MCom I Semester Business Environment Proverty Notes study Material

MCom I Semester Business Environment Proverty Notes study Material : Relative ad absolute poverty Trend of Poverty in India Causes of poverty Strategy of Poverty alleviation Poverty Elimination Programme Exercise Question Long Answer Question Short Answer Questions Objective Questions (Most Important notes for MCom Students ) :

MCom I Semester Business Environment Inflation Study Material Notes

Poverty

In spite of more than five decades of planning, the poverty in India is a problem with some grave dimensions. It is, on the one hand, quantitatively a very big problem as the number of the poor is a massive. Another aspect is that the poor belonging mostly to the socially deprived or weaker sections of society have no means, political or social, to uplift themselves on their own.

Meaning of Poverty : In simple words, poverty is a social phenomena in which section of the society is unable to fulfil the minimum consumption requirements for life, health and efficiency. These minimum requirements consists of food, clothing, housing, education and basic health facilities. Man suffers hardships in case of these minimum human needs are not fulfilled.

RELATIVE AND ABSOLUTE POVERTY

Relative poverty and absolute poverty are the two variants of poverty. Following is their brief description :

(i) Relative Poverty: When poverty is studied in relation to other persons or society or from one country to another, it is called relative poverty. The country or class of people whose level of subsistence is low is treated as poor or relatively poor in comparison to the country or class of people having high level of subsistence.

Relative poverty is also interpreted in terms of inequality of income within the country. It indicates the relative position of different segments of the population in the income hierarchy. For instance, in India share of 20 per cent of low income group of people in the national income is barely 7 percent while that of 20 percent of high income group of people is 46 percent. [In terms of unequal distribution of income of the people of an area, poverty is often measured using the concept of Lorentz Curve and Ginni Coefficient.]

(ii) Absolute Poverty (Poverty Line): It is the poverty which is studied in subiective terms wherein a person does not have resources even to meet his necessaries of life. Thus it refers to the measure of poverty, keeping in view the economic conditions of a country. Poverty line is drawn on the basis of expenditure that is necessary to secure minimum acceptable living standard for work and efficiency. Since food is of all our basic requirements, as it provides nutrition for living

Poverty line is drawn on the basis of a minimum necessary and working, so the Poverty line is drawn on the nutritional standard expressed in terms of intake of calories. In India, the minimum necessary calories intake of a person has been put at 2400 calories per day in rural areas and 2100 calories in urban areas. To convert this calorie intake based poverty line into a monetary measure of poverty, the cost of minimum consumption requirements of food that would provide this essential calorie intake (viz., 2400 calories in rural and 2100 calories in urban areas) is calculated at prevailing prices.

The Planning Commission has worked this cost at 816 per month in rural areas and * 1000 in urban areas on the basis of prices prevailing in 201112. Thus, those persons whose monthly consumption expenditure is less than 816 in rural areas and less than 1000 in urban areas as calculated at 2011-12 prices, fall below the poverty line.

In short, poverty line divides the population in two groups, one group of those who have this purchasing power or more and the other group of those people who do not have this much of purchasing power. The former group is regarded as living “Above the Poverty Line (APL)”. These people are not regarded as poor. The later group is considered as living “Below the Poverty Line (BPL)”. These people are called poor. Thus, the poverty line refers to the cut-off point on the line of distribution, which divides the population as poor and non-poor. This poverty line either may be high or low.

Proverty Notes study Material

TRENDS OF POVERTY IN INDIA

1  Incidence of Magnitude of Poverty in India: The percentage of the people falling below poverty line of the total population is called ‘Poverty Ratio’ and is expressed in percentage terms, i.e., population living below poverty line as a percentage of total population. Table below shows the ‘poverty ratio’ as well as the absolute number of people below the poverty line :

Table : Percentage and Number of the Poor in India Poverty Ratio

Proverty Notes study Material

In the year 2004-05 about 407.1 million of people, i.e., 37.2 percent of the total population lived below poverty line. In 2011-12, as many as 269.3 million of of people i.e., 21.9 percent of population was living below poverty line.

2. Rural-Urban Variation of Poverty: An important feature of poverty in India is that its incidence is far greater in rural than urban areas.

