Poverty And Development Issues: Definition, Types, Indicators, Challenges |
To prepare for INDIAN SOCIETY for any competitive exam, aspirants have to know about Social Empowerment. It gives an idea of all the important topics for the IAS Exam and the Economy syllabus (GS-II.). Important Social Empowerment terms are important from Economy perspectives in the UPSC exam. IAS aspirants should thoroughly understand their meaning and application, as questions can be asked from this static portion of the IAS Syllabus in both the UPSC Prelims and the UPSC Mains exams.
Poverty Dimensions
- Poverty is a multidimensional phenomenon in which a person or community lacks the financial resources and essentials for a minimum standard of living.
- According to the 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.
- Each nation may have its own threshold that determines how many of its people are living in poverty.
In India, 21.9% of the population lived 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: Absolute and Relative Poverty:
- Measures of absolute poverty are usually based upon the idea of subsistence. In other Words, people are in poverty if they do not have the resources to maintain human life.
- Supporters of the concept of relative poverty, however, tend to dismiss this view. They argue that a definition must relate to the standards of a particular society at a particular time
| Absolute poverty | It refers to a condition where a person does not have the minimum amount of income needed to meet the minimum requirements for one or more basic living needs over an extended period of time. It may be calculated in monetary terms, nutrition attainment or calories terms.
For example: Homeless people living on the streets, families that cannot afford to buy food to feed themselves and their children are also examples of absolute poverty. |
| Relative poverty | It occurs when people do not enjoy a certain minimum level of living standards as determined by the government (and enjoyed by the bulk of population) that vary from country to country, which is said to be increasing and may possibly never be eradicated.
For example: For example, in the UK relative poverty is defined as income 50% less than average incomes or someone living in a rich society may have a steady income and all the necessities for living, but because they do not have as many luxuries as others living in the society, they are said to be in relative poverty. |
Indicators of Poverty in Society
MEASUREMENT OF POVERTY
- Pre-independence poverty estimates
- Post-independence poverty estimates
Broadly, the poverty of a given society is expressed in terms of malnutrition, low consumption expenditure, low income, chronic illness or poor health, illiteracy, unemployment, unsanitary housing conditions, poor resources, high disparity income distribution.
Pre-independence poverty estimates:
| Dada Bhai Naoroji
(Book – Poverty and Un-British rule in India) |
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| 1938 |
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| The Bombay Plan (1944) |
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Post-independence poverty estimates:
| Planning Commission 1962 | Planning Commission Expert Group (1962), constituted by the Planning Commission formulated the separate poverty lines for rural and urban areas (Rs.20 and Rs.25 per capita per year respectively). |
| Y. K. Alagh Committee (1979) | By 1979, it was decided that poverty should be measured precisely based on starvation. Committee was constituted which gave its recommendation as the people consuming less than 2,100 calories in the urban areas or less than 2,400 calories in the rural areas are poor. |
| Lakdawala Committee (1993) | In 1993, an expert group constituted to review methodology for poverty estimation, chaired by D.T. Lakdawala, made the following suggestions:
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| Suresh Tendulkar Committee (2005) |
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| C. Rangarajan Committee (2012-14) | The committee raised the cost of living per day to Rs. 32 and Rs. 47 for rural and urban areas, respectively. Hence, the poverty percentage of India worked closely to 30% and in absolute terms close to 40 crores poor. |
| Arvind Panagariya Task Force (2015) | The task force suggested setting up a committee to identify people “Below Poverty Line (BPL)” It also suggested participation of states. The paper talks of considering four options for tracking the poor.
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| NITI Aayog Task Force |
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Estimating Poverty: Challenges
- Components of PLB à Determining components of Poverty Line Basket (PLB) is one of the challenges of poverty line estimation because of the price differentials (of constituents of basket) which vary from state to state and period to period.
- Variations across states à Some states such as Odisha and West Bengal supported the Tendulkar Poverty Line while others such as Delhi, Jharkhand, Mizoram etc. supported Rangarajan report.
- The current official measures of poverty are based on the Tendulkar poverty line, fixed at daily expenditure of ₹27.2 in rural areas and ₹33.3 in urban areas is criticized by many for being too low.
- Demographic and Economic Dynamics à Further, consumption patterns, nutritional needs and prices of components keep on changing as per dynamics of macro economy and demography.
- Lack of consensus among the states over the acceptance of the Tendulkar and Rangarajan committee report. Some states such as Odisha and West Bengal supported the Tendulkar Poverty Line while others such as Delhi, Jharkhand, Mizoram etc. supported Rangarajan report.
- Most of the governments have mothballed the reports of committees and panels à because this issue is not only politically sensitive but also has deeper fiscal ramifications.
- Problem of determining threshold à If the poverty threshold is high, it may leave out many needed people; while if it is low, then it would be bad for the fiscal health of the government.
Redefining Poverty Measures
- Redefining Poverty lines à Poverty lines have to be recalibrated depending on changes in income, consumption patterns and prices.
