(Online Course) GS Concepts : Indian Economy - Poverty and Inequality Concepts, Data Policy and Analysis

Topic: Poverty and Inequality Concepts, Data Policy and Analysis

Question. Write a short notes on Poverty.

Ans. Poverty is deprivation of basic needs that determine the quality of life-food clothing, shelter, safe drinking water etc. It also includes the deprivation of opportunities to health, education, skills, employment etc.
Many different factors have been cited to explain why poverty occurs. No single explanation has gained universal acceptance. The factors responsible for poverty include:

• Historical factors, for example imperialism and colonialism.

• Overpopulation.

• Growth is not fast enough to eradicate poverty.

• Models of growth may be unsuitable for poverty alleviation. For example, capital-intense growth in a labour surplus country.

• Poverty itself, preventing investment and development.

• Widespread reliance on traditional methods of agriculture. About 60% of the population depends on agriculture whereas the contribution of agriculture to the GDP is 20%.While services and industry have grown at double digit figures, agriculture growth rate has dropped from 4.8% to 2%.

• Geographic factors, for example lack of fertile land and access to natural resources.

• Anti-poverty schemes not being effective due to institutional and other inadequacies

• War, including civil-war, genocide.

• Lack of education and skills.

• gender discrimination

• Matthew effect— the phenomenon, widely observed across advanced welfare states, that the middle classes tend to be the main beneficiaries of social benefits and services, even if these are primarily targeted at the poor.

Matthew effect refers to those already having an asset base benefiting from it while those without it continue to be denied the same.

Types of Poverty

Human Poverty is the lack of essential human capabilities literacy and nutrition.
Income Poverty: The lack of sufficient income to meet minimum consumption needs. The World Bank defines extreme poverty as living on less than one US$ per day, and moderate Poverty as less than $2 a day.

Question. Briefly discuss the governments initiative to Eradicate Poverty

Ans. The strategy of the Government includes the following elements

• The main plank to anti-poverty strategy is reducing poverty through the promotion of economic growth In India, after reforms began in 1991 when growth rates increased Poverty levels fell quite steeply (NSSO 2005).

• Socioeconomic Planning

• Food security through the nation wide PDS- largest in the world.

• Progressive taxation to gamer fiscal Resources for Spending on poor.

• Social safety net like the, National Social Assistance Programme (NSAP).

• Open Society in Which Poverty is recognize as a national challenge and earnest efforts are made to tackle it (Amartya Sen).

• Anti-poverty programmes - MGNREGA 2005.

• Massive social sector expenditure for skill building

• Decentralization through PRJ5 and Nagarapalikas for better delivery models.

Question. Define Poverty Line?

Ans. It is the level of income below which one cannot afford to purchase all the resources one requires to live. People who have an income below the Poverty line have no disposable income.
When comparing Poverty across Countries the Purchasing power parity exchange rates are used. These are used because poverty levels otherwise would change with the normal exchange rates. Thus, ‘living for under $1 a day’ should be understood as having a daily total consumption of goods and services comparable to the amount of goods and services that can be bought in the U.S. for $1.
Poverty lines are defined as the per capita monetary, requirement an individual needs, to afford the purchase of a basic bundle of goods only food or food and other goods. The value of this basic basket of goods can be determined in many ways, for example:
Absolute Poverty is a fixed measure in terms of a minimum calorific requirement plus essential non-food components if any. It is used in India. Individuals are considered as poor if the per capita real income/consumption of the household which they belong is below the benchmark poverty line. In India monetary requirement to consume 2100 calories in urban areas and 2400 calories in rural areas per day per person is the absolute poverty line- monthly per capita consumption expenditure below Rs. 356.35 for rural areas and Rs. 538.60 for urban areas.
Relative Poverty line set the line in relation to another variable: the average expenditure or income in a country, for example the line is derived as 60 percent of the country’s per capita income.

Question. What is Headcount Ratio?

Ans. The most common standard indicator is the incidence of poverty (also called Poverty rate or headcount rate). This describes the percentage of the population whose per capita incomes are below the poverty line, that is, the population that cannot afford to buy a basic basket of items. In many instances, a different poverty line—a much more austere one that generally only includes food items—is applied to derive the extreme poverty rate.

Question. What do you understand by Poverty Gap?

Ans. PG is a measure of the intensity of poverty among the poor: the difference between the mean income among the poor and the poverty line. This indicator measures the magnitude of poverty as well as its intensity number of poor and how poor they are. The Poverty Gap Index is the combined measurement of incidence of poverty and depth of poverty. PG is also called the Foster-Greer-Thorbecke (FGT) index. It is the gap between the average poverty among the poor and the poverty line.

Question.What is Misery Index?

Ans. The misery index was initiated by Chicago Economist Robert Barro in the 1970’s. It is the unemployment rate added to the inflation rate. It is assumed that both a higher rate of unemployment and a Worsening of inflation cause and intensify the misery. A combination of rising inflation and more people of out of work (“stagflation”) implies a deterioration in economic performance and a rise in the misery index.

Planning Commission and Poverty

The Planning Commission as the Nodal agency in the Government of India for estimation of poverty has been estimating the number and Percentage of poor at - national and state levels. Estimates of poverty are made from the large sample survey data on household Consumer expenditure conducted by the National Sample (NSSO) of the Ministry of Statistics and Programme Implementation.

The Planning Commission estimated that 2 7.5% of the population was living below the poverty line in.2004-2005 do 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 with most of them comprising daily wagers self-employed households and landless labourers.

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