Dealing with the Challenges of Poverty

India is adopting the “graduation approach,” an innovative poverty alleviation strategy pioneered by the Bangladesh Rural Advancement Committee (BRAC) and successfully implemented across 50 countries. This model moves beyond conventional cash handouts, offering holistic support to ultra-poor families through social protection, empowerment, financial inclusion, and livelihood development. While these initiatives show promise, India still faces significant challenges in effectively tackling its widespread poverty.

History of Poverty Estimation in India

Evolution of Poverty Estimation in India

Pre-Independence Period:        

Dadabhai Naoroji’s Poverty Line (1867):

• In his seminal work “Poverty and the Un-British Rule in India,” Dadabhai Naoroji provided one of the earliest estimates of poverty in India.
• He defined a poverty line based on minimum subsistence requirements, estimating it to be between ₹16 and ₹35 per capita annually at 1867-68 prices.
• His methodology focused on the cost of basic food, clothing, and shelter necessary for survival.

National Planning Committee (1938):

• Formed under the leadership of Subhash Chandra Bose, the committee recommended ensuring a minimum standard of living.
• In 1944, the Bombay Plan proposed a poverty line of ₹75 per capita annually.

Post-Independence Period:

First Official Attempt (1962):

• The Working Group of the Planning Commission defined poverty in terms of consumption expenditure.
• It recommended a minimum monthly consumption expenditure of ₹100 per household (five persons or four adult units) or ₹20 per capita, based on 1960-61 prices.

Dandekar and Rath Committee (1971):

• The first systematic assessment of poverty in India, led by V.M. Dandekar and N. Rath, utilized National Sample Survey (NSS) data.
• It suggested defining the poverty line based on an expenditure ensuring a daily calorie intake of 2,250 calories for both rural and urban areas.
• For rural areas, a minimum of ₹17 per capita was deemed necessary to meet basic nutritional needs.

Alagh Committee (1979):

• This committee established separate poverty lines for rural and urban areas based on nutritional requirements and associated consumption expenditures.
• It recommended updating poverty estimates by adjusting for inflation, laying the groundwork for subsequent methodologies.

Lakdawala Committee (1993):

• The committee retained calorie-based poverty estimation but introduced state-specific poverty lines, updated using the Consumer Price Index for Agricultural Labourers (CPI-AL) for rural areas and Consumer Price Index for Industrial Workers (CPI-IW) for urban areas.
• It discontinued scaling poverty estimates using National Accounts Statistics.

Tendulkar Committee (2009):

• This committee moved away from calorie-based estimations, adopting a broader consumption basket that included health and education expenses.
• It introduced uniform poverty lines for rural and urban areas. For 2004-05, the poverty line was set at ₹446.68 for rural areas and ₹578.80 for urban areas, equivalent to ₹33/day in PPP terms.

Rangarajan Committee (2014):

• Using large household surveys, it set poverty thresholds at ₹32/day (rural) and ₹47/day (urban), based on normative nutritional and behavioral standards.
• However, the government rejected its recommendations, and Tendulkar’s methodology remains the benchmark.

Modern Developments:

Multidimensional Poverty Index (MPI):

• Introduced in 2010 by the UNDP and Oxford Poverty and Human Development Initiative, the MPI measures poverty across multiple dimensions, including education, health, and living standards.
• India has adopted MPI to capture non-income-based aspects of poverty.

Periodic Labour Force Surveys (PLFS):

• These surveys provide updated data on income and employment, contributing to poverty assessments and addressing labour market dynamics

Current Status of Poverty in India

Status:

• India has achieved a substantial decline in multidimensional poverty, dropping from 29.17% in 2013-14 to 11.28% in 2022-23, marking a reduction of 17.89 percentage points.
• However, as of 2024, nearly 129 million Indians still live in extreme poverty, surviving on less than $2.15 (approximately ₹181) per day.