- Viable Poverty line à It makes sense to set the poverty line at a level that allows households to get two square meals a day and other basic necessities of life.
- Hybrid of Absolute and Relative Measurement of Poverty à The hybrid approach which would measure poverty from the perspective of a common global standard of living and relative poverty within countries. The poverty line in case of a hybrid model would be equivalent to the income required to achieve a certain welfare status, which includes basic nutrition and social inclusion.
- Political Economic Equilibrium à Indian political, policy and administrative systems have to adjust to the new realities of the transition to a middle- income country, in which poverty does not mean living at the edge of hunger but, rather, lack of income to take advantage of the opportunities thrown up by a growing economy. The focus of government spending should be on the provision of public goods rather than subsidies.
| Uniform Reference Period (URP) | Up until 1993-94, the poverty line was based on URP data, which involved asking people about their consumption expenditure across a 30-day recall period, that is the information was based on the recall of consumption expenditure in the previous 30 days. |
| Mixed Reference Period (MRP) | SSO switched to an MRP method which measures consumption of five low-frequency items (clothing, footwear, durables, education and institutional health expenditure) over the previous year, and all other items over the previous 30 days. |
Poverty: Causes
| The Old Perspective | One view of poverty is that it is providential, and it is the result of an individual. |
| The Modern Perspective | According to the modern view, poverty is beyond individual control, and it is the social system functioning which is the major cause of poverty. |
Climatic factors:
- The hot climate of India reduces the capacity of people especially the ruralites to work for which production severely suffers.
- Frequent flood, famine, earthquake and cyclone cause heavy damage to agriculture as a result, the price of food increases, and access becomes more and more limited, putting many at higher risk of hunger.
- Flooding can also contaminate water sources, increasing the transmission of water-borne diseases, such as Typhoid and Cholera.
- Moreover, absence of timely rain, excessive or deficient rain affect severely country’s agricultural production
| Some steps can be taken into consideration: |
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Demographic factors:
The following demographic factors are accountable for poverty in India:
| Rapid growth of population: |
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| Size of family: |
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Political Factors in India’s Poverty
Both rural and urban poverty remains ubiquitous even after more than seven decades of gaining independence from foreign rule. The reasons in this regard can be as follows:
- Communal tensions and strife between two regional parties disrupt the process of allowing concessions and solving poverty.
- In most cases, rural reforms are either stalled for an indefinite period of time. Even if the measures are implemented, they are mostly half-measures and confined to short-term solutions that don’t do much good to India’s poverty reduction goals
- Vote bank politics is also held accountable for poverty in India where various political leaders find it convenient to exclude a huge chunk of the population from the poverty census after getting elected. Minority ethnic communities, tribal groups and the Dalits are often not included in the list of beneficiaries
- Various development plans are being guided by political interests which is the major cause of concern for poverty in India. Hence, the planning has not been successful to tackle the problem of poverty and unemployment.
Population Growth in India’s Poverty
- On average, 17 million people are added every year to its population which raises the demand for consumption goods considerably.
- When the population increases, the scarce resource sharing is at stake which will create a huge poverty gap.
Capital and Able Entrepreneurship Deficit
- Capital and able entrepreneurship have an important role in accelerating the growth. But these are in short supply making it difficult to increase production significantly.
Housing and Homelessness in India’s Poverty
- The poor are, not surprisingly, more likely to be homeless than the not so poor but also more likely to live in dilapidated housing and unable to buy their own homes.
- Many poor families spend more than half their income on rent, and they tend to live in poor neighbourhoods that lack job opportunities, good schools and other features of modern life that wealthier people take for granted.
- The lack of adequate housing for the poor remains a major national problem. Even worse is the case for the complete homeless people.
Poverty: Social Factor
Untouchability:
- Various social issues like untouchability that are still prevalent in various parts of India are a major cause of hindrance in reducing poverty.
- They are not allowed to venture into the general employment opportunities and are forced to do human jobs like manual scavenging.
Caste system:
- The subordination of the low caste people by the high caste people caused the poverty of the former.
- Due to the rigid caste system, the low caste people could not participate in the game of economic progress.
- For example: a lower caste person will not be allowed to become a businessman or a trader.
- Figure shows that Dalits are the least likely to start their own enterprises and most likely to work as labourers for others, with SCs having the lowest relative share in the self-employed category and the highest share in casual laborers The OBCs have a roughly proportionate share in each employment category.
- Figure shows that non-Muslim upper castes have a much higher share among white collar employees, while Dalits and Adivasis (SCs/STs) have a much greater share among unskilled workers in comparison to OBCs. Thus, even though SCs and OBCs might have a similar share among regular workers, the nature of jobs SCs (and STs) are engaged in is qualitatively different.
- This system makes the poor get poorer and the rich get richer. This unbalanced and unfair system is another leading cause of poverty.
- Laws of inheritance, caste system, traditions and customs are putting hindrances in the way of faster development and have aggravated the problem of poverty.
Lack of Education:
- Education is an “agent of social change and egalitarianism”.
