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Poverty in India is widespread with the nation estimated to have a third of the world's poor. According to a 2005 World Bank estimate, 82% of India falls below the international poverty line of $1.25 a day (PPP, in nominal terms Rs. 21.6 a day in urban areas and Rs 14.3 in rural areas); having reduced from 90% in 1980. According to the criterion used by the Planning Commission of India 27.5% of the population was living below the poverty line in 2004–2005, down from 51.3% in 1977–1978, and 36% in 1993-1994

Among the causes ascribed for the high level poverty in India are its history under British rule, large population, and low literacy. Also important is India's social structure, including the caste system in India , and the role of women in Indian society . Economic growth has in the past been dampened by a dependence upon agriculture, and the economic policies adopted after its independence.

Since the 1950s, the Indian government and non-governmental organizations have initiated several programs to alleviate poverty, including subsidizing food and other necessities, increased access to loans, improving agricultural techniques and price supports, and promoting education and family planning. These measures have helped eliminate famines, cut absolute poverty levels by more than half, and reduced illiteracy and malnutrition.

Poverty estimates

The World Bank estimates that 456 million Indians (42% of the total Indian population) now live under the global poverty line of $1.25 per day (PPP). This means that a third of the global poor now reside in India. However, this also represents a significant decline in poverty from the 60 percent level in 1981 to 42 percent in 2005, although the rupee has decreased in value since then, while the official standard of 538/356 rupees per month has remained the same. Income inequality in India (Gini coefficient: 32.5 in year 1999- 2000) is increasing. On the other hand, the Planning Commission of India uses its own criteria and has estimated that 27.5% of the population was living below the poverty line in 2004–2005, down from 51.3% in 1977–1978, and 36% in 1993-1994. The source for this was the 61st round of the National Sample Survey (NSS) and the criterion used was monthly per capita consumption expenditure below Rs. 356.35 for rural areas and Rs. 538.60 for urban areas. 75% of the poor are in rural areas, most of them are daily wagers, self-employed householders and landless labourers.

Although Indian economy has grown steadily over the last two decades, its growth has been uneven when comparing different social groups, economic groups, geographic regions, and rural and urban areas. Between 1999 and 2008, the annualized growth rates for Gujarat (8.8%), Haryana (8.7%), or Delhi (7.4%) were much higher than for Bihar (5.1%), Uttar Pradesh (4.4%), or Madhya Pradesh (3.5%). Poverty rates in rural Orissa (43%) and rural Bengal (41%) are among the world's most extreme.

Despite significant economic progress, 1/4 of the nation's population earns less than the government-specified poverty threshold of 12 rupees per day (approximately USD $0.25). Official figures estimate that 27.5% of Indians lived below the national poverty line in 2004-2005. A 2007 report by the state-run National Commission for Enterprises in the Unorganised Sector (NCEUS) found that 77% of Indians, or 836 million people, lived on less than 20 rupees (approximately USD $0.50 nominal; $2 PPP) per day.

As per the 2001 census, 35.5% of Indian households availed of banking services, 35.1% owned a radio or transistor, 31.6% a television, 9.1% a phone, 43.7% a bicycle, 11.7% a scooter, motorcycle or a moped, and 2.5% a car, jeep or van; 34.5% of the households had none of these assets. According to Department of Telecommunications of India the phone density has reached 33.23% by Dec 2008 and has an annual growth of 40%. |}

Causes of poverty in India

Caste system

A disproportionally large share of poor are lower caste Hindus. According to S. M. Michael, Dalits constitute the bulk of poor and unemployed.

Many see the pan-Indian social construct of caste system as a system of exploitation of poor low-ranking groups by more prosperous high-ranking groups. In many parts of India, land is largely held by high-ranking property owners of a particular dominant caste (Brahmanas, Kshatriya) that economically exploit low-ranking landless labourers and poor artisans, all the while degrading them with ritual emphases on their so-called god-given inferior status. According to William A. Haviland, casteism is widespread in rural areas, and continues to segregate Dalits. Others, however, have noted the steady rise and empowerment of the Dalits through social reforms and the implementation of reservations in employment and benefits.

