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Income Inequalities

Poverty: Poverty is a state or condition in which a person or community lacks the financial
resources and essentials for a minimum standard of living. Poverty means that the income
level from employment is so low that basic human needs can't be met.

According to World Bank, Poverty is pronounced deprivation in well-being, and

comprises many dimensions. It includes low incomes and the inability to acquire the basic
goods and services necessary for survival with dignity. Poverty also encompasses low levels
of health and education, poor access to clean water and sanitation, inadequate physical
security, lack of voice, and insufficient capacity and opportunity to better one's life.
In India, 21.9% of the population lives below the national poverty line in 2011. In 2018,
almost 8% of the world’s workers and their families lived on less than US$1.90 per person
per day (international poverty line).
Types of Poverty: There are two main classifications of poverty:
Absolute Poverty: A condition where household income is below a necessary level to
maintain basic living standards (food, shelter, housing). This condition makes it possible to
compare between different countries and also over time. 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.
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.Usually, relative poverty is measured as the percentage of the population
with income less than some fixed proportion of median income.
Poverty Estimation in India: Poverty estimation in India is carried out by NITI Aayog’s
task force through the calculation of poverty line based on the data captured by the National
Sample Survey Office under the Ministry of Statistics and Programme Implementation
(MOSPI).

Poverty line estimation in India is based on the consumption expenditure and not on the
income levels. Poverty is measured based on consumer expenditure surveys of the National
Sample Survey Organisation. A poor household is defined as one with an expenditure level
below a specific poverty line.
Poverty Line Calculation: Poverty estimation in India is now carried out by NITI
Aayog’s task force through the calculation of poverty line based on the data captured by
the National Sample Survey Office under the Ministry of Statistics and Programme
Implementation (MOSPI). NITI Aayog as a policy think tank has replaced Planning
Commission, which was earlier responsible for calculating the poverty line in India.
Consumption Versus Income Level: Poverty line estimation in India is based on
the consumption expenditure and not on the income levels because of the following
reasons:

Variation in Income: Income of self-employed people, daily wage laborers etc. is highly
variable both temporally and spatially, while consumption pattern are comparatively
much stable.
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Additional Income: Even in the case of regular wage earners, there are additional side
incomes in many cases, which is difficult to take into account.
Data Collection: In case of consumption based poverty line, sample based surveys use
a reference period (say 30 days) in which households are asked about their consumption
of last 30 days and is taken as the representative of general consumption. Whereas
tracing the general pattern of income is not possible.
Reference Period: It is the duration/period during which the survey is conducted by
NSSO workers in which they ask certain questions to households.
If the Income or Consumption falla below a given minimum level, the household is said to
be Below the Poverty Line (BPL). If the Income or Consumption falls above a given
minimum level, the household is said to be Above the Poverty Line (APL). The minimum
level is different for different states but the average value is Rs. 15,000 per family annually.
The incidence of poverty is measured by the poverty ratio, which is the ratio of the number
of poor to the total population expressed as a percentage. It is also known as head-count
ratio.
Alagh Committee (1979) determined a poverty line based on a minimum daily requirement
of 2400 and 2100 calories for an adult in Rural and Urban area respectively. Subsequently
different committees; Lakdawala Committee (1993), Tendulkar Committee (2009),
Rangarajan committee (2012) did the poverty estimation. As per the Rangarajan
committee report (2014), the poverty line is estimated as Monthly Per Capita
Expenditure of Rs. 1407 in urban areas and Rs. 972 in rural areas.
Causes of Poverty in India:

a. Population Explosion: India’s population has steadily increased through the years.
During the past 45 years, it has risen at a rate of 2.2% per year, which means, on
average, about 17 million people are added to the country’s population each year.
This also increases the demand for consumption goods tremendously.
b. Low Agricultural Productivity: A major reason for poverty in the low productivity
in the agriculture sector. The reason for low productivity is manifold. Chiefly, it is
because of fragmented and subdivided land holdings, lack of capital, illiteracy about
new technologies in farming, the use of traditional methods of cultivation, wastage
during storage, etc.
c. Inefficient Resource utilisation: There is underemployment and disguised
unemployment in the country, particularly in the farming sector. This has resulted in
low agricultural output and also led to a dip in the standard of living.
d. Low Rate of Economic Development: Economic development has been low in
India especially in the first 40 years of independence before the LPG reforms in
1991.
e. Price Rise: Price rise has been steady in the country and this has added to the
burden the poor carry. Although a few people have benefited from this, the lower
income groups have suffered because of it, and are not even able to satisfy their
basic minimum wants.
f. Unemployment: Unemployment is another factor causing poverty in India. The
ever-increasing population has led to a higher number of job-seekers. However,
there is not enough expansion in opportunities to match this demand for jobs.
g. Lack of Capital and Entrepreneurship: The shortage of capital and
entrepreneurship results in low level of investment and job creation in the economy.
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h. Social Factors: Apart from economic factors, there are also social factors hindering
the eradication of poverty in India. Some of the hindrances in this regard are the
laws of inheritance, caste system, certain traditions, etc.
i. Colonial Exploitation: The British colonisation and rule over India for about two
centuries de-industrialised india by ruining its traditional handicrafts and textile
industries. Colonial Policies transformed india to a mere raw-material producer for
european industries.
j. Climatic Factors: Most of india’s poor belong to the states of Bihar, UP, MP,
Chhattisgarh, odisha, Jharkhand, etc. Natural calamities such as frequent floods,
disasters, earthquake and cyclone cause heavy damage to agriculture in these states.
k. Poverty Trap: The vicious cycle of Poverty is also the reason why we find Poverty
in the country. Low economic growth due to low income which is due to low saving
which is due to low investment which is due to low economic growth. Or it can be
also studied as low level of education and health care due to low levels of human
capital which is due to low productivity which is due to low income.
Poverty Alleviation Programs in India