- Poverty is also said to be closely related to the levels of schooling, technical and vocational skills.
- Lack of education and illiteracy are the most important reasons for the prevalence of widespread poverty in India.
- The literacy rate of female Dalits in Bihar is around 38.5%, which is far behind India’s progress. It is still 30 years behind India’s national literacy rate.
Social exclusion:
- Social exclusion is being unable to participate in society because of a lack of resources that are normally available to the general population.
- It can refer to both individuals, and communities in a broader framework, with linked problems such as low incomes, poor housing, high crime environments and family problems.
- Social Exclusion leads to Poverty in the following ways:
- Leads to the low representation of a section of society in government offices and this leads to fewer policies in favour of that particular section which can benefit them in a better standard of living.
- Exclusion imposes constraints under which human rights cannot be enjoyed in the same manner as by others in society. For example, basic rights like education and justice are denied, which further leads to poverty.
- The low participation of tribal people in decision-making and their alienation from land and forests were central to the continued exclusion of Adivasis from progress and development.
Low Agricultural productivity
- Subdivided and fragmented holdings,
- Under-utilization of resources is important factor
- Disguised unemployment and underemployment in agriculture
- Lack of investable capital, and lack of credit availability.
- Use of traditional methods of cultivation
- Illiteracy etc. which are the very reason for poverty in this country.
Unemployment and Poverty in India
- Unemployment is the reflection of poverty.
- Because of lack of employment opportunities, people remain either unemployed or underemployed. Most of these unemployed and underemployed workers are the small and marginal farmers and the landless agricultural labourers.
- This inequality leads to unfair loss of opportunities among the weaker sections of the society thereby making them more vulnerable.
Inflation and its Impact on Poverty
- The persistent steep increase in the price of goods and services drastically affects the poor.
- For BPL people always find it difficult to cope up with these situations and their spending pattern gets affected.
- Inflation forces them to spend almost their entire income for the very basic necessities of survival like food, clothing and shelter, in that order.
- Sometimes, the poor cannot have the basic required nutrition, hygienic living environment and cannot have basic minimum health care, and so become easy victims to malnutrition and disease. Thus, inflation condemns the poor to a lifetime of bad health and worse living conditions.
- Finally, with passage of time, the inflation results in gradual declining of human dignity by rendering them homeless and sometimes even forcing them to beg.
RECENT CONTEXT
- Recently, The Delhi High Court decriminalized beggary by striking down Delhi Prevention of Begging Rules, 1960, formulated under the Bombay Prevention of Begging Act, 1959 as unconstitutional.
- According to the supreme court, the Begging act violated Article 14 (equality before law) and Article 21 (right to life and personal liberty)of the Constitution.
Multidimensional Poverty Index (MPI) and Its Indicators
- The Global Multidimensional Poverty Index(MPI) was developed in 2010 by the Oxford Poverty & Human Development Initiative (OPHI) and the United Nations Development Programme and uses health, education and standard of living indicators to determine the degree of poverty experienced by a population.
- MPI is composed of ten indicators spread across:
Each education and health indicator has a 1/6 weight, each standard of living indicator a 1/18 weight.
Global Multidimensional Poverty Index (MPI) 2019: Inequalities and Challenges
- Global Multidimensional Poverty Index – 2019 (MPI), has revealed that there are vast inequalities across countries, and among the poorer segments of societies.
- As per the index 1 – 3 billion people in the world are still multidimensionally poor.
Multidimensionally poverty implies that poverty is defined not simply by income, but by a number of indicators, including poor health, poor quality of work and the threat of violence.
India’s ranking in the report:
- Education: years of schooling and child enrollment.
- Health: child mortality and nutrition.
- Standard of living: Electricity, flooring, drinking water, sanitation, cooking fuel and assets.
- India lifted 271 million people out of poverty between 2006 and 2016, (reduced from 0.283 in 2005-06 to 0.123 in 2015-16) recording the fastest reductions in the multidimensional poverty index values during the period with strong improvements in areas such as assets, cooking fuel, sanitation and nutrition.
- Bangladesh, Cambodia, Democratic Republic of Congo, Ethiopia, Haiti, India, Nigeria, Pakistan, Peru and Vietnam(10 selected countries have a combined population of around 2 billion people) have shown significant progress towards achieving SDG-1 i.e. ending poverty in all its forms, everywhere.
- Among 10 selected countries India(and Cambodia) reduced their MPI values the fastest and they did not leave the poorest groups behind.
POVERTY: EFFECTS
Effects of poverty on health
- A universal and simple measure of poverty consists in looking at different populations’ health and life expectancy.
- They are always more likely to have many kinds of health problems, including infant mortality, earlier adulthood mortality and mental illness, and they are also more likely to receive inadequate medical care, discrimination and unfair treatments.
- Differential prices under National List of Essential Medicines (NLEM) and non NLEM category creates ambiguity and widens the margin for private hospitals to exploit patients.
- SDG 3 – Ensure healthy lives and promote wellbeing for all at all ages.
