- Internal Code :
- Subject Code : ECON390
- University : University of New England
- Subject Name : Economics
A Case of India’s Government Role on Poverty Alleviation
Abstract on Poverty in Developing Economies
This study will help the reader to understand the basic concept of poverty and its various dimensions and causes, the reader will be able to assess the progress of a country on the basis of its political and popular structure after studying this essay. This essay is concerned with the case study of poverty intensity and its alleviation process in India, it focuses on various methodologies that have been adopted to mark poverty, history and current status of poverty in India, various committees and commitment on part of the government of India, the international cooperation to India to eradicate poverty and various kinds of hurdles which came and do have the potential to come in the pace to reduce poverty. This essay examines the potential of India and its current collaborations in order to achieve the UN SDG goal 1 of eradicating poverty by 2030.
Introduction to Poverty in Developing Economies
Poverty for years had been seen as a lack of monitory support to the individual through which he/she can fulfil the basic needs to survive. In the recent decades the definition of poverty has been understood with a wide array of factors in which all multidimensional areas of human fulfilment and optimum utilization of life has been looked upon. According to UN.org ( n.d.) Poverty is the violation of dignity, a denial of choices and opportunities, inefficiency to participate in the society, not having basic amenities like school, clinic, land, clothing, access to formal credit, insecurity, vulnerability to violence, and life in fragile surroundings. Worldwide. According to WorldBank (n.d.) globally 736 million people are living below poverty line of 1.90 $ per day that after years of assistance by the international organizations and countries. By the definition of United Nations, it is clear that poverty is undermine for human life and a human cannot be left poor.
History of Poverty in India and Current Status
India was a colony of Great Britain and it got its independence in 1947, at that time the poverty rate in India was at 70%. Britain had a big role in making India poor by draining its wealth in a span of 190 years (Raveendran, 2016). India has the highest rate of poverty. Over the last 60 years, in both the economic and political spheres there has been a much heated debate on growth and structural transformation to reduce poverty in India in particular and in developing countries in general. Reliable household primary data is a good source of poverty estimation and India has the biggest and widest series of gathering this primary data. The problem arises when these data are not accurate or are interfered with due to multiple factors such as corruption. These surveys and primary data are comparable and are made up to date from time to time. India thus has a more accurate time series confirmation data than other developing countries- for making various relationship and correlations between living standards and macroeconomic data of various factors. These data reveal that the urban population in India is continuously rising since independence from 17 % in 1950 to 31 % in 2016 (Dutt et al, 2016), however India growth rate of urbanization has been rather slower than other developing or middle income countries like china.. India 70 % of the households is dependent on agriculture and allied activities till 2016 which makes negative marginal productivity conditions in the sector of agriculture. The growth rate of GDP in the period of 1950 to 1991 was under 2 % which was not a good sign for poverty reduction in India. The evidences from the National sample survey Organization (NSSO), a primary data collecting agency of government of India, indicates that after 1991’s opening of the economy and the Globalization, privatisation and liberalisation (LPG) reforms the poverty rate has been declining with a faster pace (MOSPI, n.d.). NSSO indicated that poverty elasticity in relation to household consumption was-1.3 in the period of 1950 to 1990 (MOSPI, n.d.). It was possible because of the curb on income inequality during this period. It is also said that little growth rate of India is the key reason of India being still the highest bearer of poverty in the world but it was found that the rural economic growth paved the way for poverty reduction, because growth in the primary and tertiary sector is directly proportional to the secondary sector.. Thus the slow progress in reducing poverty is the direct result of unequal distribution of resources and lack of overall growth. Economic reforms after the 1991 crisis brought India major economic changes which were positive for all, leaving alone inequality of income. It paved the way for high economic growth rate and it was expected that this higher growth rate will support fast poverty reduction in India but the rising inequality raised doubts about direct correlation of high growth with poverty reduction. Today the poverty rate in India is 21.1 % (2016) compared to 31.1 % in 2009 (Dutt, 2016). It is necessary to investigate the role of Indian government and assistance of international institutions in reducing poverty of India which will throw light on India’s struggle to reduce poverty.