British era

The Mughal era ended at about 1760. Jawaharlal Nehru claimed "A significant fact which stands out is that those parts of India which have been longest under British rule are the poorest today." The Indian economy was purposely and severely deindustrialized (especially in the areas of textiles and metal-working) through colonial privatizations, regulations, tariffs on manufactured or refined Indian goods, taxes, and direct seizures, as noted by linguist and commentator Noam Chomsky. However, according to economist Angus Maddison, such explanation ignores the role of changes in demand and technology.

In 1830, India accounted for 17.6% of industrial production against Britain's 9.5%, but by 1900 India's share was down to 1.7% against Britain's 18.5%. (The change in industrial production per capita is even more extreme due to Indian population growth). This is because Europe - particularly Britain - industrialized before the rest of the world.

This view claims that British policies in India exacerbated weather conditions to lead to mass famines which, when taken together, led to between 30 to 60 million deaths from starvation in the Indian colonies. Community grain banks were forcibly disabled, land was converted from food crops for local consumption to cotton, opium, tea, and grain for export, largely for animal feed.

According to Angus Maddison, "They replaced the wasteful warlord aristocracy by a bureaucratic-military establishment, carefully designed by utilitarian technocrats, which was very efficient in maintaining law and order. However, the pattern of consumption changed as the new upper class no longer kept harems and palaces, nor did they wear fine muslins and damascened swords. This caused some painful readjustments in the traditional handicraft sector. It seems likely that there was some increase in productive investment which must have been near zero in Moghul India: government itself carried out productive investment in railways and irrigation and as a result there was a growth in both agricultural and industrial output."

India's economic policies

In 1947, the average annual income in India was $439, compared with $619 for China, $770 for South Korea, and $936 for Taiwan. By 1999, the numbers were $1,818; $3,259; $13,317; and $15,720. (numbers are in 1990 international Maddison dollars) In other words, the average income in India was not much different from South Korea in 1947, but South Korea became a developed country by 2000s. At the same time, India was left as one of the world's poorer countries.

Hindu rate of growth is an expression used to refer to the low annual growth rate of the economy of India, which stagnated around 3.5% from 1950s to 1980s, while per capita income averaged 1.3%. At the same time, Pakistan grew by 5%, Indonesia by 6%, Thailand by 7%, Taiwan by 8%, and South Korea by 9% and . The term was coined by Indian economist Raj Kumar Krishna.

License Raj refers to the elaborate licenses, regulations and the accompanying red tape that were required to set up and run business in India between 1947 and 1990. The License Raj was a result of India's decision to have a planned economy, where all aspects of the economy are controlled by the state and licenses were given to a select few. Corruption flourished under this system.

The labyrinthine bureaucracy often led to absurd restrictions - up to 80 agencies had to be satisfied before a firm could be granted a licence to produce and the state would decide what was produced, how much, at what price and what sources of capital were used.

— BBC

India had started out in the 1950s with:

• high growth rates
• openness to trade and investment
• a promotional state
• social expenditure awareness
• macro stability

but ended the 1980s with:

• low growth rates (Hindu rate of growth)
• closure to trade and investment
• a license-obsessed, restrictive state (License Raj)
• inability to sustain social expenditures
• macro instability, indeed crisis.

Poverty has decreased significantly since reforms were started in the 1980s.

Also:

• Over-reliance on agriculture. There is a surplus of labour in agriculture. Farmers are a large vote bank and use their votes to resist reallocation of land for higher-income industrial projects. While services and industry have grown at double digit figures, agriculture growth rate has dropped from 4.8% to 2%. About 60% of the population depends on agriculture whereas the contribution of agriculture to the GDP is about 18%.
• High population growth rate, although demographers generally agree that this is a symptom rather than cause of poverty.

Despite this, India currently adds 40 million people to its middle class every year. Analysts such as the founder of "Forecasting International", Marvin J. Cetron writes that an estimated 300 million Indians now belong to the middle class; one-third of them have emerged from poverty in the last ten years. At the current rate of growth, a majority of Indians will be middle-class by 2025. Literacy rates have risen from 52 percent to 65 percent in the same period.