Privatization of healthcare in India is a major cause of concern. It is riddled with various issues. According to the 71st National Sample Survey (NSS) total private hospitalization share in rural and urban areas is 58% and 68% respectively in 2014.
According to the Health Profile of India report, 75 % of patients, who visit private hospitals, settle medical bills from their household income or life savings (out of pocket expenditure) while another 18 % borrow money from private lenders to pay medical bills causing high levels of impoverishment.
Effects on society as a whole
- Poverty is a major cause of social tensions and threatens to divide a nation because of the issue of inequalities, in particular income inequality. This happens when wealth in a country is poorly distributed among its citizens
- The poor are more likely to be homeless and unable to buy their own homes. Many poor families spend more than half their income on rent, and they tend to live in poor neighbourhoods that lack job opportunities, good schools and other features of modern life that wealthier people take for granted.
- The lack of adequate housing for the poor remains a major national problem. Even worse is the case for the complete homeless people.
Effects of poverty on children
- Poor infrastructures, unemployment, lack of basic services and income reflect on their lack of education, malnutrition, violence at home and outside, child labor, diseases of all kinds, transmitted by the family or through the environment.
- These problems in turn weaken their ability to do well in school and stable employment as adults, helping to ensure that poverty will stick with the society across generations.
| National Legislations regarding Child Labour
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Effect of poverty on Education
- Education increases individual earnings
- Education increases earnings by roughly 10% per each additional year of schooling
- Education reduces economic inequalities
- If workers from poor and rich backgrounds received the same education, the disparity between the two in working poverty could decrease by 39%.
- Education promotes economic growth
- No country in the world has achieved rapid and consistent economic growth without at least 40 percent of its adult population being literate.
- Poor children typically go to badly maintained schools with inadequate facilities where they receive poor coaching.
- They are less likely than wealthier children to graduate from high school or to go to college.
- Their lack of education in turn restricts them and makes their own children to suffer from poverty, once again helping to ensure a vicious cycle of sadly continuing poverty across generations
Effects of poverty on terrorism
- It’s important to note that most of the time terrorists do come from poorer countries with high unemployment, and that terrorist organizations often provide much higher salaries than any other job, if any other job is available at all.
- In fact, a lot of different factors interact with the decision to become a terrorist. Personal and cultural ideals, values, and principles are just as important as material and social gain (reputation & fame for fighting the imperialists) of entering terrorism.
Effect of poverty on Economy
- Among the effects of poverty, its impact on the economy of the country is a major issue of concern. Mainly, the number of people existing in poverty influences employment rates
- Without an education, people are unlikely to find a lucrative or rather a decent paying job.
- A high unemployment rate will definitely slow down a country from progressing in all aspects.
Gendered Deprivation: Impact of Poverty on Women
- Poverty affects a greater number of women than men. Feminization of poverty is the phenomenon in which the total of poor women outnumbers the total population of poor men.
- Women are segregated, have very limited access to education (for political, religious or social reasons) and are sometimes forbidden to work or restricted to tedious ones.
- Being the cornerstone of the family, women can have a great impact not only on the household income, but also on the education of children (including sanitation), and avoiding early child deaths due to bad habits, sanitation or improper food or water.
- The feminization of poverty may be caused by changes in Family composition, Family organization, Inequality in the access to public services or in social protection.
The female face of poverty:
- Unpaid work done by women across the globe amounts to a staggering $10 trillion a year, which is 43 times the annual turnover of the world’s biggest company Apple, according to an Oxfam study.
- Inequality has a ‘female face’ in India, women’s unpaid work worth 3.1% of GDP.
- Women spend 312 minutes per day in urban areas and 291 minutes per day in rural areas on such unpaid care work, it added. In comparison, men spend only 29 minutes in urban areas and 32 minutes in rural areas on unpaid care work.
- Although India has many laws that deal with violence against women, but their implementation remains a challenge, including due to a deeply patriarchal society.
- Government Measures
- Distributive Strategies
- Specific Strategies
- Social Security
Strategies to alleviate poverty
Accelerating Economic Growth:
- According to this view, benefits of economic growth will “trickle down” to the poor in the form of more employment opportunities, greater productivity and higher wages.
- The use of capital-intensive technologies imported from the Western Countries should be avoided.
- In fact, we should pursue a labor-intensive path of economic growth.
- Such monetary and fiscal policies should be adopted that provide incentives for using labour-intensive techniques.
Agricultural Growth and Poverty Alleviation
- Agricultural growth has been recognized as an important factor that contributes to marked reduction in poverty
- The growth in agricultural output in states like Punjab and Haryana propelled by the adoption of new-high yielding technology caused a marked reduction in poverty.
- To ensure marked decline in rural poverty through agricultural growth, the rate of agricultural growth should be accelerated by increasing public investment in irrigation and other infrastructure.
- Besides, higher agricultural growth can be achieved in semi-arid and rain-fed areas by increasing public investment in infrastructure and ensuring adequate access to credit to the small farmers.
