BATCH- 2021-26

ECONOMICS- III ASSIGNMENT

Topic- Poverty

SUBMITTED BY:- SUBMITTED TO:-

Chaitanya Pareek Neetu Yogi Ma’am
ILS21209
BA-LLB (hons.)
INTRODUCTION
The concept of poverty is associated with a minimum level of living or minimum consumption
requirements of food, clothing, housing, health etc. poverty is defined as inability to achieve the
minimum requirements of life, health and efficiency due to very low income or insufficient assets.
Poverty is thus seen as a state of absolute deprivation. It is defined in terms of a certain normative
minimum level of living operationally measured by consumption expenditure that is necessary to
ensure that minimum desirable level of living. All those people who fail to secure income or assets
to have access to even these minimum consumption requirements are classified as “poor”.

Poverty is a state or situation in which a person or a group of people don't have enough money or
the basic things they need to live. Poverty means that a person doesn't make enough money from
their job to meet their basic needs. People and families who are poor may not have a good place to
live, clean water, healthy food, or medical care. Each country can use its own set of rules to figure
out how many people are poor.
Causes of poverty

Poverty in India has taken deep roots due to two major factors i.e. low level o economic
development and wide inequalities in income distribution and asset ownership. Added to these two
factors there is a third factor that has perpetuated poverty is the high growth rate of population since
1951. thus to look for causes of poverty we have to analyse the impact of economic inequalities as
well as the ill effects of rapid population growth on income, consumption and levels of living of
poor masses.

1)      Underdeveloped nature of Indian economy:  India is an underdeveloped country it has very

low per capita income compared to other countries. Its rate of growth is low. Unemployment is
widespread. Agriculture is still backward and industry too is not much developed. All these factors
have combined to keep Indians poor. The major factors are:

a)      Low level of per capita income: India is an underdeveloped country. Its current per capita
income is among the lowest in the world. Compared to Switzerland and Japan with per capita
income of around US $35000 or USA and western European nations with per capita income of
around US $20000. India with its per capita income of US $ 1040 in 2008 stands nowhere. Even
after half a century of independence India continues to be underdeveloped.

b)      Low rate of growth:  Before independence our economy was stagnating under heavy burden
of extremely backward agriculture and under developed lop sided industrial structure. Efforts were
made to put the economy under rapid growth in 5 year plans. Huge investments have been made in
agriculture, industry and infrastructure. Yet, the growth rate of the economy has been extremely
slow as the national income has gone up only 8 times over the past 5 decades. Per capita income has
gone up less than three times during this period. Thus the average India seems to have not become
much better of due to slow pace of development which could neither boost income nor remove
unemployment.
c)      Inflation: Rising prices or inflation have also contributed to poverty of people. Prices have
been continuously rising since independence. Rising prices reduce purchasing power of money and
thus reduce the real value of money income. The fixed income groups are the worst hit as they can
purchase small amount of goods and services with the given income. The unorganised labourers,
casual workers, low paid employees etc are therefore compelled to reduce their consumption and
thus move below the poverty line. This adds to the number of poor people in the country.

2) Inequalities in Income and Asset ownership:  Along with the slow pace of development and
other important factors contributing to poverty is the growing inequality in income distribution and
ownership of income yielding assets. Development process opens up new avenues of profitability
and new channels of investment. Those who have resources take advantage of these new
opportunities to make profits. So the rich become richer and their income rises and assets expand.
Of course more labour gets absorbed as more employment opportunities are created. So the poor
workers also get benefit. But this has not happened in reality. Use of modern technologies has
increased output without much increase in employment. Thus, Most of the gains of the development
have accrued only to the rich capitalist and business classes while the poor have largely been
untouched by the growth process. The share of the rich in national income has increased the
inequalities in income distribution and have widened the gap between rich and poor. Rising prices
and inflationary pressure that have accompanied the developments process have further aggravated
these inequalities. Higher prices means more profit to the business classes but low purchasing
power and low real income to the poor. According to the world bank report of 2001-2002, the top
20% of the people in India have 46% share of national income while the bottom 20% population
gets less than 8% share. The distribution of wealth and income yielding assets is also concentrated
in few hands that further increases their income and inequality. The result of these wide inequalities
in income and wealth distribution is that much of increase in income during the plans has gone to
the richer sections. The poor have remained largely ignored by the development process. Poverty
has thus grown along with the economic development of the country.

 
3)Rapid increase in population: rapidly increasing population has also been a major factor
contributing to poverty in India. Between 1951 and 2001 over 66 crore people were added to India’s
population which in March 2001 estimated at 102 crore which was 36 crore in 1951. Fast growing
population needs high growth rate of GNP to sustain the growing number of people and sustain
them even at the minimum living standards. But increasing population reduces national savings and
adversely affects capital formation thereby limiting the GNP growth rate. Consequently slow rate of
growth of GNP and high high growth rate of population depress the growth rate of per capita
income. In a situation of widespread income inequality the slow growth of national and per capita
income would mean a larger share of even this small income growth goes to the rich with virtually
no gain to the poor. It is also observed that highest growth rate of population is observed in case of
poorer sections of society, bot in rural as well as urban areas. Thus the poverty groups among which
population breeds fast but income growth is negligible, are further pushed down below the poverty
line and move from the category of poor to very poor and those slightly above the poverty line are
pushed below it due to increasing number in these families.