Rural vs. Urban Disparity:

• The poverty headcount ratio in rural areas fell significantly from 32.59% to 19.28%, while in urban areas, it declined from 8.65% to 5.27%.
• This indicates a pro-poor bias, with rural regions experiencing a faster decline in poverty levels compared to urban areas.

Key Indicators Driving Progress:

• Major improvements in nutrition, education, sanitation, and access to cooking fuel have contributed to the reduction in multidimensional poverty.
• Deprivations in sanitation decreased by 21.8 percentage points, and those in cooking fuel access dropped by 14.6 percentage points.

State-Level Achievements:

• States such as Bihar, Uttar Pradesh, Madhya Pradesh, Odisha, and Rajasthan recorded the largest reductions in poverty levels.
• Uttar Pradesh led the way, with 3.43 crore people escaping poverty, the highest among all states

Poverty as a Persistent Challenge in India Despite Progress

Rising Inequality Amid Growth

• India’s economic growth has disproportionately favored the wealthy, leading to widening income inequality.
• According to the World Inequality Report 2022, India ranks among the most unequal countries globally.
• The top 10% of the population holds 57% of the total national income, while the top 1% controls 22%.
• Conversely, the share of the bottom 50% has declined to a mere 13%.

Employment Crisis and Informal Sector Vulnerability

• Unemployment and underemployment remain key drivers of poverty, particularly in the informal sector.
• Despite post-COVID-19 GDP recovery, CMIE data (2023) shows India’s unemployment rate at 7-8%, with urban areas faring worse.
• Additionally, 80% of workers in the informal sector face a lack of job security, social benefits, and fair wages, perpetuating poverty cycles.

Rural Poverty and Agricultural Dependency

• Agriculture employs 46% of India’s workforce but contributes only 18% to GDP, highlighting low productivity and disguised unemployment.
• While schemes like PM-KISAN aim to support farmers, incomes remain inconsistent due to price volatility and climate risks.
• 70% of rural households still depend primarily on agriculture, and 82% of farmers are small or marginal, exacerbating rural poverty.

Urban Poverty and Slum Proliferation

• Rapid urbanization has resulted in the proliferation of urban slums, characterized by inadequate housing, sanitation, and job opportunities.
• As of Census 2011, 17% of the urban population lived in slums, a number that has likely grown.
• According to the World Bank (2023), urban poor communities are disproportionately affected by inflation and environmental shocks, deepening their vulnerabilities.

Health Inequalities and Financial Strain

• Health-related expenses remain a major cause of poverty, with 58.7% of healthcare spending coming from out-of-pocket payments.
• Despite programs like Ayushman Bharat, many still lack access to quality care, and catastrophic health expenditures push families below the poverty line.
• Marginalized groups and rural populations bear the brunt of health inequalities, with high maternal mortality rates and persistent malnutrition.

Education and Skills Gaps

• Inequities in education exacerbate poverty, leaving millions out of the formal schooling system.
• Pre-pandemic, 56.1% of Indian children were in learning poverty (unable to read a basic text by age 10).
• The Annual Status of Education Report 2022 revealed that 80% of Grade 3 students in rural schools couldn’t read a Grade 2 text.
• A lack of skills aligned with industry demands reduces economic mobility, perpetuating generational poverty.

Climate Vulnerabilities Amplify Poverty

• Climate change disproportionately affects the poor, who rely heavily on climate-sensitive sectors like agriculture and fisheries.
• Increasingly frequent extreme weather events worsen their plight, with 51% of Indian children living under the dual impacts of poverty and climate emergencies.
• For instance, Cyclone Amphan (2020) displaced over 2.4 million people, primarily in West Bengal, highlighting the precarious situation of vulnerable populations.

Regional Disparities in Development

• Economic development across India remains highly uneven, leading to significant regional poverty disparities.
• States like Kerala have achieved poverty rates below 5%, while states like Bihar still struggle, with over 25% of their population living in poverty.

Strategies for Effectively Addressing Poverty in India

Enhancing Access to Quality Education

Universal access to quality education, especially for marginalized groups, is vital to breaking intergenerational poverty cycles.