Enhancing Rural Connectivity for Economic Growth
- Transport plays a very important role in the economic development of the country. The Pradhan Mantri Gram Sadak Yojana (PMGSY) was launched by the GOI to provide connectivity to unconnected habitations as part of a poverty-reduction strategy.
- GOI is endeavoring to set high and uniform technical and management standards and facilitating policy development and planning at State level in order to ensure sustainable management of the rural roads network.
- This programme covers all villages with population more than 1,000 and villages in hilly and tribal areas with population more than 500.
Empowering through Human Resource Development
- Human resource development requires greater investment in educational facilities such as schools to promote literacy, technical training institutes and vocational colleges to import skills to the people.
- Further, human resource development requires health care by public investment in Primary Health Centres (PHCs), dispensaries and hospitals.
Access to Institutional Credit:
- Availability of credit to the poor on easy terms can create the conditions for small farmers gaining access to productive resources such as HYV seeds fertilizers, construction of minor irrigation such as wells and tube wells.
- This will enable the small farmers to adopt high- yielding technology to raise their productivity.
- Important changes have been introduced in the credit delivery system in India.
- Expansion of the network of rural branches of commercial banks after nationalization and fixation of limits for compulsory lending to the priority sectors (which include agriculture, small-scale industries) and fixation of lower interest rates to be charged from the poor farmers and artisans some progress has been made in this regard.
Enhancing Food Security for Poverty Alleviation
- A properly functioning public distribution system which is targeted to the poor households is an important element of the strategy for poverty reduction.
- Therefore, an effective way of raising rural incomes and ensuring food security to the poor households is an assured supply of adequate quantity of food-grains and other essential commodities at subsidised prices, that is, at prices which are lower than the market prices.
Enhancing Irrigation for Poverty Alleviation
- In order to reduce poverty in rural areas, agricultural inputs should be well-organized.
- The most important of such input is irrigation. Hence, Pradhan Mantri Krishi Sinchai Yojana was introduced by GOI with the vision of extending the coverage of irrigation.
- The basic theme of the PMKSY is ‘More Crop Per Drop’.
Affordable Housing for Poverty Eradication
- In order to build houses for the poor in India, under Housing for All by 2022, two new schemes were introduced.
- Pradhan Mantri Awas Yojana (Urban)
- Pradhan Mantri Gramin Awas Yojana (Rural).
- The Mission will be implemented during 2015-2022 and will provide central assistance to Urban Local Bodies (ULBs) and other implementing agencies through States/UTs for:
- In situ rehabilitation of existing slum dwellers using land as a resource through private participation
- Credit-linked subsidy
- Affordable housing in partnership
- Subsidy for beneficiary-led individual house construction/enhancement
Rural electrification for Poverty Eradication
- GOI has launched the scheme ‘Deendayal Upadhyaya Gram Jyoti Yojana’ for rural electrification. Under DDUGJY-RE, the Ministry of Power has sanctioned 921 projects to electrify 1,21,225 un-electrified villages, intensive electrification of 5,92,979 partially electrified villages and provide free electricity connections to 397.45 lakh BPL rural households.
Self-employment schemes for Poverty Eradication
- Primarily through Swaran Jayanti Grameen Sah-rozgar Yogana (SGSY) in the rural areas and through Swaran Jayanti Shahri Rozgar Yogana (SJSRY) in the urban areas.
Skill Development
- Deen Dayal Upadhyaya Grameen Kaushalya Yojna was introduced by the GOI to engage rural youth specially BPL and SC/ ST segment of population in gainful employment through skill training programmes.
Ending Poverty through Sustainable Development
SDG Goal 1 aims to end poverty in all its forms everywhere. While it defines extreme poverty at $1.25 but nations are allowed to use their ‘national poverty line’ methods.
| India’s SDG Goal 1 Baseline Indicators in (brackets) | Target-Goal-2030 |
| Reduce at least half of the BPL population. So, 21.9% population is BPL (2011) then its half should be removed uplifted. | 10.95% population living below poverty line. |
| Number of homeless households per 10,000 households (presently ~11) | 0 homeless |
| No. of households with min. 1 member having health insurance (presently ~29%) | 100% households |
Improve Social Protection Schemes’ coverage:
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100% households |
Role of Self-Help groups in Poverty Alleviation
What is SHG?
- The National Bank for Agriculture and Rural Development (NABARD) defines Self Help Groups as a small homogeneous group of poor households consisting of 20 or less people from a homogenous class who are willing to come together to address their common problems.
- They make regular savings and use the pooled savings to give interest-bearing loans to their members.
- The process helps them imbibe the essentials of financial intermediation including prioritization of needs, setting self-determined terms for repayment
Self-help groups and poverty alleviation
They help in poverty reduction in following ways:
- With financial inclusion the credit facility to the poor is increased. It also saves them from moneylenders.
- Opportunities for self-employment through setting of micro-enterprise.
- Skill development program undertaken by SHGs improves employability of members involved.