Neo-liberal policies and their effects

Other points of view hold that the economic reforms initiated in the early 1990s are responsible for the collapse of rural economies and the agrarian crisis currently underway. As journalist and the Rural Affairs editor for The Hindu, P Sainath describes in his reports on the rural economy in India, the level of inequality has risen to extraordinary levels, when at the same time, hunger in India has reached its highest level in decades. He also points out that rural economies across India have collapsed, or on the verge of collapse due to the neo-liberal policies of the government of India since the 1990s. The human cost of the "liberalisation" has been very high. The huge wave of farm suicides in Indian rural population from 1997 to 2007 totaled close to 200,000, according to official statistics. That number remains disputed, with some saying the true number is much higher. Commentators have faulted the policies pursued by the government which, according to Sainath, resulted in a very high portion of rural households getting into the debt cycle, resulting in a very high number of farm suicides. As professor Utsa Patnaik, India’s top economist on agriculture, has pointed out, the average poor family in 2007 has about 100 kg less food per year than it did in 1997.

Government policies encouraging farmers to switch to cash crops, in place of traditional food crops, has resulted in an extraordinary increase in farm input costs, while market forces determined the price of the cash crop. Sainath points out that a disproportionately large number of affected farm suicides have occurred with cash crops, because with food crops such as rice, even if the price falls, there is food left to survive on. He also points out that inequality has reached one of the highest rates India has ever seen. In a report by Chetan Ahya, Executive Director at Morgan Stanley, it is pointed out that there has been a wealth increase of close to $1 Trillion in the time frame of 2003-2007 in the Indian stock market, while only 4-7% of the Indian population hold any equity. During the time when Public investment in agriculture shrank to 2% of the GDP, the nation suffered the worst agrarian crisis in decades, the same time as India became the nation of second highest number of dollar billionaires. Sainath argues that

Farm incomes have collapsed. Hunger has grown very fast. Public investment in agriculture shrank to nothing a long time ago. Employment has collapsed. Non-farm employment has stagnated. (Only the National Rural Employment Guarantee Act has brought some limited relief in recent times.) Millions move towards towns and cities where, too, there are few jobs to be found.

In one estimate, over 85 per cent of rural households are either landless, sub-marginal, marginal or small farmers. Nothing has happened in 15 years that has changed that situation for the better. Much has happened to make it a lot worse.

Those who have taken their lives were deep in debt – peasant households in debt doubled in the first decade of the neoliberal “economic reforms,” from 26 per cent of farm households to 48.6 per cent. Meanwhile, all along, India kept reducing investment in agriculture (standard neoliberal procedure). Life was being made more and more impossible for small farmers.

As of 2006, the government spends less than 0.2% of GDP on agriculture and less than 3% of GDP on education. However, some government schemes such as the mid-day meal scheme, and the NREGA have been partially successful in providing a lifeline for the rural economy and curbing the further rise of poverty.

Efforts to alleviate poverty

Since the early 1950s, govt has initiated, sustained, and refined various planning schemes to help the poor attain self sufficiency in food production. Probably the most important initiative has been the supply of basic commodities, particularly food at controlled prices, available throughout the country as poor spend about 80 percent of their income on food.

Outlook for poverty alleviation

Eradication of poverty in India is generally only considered to be a long-term goal. Poverty alleviation is expected to make better progress in the next 50 years than in the past, as a trickle-down effect of the growing middle class. Increasing stress on education, reservation of seats in government jobs and the increasing empowerment of women and the economically weaker sections of society, are also expected to contribute to the alleviation of poverty. It is incorrect to say that all poverty reduction programmes have failed. The growth of the middle class (which was virtually non-existent when India became a free nation in August 1947) indicates that economic prosperity has indeed been very impressive in India, but the distribution of wealth is not at all even.

After the liberalization process and moving away from the socialist model, India is adding 60 to 70 million people to its middle class every year. Analysts such as the founder of "Forecasting International", Marvin J. Cetron writes that an estimated 390 million Indians now belong to the middle class; one-third of them have emerged from poverty in the last ten years. At the current rate of growth, a majority of Indians will be middle-class by 2025. Literacy rates have risen from 52 percent to 65 percent during the initial decade of liberalization (1991-2001).