Table shows that in the year 2011-12, 25-7 percent of total population in rural areas and 13.7 percent in urban areas were living below the poverty line. For the country as a whole 21.9 percent of population was living below the poverty line.

3. Inter-State Comparison of Population below Poverty Line : In different states there are vide variations in the percentage of population living below poverty line.

Although, generally there is a decline in the number of poor but unfortunately, there is an increase in the number of poor in Bihar, Odisha and Madhya Pradesh. The states Bihar (33-7%), The states in which poverty ratio is higher than the all-India figure are 1587%). Odisha (32.696) and Madhya Pradesh (31.7%). The percentage in other states are Uttar Pradesh (29.4%), Tamil Nadu (113%), Karnatak 0.9%), West Bengal (20-0%) and Rajasthan (14.7%).

Proverty Notes study Material

4. International Comparison : In international comparison of poverty, a uniform poverty line of consumption expenditure of US $ 1.25 per person per day has been used for all the nations. In 2011 on an average, 22.7 percent population of the world was living below poverty line. Percentage of people living below poverty line in developed countries is quite less as compared to percentage of people living below poverty line in developing countries. For example, percentage of population below poverty line in Bangladesh, India, Pakistan, China, Sri Lanka in the year 2011 was 43.3%, 32.7%, 21.0%, 13.1% and 7.0% respectively whereas in advanced countries UK, USA, Japan and Germany the percentage of population below the poverty line was less then one percent.

5. Multi-dimensional Poverty Index: Human Development Report 2013 makes it clear that the value of multi-dimensional Poverty Index for India was 0.283 in the year 2005-06. 53.7% population of India was living under multidimensional poverty in that year (612.203 million). Intensity of deprivation was 52.7 percent and 16.4 percent population was vulnerable to severe poverty. Contribution of education, health and living standards to deprivation was 21.8 percent. 35,7 percent and 42.5 percent respectively, As per World Bank’s estimates 32.7 percent population was earning less than PP $ 1.25 a day.

6. Human Poverty Index (HPI): The HPI constructed by the Human avolanment Report focused on the deprivation in the following three elements 1:fe_longevity, knowledge, and a decent standard of living The Human sort 2009 calculated HPI for 135 countries. India’s rank in terms Development Report 2009 calculated HPI for 135 as low as 88. This clearly reflects this country’s unsatisfactory performance in alleviating human poverty.

7. Global Hunger Index: International Food Policy and Researg (IFPRI) has included 81 nations in its list of Global Hunder Index for the year 0012 India has been placed at 65th rank. It may be recalled that the placed at 67th rank in 2011.

In 2012 Global Hunger Index list. China as been placed at 2nd rank, Vietnam at 26th rank, Sri Lanka at 37th rank and Pakistan at 57th rank.

CAUSES OF POVERTY

Underdeveloped and developing countries suffer from the shortage of capital Her resource to employ labour force. When some people are unemployed and hence 2 unable to contribute to production and income, sharing the people’s income in low income groups further depresses overall consumption levels and pushes people below the poverty line. The growing population again makes the problem 110 51 of poverty more critical. In brief, the causes of poverty in India are as follows:

1 Population growth : Rapidly increasing population has also been a major factor contributing to poverty in India, The pressure of population serves as a big stumbling block to economic development. In spite of increase in total production, per capita share in wealth is very little and per capita land has also fallen.

2. Existing social and political circumstances in India : The existing social and political circumstances are obstacles in the path of economic development. Law of heritance, caste system, traditions are putting hindrances in the way of faster development and have aggravated the problem of poverty. Political interference and bureaucratic style of decision making and implementation have not resulted into the creation of work culture among people and additional avenues of employment have not been created.

3. Rural poverty: The root of poverty lies in the rural sector. Basic reason of rural poverty is the semi-feudal system existing in the villages.

4. Insufficient land reform efforts : Land reform programmers were started with a thunderous enthusiasm but soon the vitality of this enthusiam was lost and the implement of land reforms became a very tame affair. Being riddled with loop holes, they have brought little justice to the rural people. The principal reasons for poor implementation of land reforms are lack of political will; absence of pressure from below because the poor peasants and agricultural workers are passive, unorganized and inarticulate, absence of up-to-date land records and legal hurdles also come in the way of land reforms.