- As a result of increased jobs there is a rise in income which enhances access to food, health services and overall rise in living standards.
- And with more women participation and their enhanced status address issues such as nutrition poverty and low literacy rate
- It is also observed that the percentage of BPL population is less in the states where there is large number of SHG
Problems faced by self-help groups:
- Ignorance of members.
- Inadequate Training Facilities in the specific areas of product selection, quality of products, production techniques, managerial ability, packing, and other technical knowledge are not adequate to compete with that of strong units.
- Problems of Marketing.
- Lack of stability and unity especially among women SHGs.
- Exploitation by Strong Members.
- Weak Financial Management, poor record keeping.
MGNREGA: Empowering Rural Employment and Alleviating Poverty
- Mahatma Gandhi Employment Guarantee Act 2005, is an Indian labour law and social security measure that aims to guarantee the ‘right to work’.
- 2006: launched in 200 districts → 2008: launched in the whole country as MGNREGS Scheme
- Ministry of Rural Development → Centrally Sponsored Scheme (not 100% funded by the Union). Union bears 100% wage cost and 75% of material cost
- It promises to give a minimum 100 days of unskilled manual labour to rural households whose adult members volunteer for it. Households are eligible for unemployment allowances if employment has not been provided within 15 days of demand.
- MNREGA labourers are used for creating durable assets as per local needs. ponds, wells, cattle sheds, granary, Vermi-compost plants, crematorium; renovation of Anganwadi centres, school buildings
- No contractors / machinery
- In any project, 60% of the amount should go towards wages and 40% towards material.
- Social audit by the gram sabha at least once in every 6 months.
MGNREGA: Future suggestion by Economic Survey-19
| Big Data Analytics: | Real time monitoring of demand for work under MGNREGA at district level. If more work is demanded by villagers = proof of farm / rural distress. Then correlate with weather data etc. then display flash alerts on the policymaker’s dashboard. So he can take corrective actions. e.g. Timely release of crop insurance claims, distribution of more loans, additional allocation of foodgrains in PDS Shops etc. |
| Financial Inclusion | Deepening MGNREGA workers’ financial inclusion through microinsurance, micro-pensions, microcredit schemes. |
| Upskilling the MGNREGA Workers: | Convergence of MGNREGA with Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDUGKY). So, they can eventually find gainful employment, and don’t have to demand ‘unskilled’ MGNREGA work all the time. |
ROLE OF FINANCIAL INCLUSION IN POVERTY REDUCTION
Meaning – Financial inclusion is where individuals and businesses have access to useful and affordable financial products and services that meet their needs that are delivered in a responsible and sustainable way. Financial inclusion is defined as the availability and equality of opportunities to access financial services.
One of its aims is to get the unbanked and underbanked to have better access to financial services. The availability of financial services that meet the specific needs of users without discrimination is a key objective of financial inclusion
| Financial inclusion and poverty alleviation: |
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| Challenges in Financial Inclusion: |
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| Ways to increase Financial inclusion:
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POVERTY AND HUMAN DEVELOPMENT
The HDI is the composite measure of every country’s attainment in three basic dimensions:
According to the World Data Lab — which monitors global poverty using advanced statistical models – less than 50 million Indians may be living on less than $1.90 a day now.
- Standard of living
- measured by the gross national income (GNI) per capita
- Health
- measured by the life expectancy at birth
- Education levels
- Calculated by mean years of education among the adult population and the expected years of schooling for children
How poverty impacts Human development?
- Poor cannot live life or get employed as per their choice as they must work even in life threatening conditions to sustain their family e.g. death of miners in Talcher coal mine, who were working because of no alternative.
- Poverty reduces the time to gain knowledge and thus impacts the awareness and decision making like voting on rational basis.
- It reduces access to education, healthcare facilities etc.
- Lack of nutrition and healthcare results in high mortality among the poor.
GoI schemes for poverty alleviation
DEEN DAYAL ANTYODAYA YOJANA: NATIONAL URBAN LIVELIHOODS MISSION (DAY-NULM)
- Ministry of Housing and Urban Affairs
- Give urban poor’s skill training and loan for self-employment → Government pays its interest subvention via PAISA Portal. This portal is coordinated by Allahabad Bank
- Develop vendor markets for urban vendors.
- Shelters for homeless people.
DEEN DAYAL ANTYODAYA YOJANA: NATIONAL RURAL LIVELIHOODS MISSION (DAY-NRLM)
- Ministry of Rural Development
- Bring minimum 1 woman from each poor household to Self Help Group → give them training and loans for candle/soap/handicraft etc. biz.
- Give training to rural men.
- They’ll do self-employment or skilled wage employment = More income than working as farm labourers.
NATIONAL RURAL LIVELIHOODS MISSION (DAY- NRLM) – SUBSCHEME
- Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDUGKY-2014):
- Rural Youth given FREE skill training to aged 15-35. Higher age limit for SC/ST/Women/PH.
- Guaranteed Placement for at least 75% trained candidates.