Role of Indian Government and Assistance of International Institutions in Reducing Poverty
In order to reduce the black money and black marketing corruption the Indian government in 2016 decided to phase out the 1000 and 500 rupee notes which were not considered legal tender thereafter. In order to reduce the middlemen and corruption, Indian government started direct benefit transfer system (DBT) in which money under a welfare scheme was to be transferred directly into the bank account of the payee and the systems of physical material transfers was abdicated and all the welfare schemes were attached with this system. Indian government is also mulling over the idea of universal basic income in which it will assist citizens with Rs 7620 (Singh, 2017). A potential backdrop of this scheme is a sudden outflow from banks which can increase prices of essential commodities. Asian development bank which is a strong supporter of poverty reduction has started to assist India in 1986 with infrastructure and economic development projects. With the help of ADB, 345 million houses have gained access to potable water since 2010 (ADB, n.d.); The World Bank has been instrumental in assisting India’s poverty since it came into existence. On regular basis it provides loans to India and other developing and underdeveloped countries. Recently under India’s COVID 19 social protection response program, World Bank has approved a dollar 1 billion assistance to support India in providing assistance to poor and rural citizens. Till now due to covid response for poor, World Bank has disbursed dollar 2 billion (Worldbank, n.d.). India is the largest country for programs under World Bank group, which reflects strong support to India. The NEW development bank (NDB) created in 2014 by CRICS countries has also approved dollar 1 billion assistance to support the poor and marginalized in covid times (Deccanchronicle, 2020). United Nations through its various agencies has been instrumental in reducing India’s poverty. The UNSDF has 7 target missions which aim directly at eliminating poverty by 2030 (UN, n.d.). India has also been a founding member of Alliance for poverty eradication at the UN. A review of the various committees and their criteria set for poverty line is needed to be investigated which is explained in the next heading.
Committees and Expert Panels
The expert group of planning commission- formed in 1962 it was constituted by the planning commission of India, the highest planning body chaired by PM of India, it separated the line of poverty for urban and rural areas with 20 Rs and 25 respectively.
Committee of Dandekar and Rath- It was constituted in 1971, this committee made the first systematic assessment of poverty in India, which was based on the data of national sample survey organization, a data collection agency of the Indian government. Previous scholars considered only minimal or basic needs as measures of the poverty line but this committee considered expenditure which was necessary to consume 2250 calories per day both in the rural and urban areas (Dutt et al, 2016). It started a debate on the line of minimum calories necessary for healthy living, it was called poverty estimation based on expenditure.
Alagh committee- It was constituted by the planning commission of India, it constituted a poverty line separate for urban and rural areas based on nutritional requirements and expenditure on consumption. From now on poverty estimation was done by adjusting the inflation (Dutt et al, 2016).
Committee headed by Lakdawala- it was constituted in 1993, it was based on the consumer price index-industrial workers and agricultural labourers CPI-IW and CPI-AL (Raveendran, 2016), (consumer baskets for essential goods), these two baskets reflected the actual consuming patterns of the poor I India, this committee made recommendations-
- Expenditure consumption should be made on calorie consumption.
- The poverty lines should be state specific as inflation adjusted according to each state and based on CPI-IW and CPI-AL of each state.
- Scaling of poverty based on national statistics should be discontinued.
Tendulkar committee- It was constituted in 2009, considered as very important committee in the poverty line estimation for India. It was constituted to review the methodology of poverty estimation in India and to review and correct the discrepancies in the previous methods-
Inaccurate and old consumption pattern- The older consumption pattern was linked with 1973-74 consumer basket when significant consumption pattern changes and inflation have taken place till 2009 (Singh, 2017) .
- Adjustments to inflation both on the basis of spatially and temporarily were the issues that have to be adjusted.
- Earlier poverty line baskets decided that health and education were solely to be provided by the state and made poverty lines accordingly, which have to be changed.
Tendulkar committee recommended-
- It recommended shift from calorie based consumption to consumption of the items like cereals, pulses, milk, oil, vegetables, dry fruits, fresh fruits and vegetables, fuel, clothing, medical expenses, entertainment and other essential factors.
- It recommended a uniform poverty line basket for both the rural and urban areas unlike the Alagh committee recommendations, and based on the uniform poverty basket it based its poverty line as 447 Rs for rural areas and 579 Rs for urban areas (per month).It also adjusted the private expenditure threshold, procedure for the price adjustment and mixed reference period. Tendulkar committee calculated the poverty lines on the basis of purchasing power parity of India of Rs 33 per day (Raveendran, 2016).
Committee headed by C Rangarajan- The committee was constituted on the background of a national outrage of the planning commission’s recommended poverty line of Rs 22 per day. The objective of this committee was to review the international methods of poverty estimation and adjusting them to apply into India and to recommend how these poverty estimates can be applied into the government assisted welfare programs (Raveendran, 2016). Rangrajan committee estimated poverty on the basis of an independent organization and on the basis of household’s capacity to save.