Controversy over extent of poverty reduction

The definition of poverty in India has been called into question by the UN World Food Programme. In its report on global hunger index, it questioned the government of India's definition of poverty saying:

The fact that calorie deprivation is increasing during a period when the proportion of rural population below the poverty line is said to be declining rapidly, highlights the increasing disconnect between official poverty estimates and calorie deprivation.

While total overall poverty in India has declined, the extent of poverty reduction is often debated. While there is a consensus that there has not been increase in poverty between 1993-94 and 2004-05, the picture is not so clear if one considers other non-pecuniary dimensions (such as health, education, crime and access to infrastructure). With the rapid economic growth that India is experiencing, it is likely that a significant fraction of the rural population will continue to migrate toward cities, making the issue of urban poverty more significant in the long run .

Some, like journalist P Sainath, hold the view that while absolute poverty may not have increased, India remains at a abysmal rank in the UN Human Development Index. India is positioned at 132 place in the 2007-08 UN HDI index. It is the lowest rank for the country in over 10 years. In 1992, India was at 122 place in the same index. It can even be argued that the situation has become worse on critical indicators of overall well-being such as the number of people who are undernourished (India has the highest number of malnourished people, at 230 million, and is 94th of 119 in the world hunger index), and the number of malnourished children (43% of India's children under 5 are underweight (BMI<18.5), the highest in the world) as of 2008.

Economist Pravin Visaria has defended the validity of many of the statistics that demonstrated the reduction in overall poverty in India, as well as the declaration made by India's former Finance Minister Yashwant Sinha that poverty in India has reduced significantly. He insisted that the 1999-2000 survey was well designed and supervised and felt that just because they did not appear to fit preconceived notions about poverty in India, they should not be dismissed outright. Nicholas Stern, vice president of the World Bank, has published defenses of the poverty reduction statistics. He argues that increasing globalization and investment opportunities have contributed significantly to the reduction of poverty in the country. India, together with China, have shown the clearest trends of globalization with the accelerated rise in per-capita income..

A 2007 report by the state-run National Commission for Enterprises in the Unorganised Sector (NCEUS) found that 77% of Indians, or 836 million people, lived on less than 20 rupees per day (USD 0.50 nominal, USD 2.0 in PPP), with most working in "informal labour sector with no job or social security, living in abject poverty."

A study by the McKinsey Global Institute found that in 1985, 93% of the Indian population lived on a household income of less than 90,000 rupees a year, or about a dollar per person per day; by 2005 that proportion had been cut nearly in half, to 54%. More than 103 million people have moved out of desperate poverty in the course of one generation in urban and rural areas as well. They project that if India can achieve 7.3% annual growth over the next 20 years, 465 million more people will be lifted out of poverty. Contrary to popular perceptions, rural India has benefited from this growth: extreme rural poverty has declined from 94% in 1985 to 61% in 2005, and they project that it will drop to 26% by 2025. Report concludes that India's economic reforms and the increased growth that has resulted have been the most successful anti-poverty programmes in the country.

Persistence of malnutrition among children

According to the New York Times, is estimated that about 42.5% of the children in India suffer from malnutrition. The World Bank, citing estimates made by the World Health Organization, states "that about 49 per cent of the world's underweight children, 34 per cent of the world's stunted children and 46 per cent of the world's wasted children, live in India." The World Bank also noted that "hile poverty is often the underlying cause of malnutrition in children, the superior economic growth experienced by South Asian countries compared to those in Sub-Saharan Africa, has not translated into superior nutritional status for the South Asian child."

A special commission to the Indian Supreme court has noted that the child malnutrition rate in India is twice as great as sub-Saharan Africa

See also

• Economy of India
• Poverty by country
• Dharavi (Slum)
• Pavement dwellers
• Housing in India
• Electricity sector in India
• Water supply and sanitation in India