- Covers Youth of Jammu and Kashmir (HIMAYAT scheme)
- Cover Youth of North Eastern States & Left- Wing Extremist (LWE) districts (ROSHNI Scheme)
- Startup Village Entrepreneurship Programme (SVEP-2015): self-explanatory training, loan, marketing assistance etc.
- PM’s Employment Generation Scheme where person / SHG given credit linked subsidy to start non-farm micro- enterprise]
- Aajeevika Grameen Express Yojana (AGEY-2017): Interest-free loans given to SHG / Community Based Organisations (CBOs) to buy public transport vehicle so they can earn by transporting passengers.
DISHA COMMITTEES (2016)
- Ministry of Rural Development
- District Development Coordination and Monitoring Committee (DISHA) = elected members of (Parliament + State legislature + Local Governments: PRI,ULB) for efficient and time-bound development of districts.
- They will meet once every quarter and assess the schemes implementation.
- DISHA Committee’s chairman will be the senior most MP (Lok Sabha) from the given district. DM/Collector(IAS) will act as member Secretary to implement the Committee’s directives.
MISSION ANTYODAYA (2017)
- Ministry of Rural Development
- It’s similar to ‘Adarsh Gram Yojanas
- Here the Government will implement the other ongoing schemes with more vigilance and accountability with the help of Gram Panchayat, NGOs, SHGs, ASHA workers etc.
- At least 50,000 Gram Panchayats become poverty free by 2020.
Some of the reasons why the scheme is not 100% productive:
- The resources allocated to anti-poverty programmes are inadequate and there is a tacit understanding that targets will be curtailed according to fund availability. For instance, Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) does not provide the guaranteed 100 days of work in many states.
- There is no method to ensure that programmes reach everybody they are meant for.
- Lack of awareness of these schemes amongst the masses given their illiteracy and ignorance.
- It may possibly be better to implement these programmes through NGOs and Civil Society Organisations after a strict screening process.
- Need to bring in an independent ‘social audit’ of these schemes not for fixing accountability but for plugging leakages, improving delivery.
- Absence of any monitoring mechanism for the efficacy of such schemes or to know the end result.
- There is no systematic attempt to identify people who are in poverty, determine their needs, address them and enable them to move above the poverty line.
Addressing Poverty through Human Development and Income Opportunities
- Improving human development outcomes for the poor by improving their quality of life and income earning opportunities.
- Creating more good locations as more and more of India’s poor are concentrated in the poorest states.
- Future efforts will need to address job creation in more productive sectors, which has until now been lukewarm and has yielded few salaried jobs that offer stability and security.
- Capitalizing on growing connectivity between rural and urban areas, and between the agriculture, industry and services sectors is also a viable solution in this regard.
Universal Basic Income: A Panacea for Poverty?
What is UBI?
- UBI is a fixed income every adult – rich or poor, working or idle – receives from the government.
- It is a periodic, unconditional cash transfer to every citizen in the country.
- Universal Basic Income means the government depositing a specific sum of money in a beneficiary’s bank account each year to augment his/her purchasing power in the open market. The term ‘universal’ is ‘de-jure’ , in reality, UBI is not meant for rich & middle class families, they will be excluded.
- Interim-Budget-2019 à Spending about ₹ 12 lakh crores in schemes. Out of that ₹3.3 lakh crores in subsidies. Yet, schemes/subsidies suffer from two problems.
- Inclusion Error: Non-poor (well to do families) receive benefits, “free rider” About 40% of Food subsidies wasted in this manner.
- Exclusion Error: Real Poor not receiving benefit, about 40-60% of real needy
- Families don’t receive scheme benefits.
- Leakage : 20-36% money allotted in PDS/MNREGA is gone in corruption by the middleman / bureaucrats.
Universal Basic Income and Poverty
Despite making remarkable progress in poverty reduction, nearly 22 percent of the population lives below poverty line (Tendulkar committee report, 2011-12):
- One of the major criticisms of poverty alleviation programmes is significant leakages. UBI is seen as a more efficient alternative.
- UBI strengthens economic liberty at an individual level. This would help them to choose the kind of work they want to do, rather than forcing them to do unproductive work to meet their daily requirements.
- As a form of social security UBI will help in reducing inequality and eliminating poverty. Thus it ensures security and dignity for all individuals.
- UBI could promote greater productivity. For example, agriculture labourers who own small patches of land and earlier used to work in others’ farms for low wages, can now undertake farming on their own land. In the long term, this will reduce the percentage of unused land and help in increasing agricultural productivity.
- Transferring basic income directly into bank accounts will increase the demand for financial services. This would help banks to invest in the expansion of their service network, which is very important for financial inclusion.
UBI: Pro-Arguments By Eco Survey
- Safety Net à Protects people from deprivation, destitution PDS= leakage, diversion. Better give ₹ ₹ to needy people to buy from the open market.
- MNREGA à Not good because it’s creating a shortage of farm labourers. Scheme is rife with corruption & mismanagement.