It recommended that poverty line should be based on normative level of adequate nutrition and behavioural purpose of non food expenses which means people’s habit of use and consumption. It fixed calories consumption level of 2090 kcal for urban and 2155 kcal for rural areas. Protein intake of 48 gms and 50 gms for rural and urban areas respectively, fat of 28 gms and 26 for urban and rural areas respectively. It set a line of 47 Rs and 32 Rs a day in urban and rural areas respectively (Thorat et al, 2017). On these thresholds, Rangarajan committee concluded 19% higher poor in rural areas and 41% higher in urban compared to tendulkar committee (Thorat et al, 2017). It can clearly be seen that political constraints are a big hurdle into the pace of poverty alleviation in India which is discussed in the next heading.
Political and People’s Participation Constraints to Poverty Alleviation in India
India have a tendency where poor and marginalised caste vote more than the affluent and upper castes and more from those in developed economies. Thus votes are higher in rural than in urban areas. India has both the right and the left wing parties, but all the same poor expect from the government more than usually in other nations as history of India has been of continuous and dynamic welfare schemes. This expectation was made possible from the constitution of India which provided for fair and just opportunities for all irrespective of any of the differences like caste, creed, colour, place of birth, orientation (Dhongde & Miniou, 2010). However, the state is also bounded by the procedure of governance and other liabilities which were emerged from economic and social conditions and requirements. Apart from this, the innate nature of the politics in India allows for poverty alleviation not just as a constitutional need but a political need also. State has played its roles of poverty alleviations through many frameworks and is necessary for it to mediate between political, social, economic institutions, to regulate markets, to impose taxation policies in order to redistribute resources to balance out the rich and the poor, at least to that level where poor can pick fair opportunities for him/her. Since the LPG reforms and opening up of economy in 1991, the role of state has been reduced to a mediator, a political instrument of governance, where the allocation and distribution of resources was seen as a result of market policies (Laissez Faire). This withdrawal of state of its role of instrument of social inclusion was a setback for the poor. However through the last decade, pro poor sentiments have been strengthened from the active participation of media, NGOs, independent organizations and role of political opposition and recognition of various acts and laws as right to education, food security act, MGNAREGA employment guarantee scheme and land acquisition settlement act, such rights are emerged as implied rights under fundamental rights exhibited by judicial activism of India (Thorat et al, 2017). Populist policies have also been popular among political parties have benefitted the poor, however when it is seen as a solution to poverty, bringing more people to mainstream, it is a political symptom of inequality rather than solution.
The lack of basic infrastructure and inadequate medical facilities is a big hurdle in preventing people to be pushed below poverty line. People living in urban areas have a higher chance of medical care and out of the pocket expenses pushed 55 million Indians into poverty in 2017, less than 20 % of Indian rural people have access to potable water (Dutt et al, 2016). However government has been successful in recent years in the sanitization and toilet measures in rural areas. Also the rise of backward caste movements, their representation in political institutions and authorities has still not changed their social status and oppression nor has changed the way of economic allocation of resources. On the other side, the breakdown of political process into political empowerment and economic empowerment has led state to be merely as a mediator and regulator. The government has made a budget to spend 1 trillion Rs on welfare schemes and poverty alleviation. It has been reported several times that there are a number of leakages in the allocation of welfare benefits and that poor are not benefitted up to the mark, thus government of India came with direct benefit transfer scheme in which middlemen were erased and all the welfare schemes were attached to this scheme (Dhongde & Miniou, 2010). A survey in this regard is considerable where Transparency international and Centre for media studies surveyed that 33% of the BPL people pay bribes to the authorities to access these welfare schemes provided the rise of caste based politics has not only given benefits to the marginalised but also created a juncture of vested interests.
Conclusion on Poverty in Developing Economies
Various factors of poverty have been investigated in the essay and the chances of India to cope with the aim of UN to eradicate the poverty by 2030 seems possible provided India keep pace with the current growth rate, changes its policies for optimum resource allocation and a continuous improvement in the gini coefficient can only pave the way for India’s aim to eradicate poverty. In India, engagement of the poor and those who are not connected to the mainstream with the political empowerment is a double-edged sword. It is also advised that India as a developing economy must lay stress on eradicating political and popular constraints which have till now proved to be a big hurdle in the process, also India needs to frame a strict methodology for fixing the lines of poor and in addition to it, for maximum utilization of public funds, poor be categorised in 2 or 3 levels, the fund to be allocated on the intensity of poverty.
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