There are various programmes run by the Government to eradicate poverty.

a. Integrated Rural Development Programme (IRDP): It was introduced in 1978-79

and universalized from 2nd October, 1980, aimed at providing assistance to the rural
poor in the form of subsidy and bank credit for productive employment
opportunities through successive plan periods.
b. Jawahar Rozgar Yojana/Jawahar Gram Samridhi Yojana: The JRY was meant
to generate meaningful employment opportunities for the unemployed and
underemployed in rural areas through the creation of economic infrastructure and
community and social assets.
c. Rural Housing – Indira Awaas Yojana: The Indira Awaas Yojana (LAY)
programme aims at providing free housing to Below Poverty Line (BPL) families in
rural areas and main targets would be the households of SC/STs.
d. Food for Work Programme: It aims at enhancing food security through wage
employment. Food grains are supplied to states free of cost, however, the supply of
food grains from the Food Corporation of India (FCI) godowns has been slow.
e. National Old Age Pension Scheme (NOAPS): This pension is given by the central
government. The job of implementation of this scheme in states and union territories
is given to panchayats and municipalities. The states contribution may vary
depending on the state. The amount of old age pension is ₹200 per month for
applicants aged 60–79. For applicants aged above 80 years, the amount has been
revised to ₹500 a month according to the 2011–2012 Budget. It is a successful
venture.
f. Annapurna Scheme: This scheme was started by the government in 1999–2000 to
provide food to senior citizens who cannot take care of themselves and are not under
the National Old Age Pension Scheme (NOAPS), and who have no one to take care
of them in their village. This scheme would provide 10 kg of free food grains a
month for the eligible senior citizens. They mostly target groups of ‘poorest of the
poor’ and ‘indigent senior citizens’.
g. Sampoorna Gramin Rozgar Yojana (SGRY): The main objective of the scheme
continues to be the generation of wage employment, creation of durable economic
infrastructure in rural areas and provision of food and nutrition security for the poor.
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h. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)

2005: The Act provides 100 days assured employment every year to every rural
household. One-third of the proposed jobs would be reserved for women. The
central government will also establish National Employment Guarantee Funds.
Similarly, state governments will establish State Employment Guarantee Funds for
implementation of the scheme. Under the programme, if an applicant is not provided
employment within 15 days s/he will be entitled to a daily unemployment
allowance.
i. National Rural Livelihood Mission: Aajeevika (2011): It evolves out the need to
diversify the needs of the rural poor and provide them jobs with regular income on a
monthly basis. Self Help groups are formed at the village level to help the needy.
j. National Urban Livelihood Mission: The NULM focuses on organizing urban
poor in Self Help Groups, creating opportunities for skill development leading to
market-based employment and helping them to set up self-employment ventures by
ensuring easy access to credit.
k. Pradhan Mantri Kaushal Vikas Yojana: It will focus on fresh entrant to the
labour market, especially labour market and class X and XII dropouts.
l. Pradhan Mantri Jan Dhan Yojana: It aimed at direct benefit transfer of subsidy,
pension, insurance etc. and attained the target of opening 1.5 crore bank accounts.
The scheme particularly targets the unbanked poor.
Final Word: The Global Multidimensional Poverty Index-2018 released by the UN
noted that 271 million people moved out of poverty between 2005-06 and 2015-16 in India.
The poverty rate in the country has nearly halved, falling from 55% to 28% over the
ten-year period. Still a big part of the population in india is living Below the Poverty Line.
Rapid economic growth and the use of technology for social sector programs have helped
make a significant dent in extreme poverty in the country. Despite rapid growth and
development, an unacceptably high proportion of our population continues to suffer from
severe and multidimensional deprivation. Thus, a more comprehensive and inclusive
approach is required to eradicate poverty in India.
Unemployment
Unemployment occurs when a person who is actively searching for employment is unable
to find work. Unemployment is often used as a measure of the health of the economy.
NSO defines employment and unemployment on the following activity statuses of an
individual:
i. Working (engaged in an economic activity) i.e., 'Employed'.
ii. Seeking or available for work i.e., 'Unemployed'.
iii. Neither seeking nor available for work.
The first two constitute the labour force and unemployment rate is the percent of the
labour force that is without work.
Unemployment rate = (Unemployed Workers / Total labour force) × 100.
What are Different Types of Unemployment?