- Some people face accidents of birth (SC/ST/Rural/Poor). Some people face accidents of life (e.g. drought, disaster, husband dead, caught in debt trap by informal money lender). UBI will help them overcome these accidents, boost their psychological aspirations.
- PAN cards are already linked with Bank accounts so it is possible to exclude the rich / middle class easily. So, implementation of Universal Basic Income should not prove difficult.
UBI: Anti-Arguments By Eco Survey
- Able bodied men given ‘charity’. It will turn them lazy. Gandhi will not approve it.
- 1st world nations can afford UBI because their tax to GDP is high. If we give ₹ 12000 per year to poor people (without shutting down existing schemes) then Fiscal deficit = about 12% of GDP = new variety of problems (Counter arguments: if we stop all schemes/subsidies and give only ₹ 2500 / per year as UBI to only poor people, then Fiscal deficit will stay at 3% while poverty will decline from 21.9% → just 9%)
- Extra money in the hands of the poor without proportional increase in the supply of goods → demand side inflation. So, a poor person’s real purchasing power will not increase, they will remain poor only.
- Providing Universal basic income without crossing the fiscal deficit target will require stopping the schemes like NFSA, MDM, NREGA à but that will not be ‘politically feasible’.
- Many families hid their assets during the SECC-2011 survey, so it’s not reliable data. So if UBI is given to people based on SECC data à Inclusion Error, with non-poor’s getting benefits.
- Men of the house may misuse ₹ ₹ on alcohol, gambling & other social ills. Better to give entitlements in the form of ‘king. free food under mid-day meal, subsidized grains at PDS shop.
Challenges in UBI:
- Replacing existing schemes with cash transfer will adversely impact the development goals of India. UBI can’t be at the cost of expenditure on health, education or rural infrastructure
- A guaranteed minimum income might make people lazy and it breeds dependency. They may opt out of labour market and can refuse to work
- It will also face the problem of ‘exclusion error’ in the identification of beneficiaries. Efficiency will be reduced. Corruption will creep More importantly, UBI will not remain ‘universal’.
- If the UBI is funded by higher taxes, especially by indirect taxes, it will result in inflation. This, in turn, will reduce the purchasing power of the people and lowers the value of the amount transferred.
Suggestions
- Movement in the HDI is driven by changes in health, education and income. The schemes for these are meant for long-term improvement in human development, rural infrastructure, employment etc. and can’t be substituted by cash transfer. Thus, a complementary and aiding income can be a balanced solution.
- A transparent and safe financial architecture that is accessible to all is important for the success of the UBI. In other words, the success of UBI depends on the success of an efficient mode of delivery like JAM Trinity.
- Study the efficiency of similar schemes in other countries (Finland, Kenya, and Spain etc.) and work out the best implementation suitable for India.
Addressing Poverty: Unfinished Business for Inclusive Development
- The main objective of all our development policies had been aimed at promoting rapid and balanced economic development with equity and social justice.
- But the benefits of all our policies and initiatives have not reached all the sections of people.
- The promise of the constitution and dreams of our forefathers of an egalitarian society remains unfulfilled.
- Time has come to think out of box solution to eliminate poverty as some sectors of the economy, some regions of the country has developed to an extent where it can compete with developed countries in terms of social and economic development, yet there are many others who have not been able to come out of the vicious circle of poverty.
- While India’s GDP and national income is rising every year, not everyone has benefited equally from this prosperity.
- Poverty acts as a barrier against gender development & human development.
- Therefore, SDG Goal 1 aims to end poverty in all its forms everywhere.
Economic Survey 2017 gave both the pro and anti-arguments. Its intent was only to ‘generate a debate’ around the topic (without suggesting UBI for immediate implementation). However eventually, Interim-Budget 2019: PM-KISAN ₹ 6k / per year to small and marginal farmers.
| Conclusion-UBI-Favour: | UBI can play a pivotal role in eliminating poverty and providing a safety net against deprivation and destitution. However, UBI should be designed & implemented in a manner that minimizes leakage & doesn’t put heavy burden on fiscal resources. |
| Conclusion-UBI-Anti: | While UBI can play a pivotal role in eliminating poverty and providing a safety net against deprivation and destitution, but in the light of the aforementioned challenges, the conditions are not yet ripe for its introduction in India. |
Previous Year Questions:
| CSM 2018 – 10 marks | Despite implementation of various programmes for eradication of poverty by the government in India, poverty is still existing. Explain by giving reasons. |
| CSM 2016 – 10 marks | An essential condition to eradicate poverty is to liberate the poor from deprivation. Substantiate this statement with suitable examples. |
| CSM 2016 – 10 marks | Critically examine whether growing population is the cause of poverty or poverty is the main cause of population increase in India. |
Practice Questions:
Poverty is the root cause of all the social evils in India. Comment
- Explain how financial inclusion helps in elevating poverty from India. Mention the steps taken by the government to break the vicious cycle.
- Examine the reasons that aggravate poverty in Indian Society. Do you think the reason for poverty is not only individual but the structure of society as well?
