportion of India's population below the poverty line has fluctuated widely in the
past, but the overall trend has been downward. However, there have been roughly three
periods of trends in income poverty.
 1950 to mid-1970s: income poverty reduction showed no discernible trend. In
1951, 47 per cent of India's rural population was below the poverty line. The
proportion went up to 64 per cent in 1954-55; it came down to 45 per cent in
1960-61, but in 1977-78, it went up again to 51 per cent.
 Mid-1970s to 1990: Income poverty declined significantly between the mid-1970s
and the end of the 1980s. The decline was more pronounced between 1977-78 and
1986-87, with rural income poverty declining from 51 per cent to 39 per cent. It
went down further to 34 per cent by 1989-90. Urban income poverty went down
from 41 per cent in 1977-78 to 34 per cent in 1986-87, and further to 33 per cent
in 1989-90.
 After 1991: This post-economic reform period evidenced both setbacks and
progress. Rural income poverty increased from 34 per cent in 1989-90 to 43 per
cent in 1992 and then fell to 37 per cent in 1993-94. Urban income poverty went
up from 33.4 per cent in 1989-90 to 33.7 per cent in 1992 and declined to 32 per
cent in 1993-94. Also, NSS data for 1994-95 to 1998 show little or no poverty
reduction. The evidence till 1999-2000 was that rural poverty had increased
during post-reforms period. However, the official estimate of poverty for 1999-
2000 was 26.1 per cent, a dramatic decline that led to much debate and analysis.
The latest NSS survey (2004-05) shows poverty at 28.3 per cent in rural areas, 25.7 per
cent in urban areas and 27.5 per cent for the country as a whole, using uniform recall
period consumption. These suggest that the decline in rural poverty over the period
during 1993-94 to 2004-05 actually occurred after 1999-2000.

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NPTEL – Humanities and Social Sciences – Indian Society : Issues and Problems

Vicious Circle of Poverty


The vicious circle of poverty refers to the interconnectedness of different factors that
reinforce each other for generating poverty. According to Nurkse and Kindleberger the
reasons for this vicious circle of poverty can be classified into three groups.
 Supply side factors
 Demand side factors
 Market imperfection
Supply Side Factors
The supply side of the vicious circle indicates that in underdeveloped countries,
productivity is so low that it is not enough for capital formation. According to
Samuelson, "The backward nations cannot get their heads above water because their
production is so low that they can spare nothing for capital formation by which their
standard of living could be raised." According to Nurkse on the supply side there is small
capacity to save, resulting from low level of national income. The low real income is the
result of low productivity, which in turn, is largely due to the lack of capital. The lack of
capital is a result of the small capacity to save, and so, the circle is vicious. Thus, it
becomes clear from the above diagram that the main reason of poverty is the low level of
saving. Consequently, investment is not possible in production channels. A huge chunk
of GDP is used for consumption purposes.
People cannot save. So, there is lack of investment and capital formation. Although rich
people can save, they spend their surplus in some on luxurious goods instead of saving.
They gave preference to high priced items and foreign products. Thus, their demand does
not enlarge the size of the market. The developing countries, therefore, lack investment
facilities.
Demand Side Factors
According to Nurkse, poverty is caused by several factors in the demand side. In
underdeveloped countries the inducement to invest is low because of the low purchasing
power of the people, which is due to their small real income. The main reason for poverty
in these countries is the low level of demand. Consequently, the sizes of markets remain
low. The small size of the market becomes a hurdle in the path of inducement to invest

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NPTEL – Humanities and Social Sciences – Indian Society : Issues and Problems