References

1. ."New Global Poverty Estimates — What it means for India". World Bank.
2. ^ Poverty estimates for 2004-05, Planning commission, Government of India, March 2007. Accessed: August 25, 2007
3. ^ ""Inclusive Growth and Service delivery: Building on India's Success"" (PDF). World Bank. 2006. Retrieved 2007-04-28.
6. "Fact Sheet: Gini Coefficient" (PDF). Source: The World Bank (2004) and Census and Statistics Department (2002). Legislative Council Secretariat Hong Kong. Retrieved 2007-08-01. Note: The Gini coefficient in this datasheet is calculated on a scale of 0 to 1 and not 0 to 100. Hence, on a scale of 100 India's Gini coefficient (1999-2000) is 32.5 rather than 3.25
7. A special report on India: Ruled by Lakshmi Dec 11th 2008 From The Economist print edition
8. "Development Policy Review". World Bank.
9. This figure is extremely sensitive to the surveying methodology used. The Uniform Recall Period (URP) gives 27.5%. The Mixed Recall Period (MRP) gives a figure of 21.8%
10. Planning commission of India. Poverty estimates for 2004-2005
11. "Nearly 80 Percent of India Lives On Half Dollar A Day". Reuters. August 10, 2007. Retrieved 2007-08-15.
12. "Households Availing Banking Services with Households in India" (PDF). Town and Country Planning Organisation, Ministry of Urban Affairs. 2001. Retrieved 2009-07-31.
13. "Department of Telecom, memo Feb 2009" (PDF). Department of Telecommunication of India. 2009.
14. A 'Broken People' in Booming India - The Washington Post, June 21, 2007
15. Untouchable By S. M. Michael
16. William A. Haviland, Anthropology: The Human Challenge, 10th edition, Thomson Wadsworth, 2005, ISBN 0-534-62361-1, p. 575.
17. Mendelsohn, Oliver & Vicziany, Maria, "The Untouchables, Subordination, Poverty and the State in Modern India", Cambridge University Press, 1998
18. Kevin Reilly, Stephen Kaufman, Angela Bodino, Racism: A Global Reader P21, M.E. Sharpe, 2003 ISBN 0-7656-1060-4.
20. ^ http://www.ggdc.net/maddison/articles/moghul_3.pdf
21. MEGHNAD DESAI (2003). "INDIA and CHINA: AN ESSAY IN COMPARATIVE POLITICAL ECONOMY" (PDF). IMF.
22. Redefining The Hindu Rate Of Growth. The Financial Express
23. "Industry passing through phase of transition". The Tribune India.
24. Street Hawking Promise Jobs in Future, The Times of India, 2001-11-25
25. The India Report. Astaire Research
26. India: the economy. Published in 1998 by BBC.
27. ^ "What Went Wrong: Derailing after the 1950s".
28. Datt, Ruddar & Sundharam, K.P.M. "22". Indian Economy. pp. 367, 369, 370.{{cite book}}: CS1 maint: multiple names: authors list (link)
29. Sarkaritel.com : Corporate News & Features : Highlights of Economic Survey 2004-2005
30. India CIA World Fact Book. August 7, 2008. Retrieved August 20, 2008.
31. Dr. Marvin J, Cetron
40. The Multidimensions of Urban Poverty in India, Centre de Sciences Humaines - New Delhi
42. Lifting The Poverty Veil J. Ramesh, India Today
43. World Bank ICRIER
44. Nearly 80 pct of India lives on half dollar a day, Reuters, August 10, 2007. Accessed: August 15, 2007
45. "Report on Conditions of Work and Promotion of Livelihoods in the Unorganised Sector" ], National Commission for Enterprises in the Unorganised Sector, Government of India, August, 2007. Accessed: August 25, 2007.
47. India's middle class - Tracking the growth of India’s middle class - Economic Studies - Country Reports - The McKinsey Quarterly
48. The Tribune, Chandigarh, India - Business
49. http://www.nytimes.com/2009/03/13/world/asia/13malnutrition.html?_r=1
50. "'India has highest number of underweight children'". The Indian Express. 2009-04-14. Retrieved 2009-04-28.
51. http://www.medindia.net/news/Malnutrition-Among-Indian-Children-Worse-Than-in-Sub-Saharan-Africa-30955-1.htm

Further reading

• Poverty in India, World Bank
• "Can India eradicate poverty? Will India's economic boom help the poor?"
• "World Hunger - India"
• George, Abraham, Wharton Business School Publications - Why the Fight Against Poverty is Failing: A Contrarian View
• Poverty and riches in booming India

External links

• Rural poverty in India (IFAD)
• Poverty in India 2

• Economy of India
• Indian society
• Poverty in India