a. Disguised Unemployment: It is a phenomenon wherein more people are

employed than actually needed. It is primarily traced in the agricultural and the
unorganised sectors of India.
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b. Seasonal Unemployment: It is an unemployment that occurs during certain

seasons of the year. Agricultural labourers in India rarely have work throughout
the year.
c. Structural Unemployment: It is a category of unemployment arising from
the mismatch between the jobs available in the market and the skills of the
available workers in the market. Many people in India do not get jobs due to lack
of requisite skills and due to poor education level, it becomes difficult to train them.
d. Cyclical Unemployment: It is a result of the business cycle, where
unemployment rises during recessions and declines with economic growth.
Cyclical unemployment figures in India are negligible. It is a phenomenon that is
mostly found in capitalist economies.
e. Technological Unemployment: It is the loss of jobs due to changes in technology.
In 2016, World Bank data predicted that the proportion of jobs threatened by
automation in India is 69% year-on-year.
f. Frictional Unemployment: The Frictional Unemployment also called as Search
Unemployment, refers to the time lag between the jobs when an individual is
searching for a new job or is switching between the jobs. In other words, an
employee requires time for searching a new job or shifting from the existing to a
new job, this inevitable time delay causes frictional unemployment.
g. Vulnerable Employment: This means, people working informally, without
proper job contracts and thus sans any legal protection. These persons
are deemed ‘unemployed’ since records of their work are never maintained. It
is one of the main types of unemployment in India.
What are the Major Causes of Unemployment in India?

a. Social Factors: In India the caste system is prevalent. The work is prohibited for
specific castes in some areas. In big joint families having big business, many such
persons will be available who do not do any work and depend on the joint
income of the family.
b. Rapid Growth of Population: Constant increase in population has been a big
problem in India. It is one of the main causes of unemployment.
c. Dominance of Agriculture: Still in India nearly half of the workforce is
dependent on Agriculture. However, Agriculture is underdeveloped in India.
Also, it provides seasonal employment.
d. Fall of Cottage and Small industries: The industrial development had adverse
effects on cottage and small industries. The production of cottage industries began
to fall and many artisans became unemployed.
e. Immobility of Labour: Mobility of labour in India is low. Due to attachment to
the family, people do not go to far off areas for jobs. Factors like language,
religion, and climate are also responsible for low mobility.
f. Defects in Education System: Jobs in the capitalist world have become highly
specialised but India’s education system does not provide the right training and
specialisation needed for these jobs. Thus, many people who are willing to work
become unemployed due to lack of skills.
What are Government’s Initiatives to Curb Unemployment?

a. Support for Marginalized Individuals for Livelihood and Enterprise (SMILE)

b. PM-DAKSH (Pradhan Mantri Dakshta Aur Kushalta Sampann Hitgrahi)
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c. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)

d. Pradhan Mantri Kaushal Vikas Yojana (PMKVY)
e. Start Up India Scheme
f. Rozgar Mela
As Poverty and Unemployment are directly and indirectly to one another. So are there causes
and solutions. As the causes of the Poverty and Unemployment are inter-twinned, it is
important to understand how to eradicate or find solutions to the problem:
a. Education: Education can be a tool to help a country solve the problem of poverty
and unemployment, as education would ensure that people have good jobs, they get
good income and thus we solve the problem of poverty and unemployment.
b. Capital investment: A country needs to undertake capital investment with respect to
infrastructure and human skilling people for better jobs, as well as creating capital
avenues for investments will eventually ensure creation of more jobs, more income.
Thus, assuring the fact that there are jobs for everyone as well as promoting growth
and development in an economy.
c. Government intervention: A proactive government which tries to solve the
problems of the people with respect to poverty, unemployment, would work in a very
big way. A government needs to be proactive with respect to understanding the needs
of the economy as well as work for the economy which can ensure the fact that we are
able to consider various parameters like consumption, savings, investment, when we
are trying to understand and look into the possibilities of eradicating poverty and
unemployment.
d. Skilling and job training: Vocational training can be a simpler way to ensure that we
train people for jobs as well as provide more jobs for people. Poverty and
employment can be solved with the same.
e. Micro Financing: One of the successful models that we are able to see across the
world is micro financing programs, which provides entrepreneurial support to small
and marginal Income group. It would be very supportive for any government if they
intend to consider providing more micro finance programmes for entrepreneurship.
f. Balancing between labour intensive and capital-intensive industries: Automation
and technology can make production efficient, but reduced jobs does. Governments
must find a simpler way to reduce poverty and unemployment by creating more jobs
for people without affecting the productivity as well as. The efficiency of the
economy.
g. Social Security: A government needs to consider the fact that basic public goods are
to be provided to people at affordable cost. Similarly, access to basic resources will
ensure that the health of the people is taken care of, virtual eventually ensure the fact
that poverty and unemployment are. Taken care of at micro level.
h. Monetisation of economy: Low wages, low savings make it difficult for people to
get credit, does. Ensuring the fact that financial inclusion of families and support to
marginal and small families can ensure that poverty and unemployment in marginal
groups or disadvantaged groups over a period of time.