 Measures to reduce poverty.

 Since poverty in India is essentially a consequence of low rate of economic development,

inequality in income distribution and rapid population growth the remedy lies in accelerating the
tempo of economic development, reducing income inequalities, controlling the growth rate of
population. These are some of the measures to reduce poverty and can be summarized as follows:

 1)      Accelerating the growth rate: a major cause of poverty in India is extremely slow growth
rate of economy. A fast growing economy turns out increasingly large amount of goods and
services every year, generates higher income and provides greater employment opportunities. If
income distribution remains unaltered, the poor too will share this increased income through greater
employment and job opportunities. Thus there will be some improvement in the lot of the poor
masses and incidence of poverty will be reduced. This what India needs to do urgently is to step up
the tempo of its development. The growth rate achieved so far has not been able to make any
significant dent into the poverty. We must aim at much higher growth rate of atleast above 10%
p.a.  the areas on which India should give emphasis for removal of poverty are:
a)      Increase in the rate of  investment: though India has considerably increased its saving and
investment rate since independence, yet this is not adequate enough to give such high rate of growth
that is needed to eradicate poverty. Thus more efforts should be made to increase domestic savings
and expand inflow of foreign resources for further increasing the rate of investment.

b)      Emphasis on development of agriculture: since the greater incidence of poverty is found in

the rural areas, greater emphasis should be placed on rapid development of agriculture. Larger
income in the rural sector will not only remove rural poverty but by creating more demand of
industrial goods it will help in inducing more production and income in urban areas as well thereby
reducing urban poverty.

c)      Increase in production of consumer goods and mass consumption: industry should be

expanded and greater priority should be given to production of consumer goods for the masses.
Greater availability of such goods as cotton, sugar, edible oil, etc. will help the poor to increase
their consumption level.

d)     Change in industrial technology: most of the modern technology has been developed in the
western countries and does not create much employment. Efforts should be made to develop and
adopt an appropriate technology that uses more labour and thus creates more employment and
income for the unemployed labour class. This will help reduce industrial unemployment and urban
poverty.

e)      Development of village and small scale industries: village industries like handloom and
khadi , coir goods, sericulture, bee keeping, handicrafts, etc. can help create employment and
income for the rural poor. Small scale industries using improved but labour intensive technology
should be set up in the urban areas. Such industries create more employment with given amount of
capital and are thus extremely helpful in reducing poverty among the urban poor.

f)       Price stability: rising prices reduce purchasing power of given money income and thus
enable people to consume smaller amount of goods and services than before. Therefore government
must adopt policies and measures that are aimed directly at controlling inflation and bringing about
price stability. This would substantially contribute to removal of poverty.

g)      Direct attack on poverty: policies and programmes should  be evolved which are aimed
directly at poor people for helping them to cross the poverty line. Thus programmes should be made
for providing minimum needs of the poor such as food, drinking water, shelter, elementary
education, healthcare etc. poor should be provided with some income yielding assets so that they
could start earning their living and move above the poverty line.

2)      Reducing inequalities in income distribution: a high growth rate of GNP is accompanied

with increased inequalities of income, the fruits of development will go only to the rich whereas the
poor will grow in numbers. Thus inequalities must be reduced if development is to benefit the poor.
Special care of the poor must also be taken to make them better off. Some steps in this direction are
as follows:

a)      Low paid workers in agriculture and unorganised sector should be enabled to secure higher
wages consistent with their productivity through labour legislation or minimum wage laws.

b)      Taxes should not be imposed on wage goods i.e. goods mainly consumed by poor masses. On
the other hand goods consumed by the rich and upper middle class people may be taxed to raise
government revenues.

c)      Necessary goods must be available to the poor at subsidised rate through public distribution
system.

d)     Free health and education facilities should be provided to the poor.

e)      Efforts should be made to ensure that supply of wages goods increases in accordance with
their growing demand so that the supply demand imbalances does not cause their prices to rise.

f)       Poor families which do not have any earning member should be provided employment for
atleast one person through programmes that are financed by the government.

3)      Limiting growth rate of population: Along with securing high growth rate of national
income and reduction in inequalities, serious efforts must be made to reduce the growth rate of
population. When national income income increases substantially and population grows slowly, per
capita income will grow fast. And since inequalities have been reduced, the increasing per capita
income would ensure better living standards for all, including the poor people. Increase in per capita
income will also ensure greater savings, more capital formation, and rapid economic development.
This would secure further reduction in poverty. Hence population control assumes a great
significance in any programme that seeks to reduce poverty. Urgent steps including propagation and
adoption of effective birth control measure must be taken to initiate rapid growth rate of population
to make a dent in poverty.

SPECIAL PROGRAMMES ON POVERTY REMOVAL AND EMPLOYMENT

GENERATION.