Market Imperfections
According to Meier and Baldwin, the existence of market imperfections prevents
optimum allocation and utilization of natural resources, and the result is
underdevelopment, and this, in turn, leads to poverty. The development of natural
resources depends upon the character of human resources. But due to lack of skill and
low level of knowledge, natural resources remain unutilized, underutilised and misused.
Causes of Poverty in India
Colonial Exploitation: Colonial rule in India is the main reason of poverty and
backwardness in India. The Indian economy was purposely and severely de-industrialized
through colonial privatizations. British rule replaced the wasteful warlord aristocracy by a
bureaucratic-military establishment. However, colonial exploitation caused backwardness
in India. In 1830, India accounted for 17.6 per cent of global industrial production against
Britain's 9.5 per cent, but, by 1900, India's share was down to 1.7 per cent against
Britain's 18.5 per cent. This view claims that British policies in India, exacerbated by the
weather conditions led to mass famines, roughly 30 to 60 million deaths from starvation
in the Indian colonies. Community grain banks were forcibly disabled, land was
converted from food crops for local consumption to cotton, opium, tea, and grain for
export, largely for animal feed.
Lack of Investment for the Poor: There is lack of investment for the development of
poorer section of the society. Over the past 60 years, India decided to focus on creating
world class educational institutions for the elite, whilst neglecting basic literacy for the
majority. This has denied the illiterate population – 33 per cent of India – of even the
possibility of escaping poverty. Thus, there is no focus on creating permanent income-
generating assets for the poor people.
Social System in India: The social system is another cause of poverty in India. The
social subsystems are so strongly interlocked that the poor are incapable of overcoming
the obstacles.

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NPTEL – Humanities and Social Sciences – Indian Society : Issues and Problems

India's Economic Policies: In 1947, the average annual income in India was US$439,
compared with US619 for China, US$770 for South Korea. But South Korea became a
developed country by the 2000s. License Raj prevailed with elaborate licenses,
regulations and accompanying red tape. Corruption flourished under this system.
Over-reliance on Agriculture: In India there is high level of dependence on primitive
methods of 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, the agriculture
growth rate has dropped from 4.8 per cent to 2 per cent. About 60 per cent of the
population depends on agriculture, whereas the contribution of agriculture to the GDP is
below 18 per cent. The agricultural sector has remained very unproductive. There is no
modernization of agriculture despite some mechanization in some regions of India.
High Illiteracy: Indian literacy rate rose almost tenfold during the British era. In 1947,
India's literacy rate matched China's. However, in 2007, China reported at 91 per cent
literacy rate versus 66 per cent for India. Now India suffers from about 35 per cent
illiteracy among the adult population. Literacy levels among SC, ST and females are very
low.
High Unemployment: There is high degree of underutilization of resources. The whole
country suffers from a high degree of unemployment. India is marching with jobless
economic growth. Employment is not growing, neither in the private sector, nor in the
public sector. The IT sector has become elitist, which does not improve the poverty
situation in the country. Disguised unemployment and seasonal unemployment is very
high in the agricultural sector of India. It is the main cause of rural poverty in India.
Lack of Entrepreneurship: The industrial base of India has remained very slender. The
industrial sickness is very widespread. The whole industrial sector suffers from capital
deficiency and lack of entrepreneurial spirit.

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NPTEL – Humanities and Social Sciences – Indian Society : Issues and Problems

Causes for Urban Poverty


The causes of urban poverty in India are:
1. Migration of Rural Youth towards Cities
2. Lack of Vocational Education / Training
3. Limited Job Opportunities of Employment in the Cities
4. Rapid increase in Population
5. Lack of Housing Facilities
6. No proper Implementation of Public Distribution System
References
Agrawal, AN (Latest Edition), Indian Economy, Biswa Pakashan, New Delhi.
Dutta, R and KPM Sundarama (Latest Edition), Indian Economy, S. Chand &
Sons, New Delhi.
Sen, Amartya (I 999), Development as Freedom, Oxford University Press, London.
World Bank (2000), Attacking Poverty, World Development Report 2000, ?
Washington
Questions
1. What is absolute poverty?
2. What is relative poverty?
3. What are the yardsticks to measure poverty?
4. Discuss the causes of poverty in urban India.
5. How is poverty line in India different from the international poverty line?
6. What do you mean by supply side factors of poverty?
7. What do you mean by demand factors of poverty?
8. What do you mean by market imperfection?

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