Strengthening schemes like Samagra Shiksha Abhiyan, with a focus on digital infrastructure and teacher training, is critical.

Promoting Livelihood Diversification in Rural Areas

• Reducing dependence on agriculture by diversifying rural livelihoods is crucial.
• Strengthening MGNREGA with skill-based projects and integrating it with rural entrepreneurship programs can create sustainable incomes.

Strengthening Social Safety Nets

• Effective social protection systems are essential to shield the poor from economic shocks.
• Expanding and improving Direct Benefit Transfers (DBT) under schemes like PM-KISAN and Ayushman Bharat can reduce vulnerabilities.

Universalizing Financial Inclusion

• Expanding access to affordable credit, insurance, and banking services can economically empower the poor.
• Strengthening the Pradhan Mantri Jan Dhan Yojana with financial literacy campaigns and linking it to Microfinance Institutions (MFIs) can support small businesses.

Skill Development and Employment Generation

• Skill development aligned with market demands is key to tackling unemployment and underemployment.
• Revamping the Pradhan Mantri Kaushal Vikas Yojana (PMKVY) with localized, industry-specific training programs can increase employability.

Addressing Hunger and Malnutrition

• Ensuring the availability and affordability of nutritious food is essential to combating hunger.
• Strengthening the Public Distribution System (PDS) with fortified staples and streamlining Aadhaar-linked delivery can improve food security.
• Expanding initiatives like Poshan Abhiyan to focus on high-burden districts is crucial.

Empowering Women and Marginalized Groups

• Empowering women through economic and social initiatives can have a multiplier effect on poverty reduction.
• Expanding access to credit under schemes like Stand-Up India and enhancing SHG networks under DAY-NRLM can encourage entrepreneurship among women.

Climate-Resilient Development

• Promoting climate-resilient livelihoods is crucial to mitigating the impact of climate change on vulnerable populations.
• Expanding crop insurance under the PM Fasal Bima Yojana with better coverage and timely payouts can safeguard farmer incomes.

Fostering Micro, Small, and Medium Enterprises (MSMEs)

MSMEs play a crucial role in employment generation and economic inclusivity, especially for low-skilled workers.

Strengthening MSME credit access through programs like the Emergency Credit Line Guarantee Scheme (ECLGS) can boost small businesses.

Integrated Urban-Rural Development Policies

• Balanced development policies can address migration-driven poverty by creating rural opportunities and improving urban living conditions.
• Expanding the One District, One Product (ODOP) initiative with integrated rural enterprise zones can create local employment.

Enhancing Digital Literacy and Access

• Bridging the digital divide is essential for empowering rural and remote communities.
• Expanding BharatNet to provide high-speed internet to all gram panchayats and launching digital literacy drives can bridge gaps in economic opportunities.

Promoting Renewable Energy Access for the Poor

• Access to affordable and reliable energy can improve living standards and productivity for low-income households.
• Scaling up programs like PM Kusum Yojana to provide solar solutions for small farmers can reduce irrigation costs.

Developing Region-Specific Poverty Strategies

• Region-specific challenges require tailored solutions.
• Flood-prone states like Assam need robust flood-resilient infrastructure.
• Drought-prone regions in Rajasthan require enhanced water conservation under the Jal Shakti Abhiyan.

Encouraging Public-Private Partnerships (PPPs) in Welfare Delivery

• PPPs can enhance the reach and efficiency of welfare programs by leveraging private-sector expertise.
• Private entities can complement government initiatives in education, healthcare, and skilling through CSR programs.

India has made significant strides in poverty reduction, particularly in reducing multidimensional poverty (SDG 1). However, persistent challenges such as inequality, unemployment, and lack of access to basic services remain. A multi-pronged approach is needed to address the root causes of poverty, including strengthening social protection, promoting inclusive growth, and investing in human capital.

The End of the Blog: Dealing with the Challenges of Poverty