In view of growing magnitude of poverty and unemployment inspite of a reasonable, though not
high, growth rate achieved during the first three decades of planning, special programmes were
designed and implemented to make a direct attack on poverty. These programmes included self
employment and income generative schemes for the poor like Integrated rural development
programme (IRDP), training rural youth for self employment etc( TRYSEM) etc. some of the major
programmes are:

1)          Swarnajayanti gram swarozgar yojna (SGSY): this a self employment programme

which include the earlier anti poverty programme like the IRDP, TRYSEM, development of women
and children in rural areas (DWCRA) and million wells scheme(MWS). The IRDP aimed at
providing income assets to the identified poor families through a scheme of concessional loans and
subsidies so as to enable them to move above the poverty line on lasting basis. TRYSEM was
designed to train rural youth in technical skills and provide them with loans to set up rural industries
and business activities and thus become self employed persons. The DWCRA sought to improve the
socio economic status of the poor women in rural areas through creation of income generating
activities for women groups. The MWS aimed at providing open irrigation wells free of cost to the
rural poor, small farmers, freed bonded labour in rural areas and the farmers belonging to SC and
ST classes. All of the above self employment generating programmes have now been redesigned
and restructured to improve their effectiveness and merged into single programme called
Swarnajayanti gram swarozgar yojna from april 1999. the objective of SGSY is to help poor
families to cross the poverty line by providing them income yielding assets such as sewing
machines, pair of bullocks to plough land etc.
2)          Jawahar gram samridhi yojna(JGSY): the objective of JGSY are creation of village
infrastructure and durable assets like roads, dams, wells, irrigation channels etc, to enable the rural
poor to get sustained employment and provide supplementary employment to underemployed poor
persons.

3)          The employment assurance scheme: the employment assurance scheme was launched in

October 1993 but the scheme was restructured in 1999. the EAS is now being implemented in all
5448 rural blocks. The main objective of EAS is to create additional wage employment
opportunities through manual work for the people below poverty line.

4)           Samporna grameen rozgar yojna(SGRY): launched in 2001 the scheme aims at

providing wage employment in rural areas. It seeks to ensure food security to the poor. The scheme
is being implemented on cost sharing basis of 75:25 between centre and state government.

5)          The National Social Assistance Programme: The NSAP recognizes the responsibility of

the government for providing social assistance to the poor in case of maternity, old age and death of
the bread earner. It is centrally sponsored scheme for which the entire funds are provided by the
central government under the 3 components, i.e. National Old Age Pension Scheme, National
Family Benefit Scheme, National Maternity Benefit Scheme.

6)          Pradhan Mantri Gramodaya Yojana (PMGY): A new scheme for removal of rural
poverty was introduced in budget 2000-2001 for which an allocation of Rs.5000 crore was made.
The PNGY focuses on village level development in 5 critical areas that is health, primary education,
drinking water, housing and road development.

7)          Indra Awaas Yojana (IAY): This is a major scheme for construction of houses to be given
to the poor free of cost & construction of new houses, conversion of kuchcha houses into puccaa
houses.

8)          Samagra Awas Yojana (SAY): This has been launched as a comprehensive housing

scheme in 1999-2000 on a pilot project basis in 1 block each of 25 districts in 24 states. The aim of
the scheme to ensure integrated provision of shelter, sanitation and drinking water.

9)          Food and Work Programme : This programme was launched in 2001 with the aim of
augmenting food security through wage employment in the draught affected rural areas in 8 states.
The centre supplies food grains for this scheme free of cost to the states. The wages by the state
government can be paid partly in kind, i.e. upto 5 kg of food grains per day for one days work by
one person and partly in cash.

10)      Prime Minister Rojgar Yojana (PMRY) : The PMRY was launched in urban areas in
1993-1994 and extended to rural areas in 1994-1995. This scheme aims at providing self
employment to the educated unemployed youth by giving them loans to set up micro enterprises.

11)      Swarn Jayanti Shahri Rojgar Yojana (SJSRY) : SJSRY came into operation in 1997 and
has merged it in  3 earlier urban anti=poverty and employment generation programmes that is
Nehru Rojgar Yojna, urban basic services for the poor, prime minister integrated urban poverty
alleviation programme.

12)      Valmiki Ambedkar Awas Yojana (VAMBAY) : This scheme was launched in 2001 with
the aim of ameliorating the conditions of urban slum dwellers living below the poverty line who do
not possess adequate shelter. The primary objective of VAMBAY is to facilitate the
construction  and up gradation of dwelling units for slum dwellers and provide a healthy urban
environment.

 CONCLUSION

The success of the anti poverty strategy is reflected in the decline in overall poverty ratio from 55%
in 1973-74 to 36% in 1993-94, a nearly 20% fall in two decades. During the next five years, 1993-
94 and 1999-2000, the poverty ratio further declined by 10% to the level of 26%. Thus within a
period of 25 years, poverty ratio declined by 30%, which is surely a significant achievement,
especially in the view of the fact that country’s population had risen sharply during this period. The
absolute number of poor declined from 32 crores persons in 1973-74 to 26 crore in 1999-2000. this
figure further has gone up in 2006 when planning commission of India estimated that 28% of the
total population of India is poor. According to recent Indian government committee 38% (380
million) of india’s population is poor.