5. Unequal distribution of land : In the rural sector, land is the principal source of income. If land- the fountain head of income-benefits only a minor fraction of the rural population, the whole structure of land ownership fails to meet the ends of social justice. The best course to bring a reduction of inequalities of income is to bring about a reduction in inequalities of land ownership.

6. Less employment opportunities other than agriculture : A big portion of population in India depends on the agriculture. Due to lack of training and specialisation in other fields job opportunities are less for them.

7. Increase in price: Inflation has reduced purchasing power of money. This has reduced real income and thus people can buy less and consume less with given income. This has added to poverty.

8. Lack of industrialisation : The process of industrialisation has not been able to make a dent on the problems of unemployment and poverty.

9. Caste system : Traditional and orthodox approaches like casteism is the main factor to increase poverty.

10. Level of education : Level of education in India is not well-developed. As a result, people are not benefitted by new inventions and technology. It increases poverty.

11. fed-tapism : During the process of implementation of poverty alleviation programmes, several distortions appear due to appear due to bureaucracy and red tapism, the original intentions of the programme get affected to the extent that major deviations from the avowed objectives take place.

12. Late implementation in programme: Delay in the implementation of poverty alleviation programmes looses their importance and actual persons are not benefited by the programmes.

Proverty Notes study Material

STRATEGY OF POVERTY ALLEVIATION

The raising of the standard of living of the masses is one of the objectives of planning in India. The Fourth Plan talked of improvement in the condition of the common man and the weaker sections through provision of employment and education’. It also emphasised the attainment of a ‘national minimum’ as an essential pre-requisite to improve the conditions of the ‘lower income groups’. The following measures can go a long way to reduce the inequalities of income. These are :

1 Balanced development: According to this policy, the available capital should be employed in diversified and extensive uses. In this way, the cross demand would emerge and as a result the market imperfections would be eliminated.

2. Spread of education and changing pattern of social and institutional structure: To provide a much greater quantum of grants for schools in the backward areas and for backward classes so that inequality of opportunity can be reduced. A built-in mechanism should be developed at each level so that a substantial proportion of seats is fixed for under privileged section of society. The problem of dropouts with reference to under privileged classes should be analysed and remedial actions be planned.

3. Proper utilisation of productive resources : Recent studies and researches have proved that productivity on small farms is as high as on large farms. Once a relatively better resource base is provided to the small cultivators, it would be desirable to strengthen it with the provision of credit and better inputs so as to lift the poor peasantry out of abject poverty.

4. Developed Techniques : Prof. Gunnar Myrdal was the opinion that capital intensive technique of production as practiced by western countries was ill-suited for India. In fact, intermediate technique which is mid-way between labour-intensive and capital intensive techniques should be adopted in India. It will lead to more employment and help eradicate poverty.

5. Increase in cooperative sector: Self-employment in the rural areas is the major form of employment and this must not be ignored in the strategy of poverty alleviation. But where entrepreneurship lacks, cooperative sector should be encouraged.

6. Monetary measures : Monetary and fiscal measures such as taxation, deficit financing, development of banking system, establishment of public enterprises, use of foreign capital and unused res and unused resources etc. are also important for the poverty alleviation.

7. Pace of capital formation: To pace the capital formation by domestic savings, following steps should be taken:

(i) Increase the rate of interest on savings,

(ii) Mobilise the savings;

(iii) Provide right direction to savings; and

(iv) Make the best use of available capital.

8. Other measures: Other measures to eradicate poverty are as follows:

(ii) Most of the schemes for the amelioration of the poor get distorted during the process to implementation. Either they are abandoned or are soft-pedaled. It is, therefore, essential that programmers of rural development are not put under the charge of panchayats. Instead, special development councils should be set up in which majority representation should be given to the small and marginal farmers, to the artisans and development of councils is revolutionized, it would not be possible to implement the policies designed for the poor. The present nexus between the bureaucrats; the landlord, capitalist and the politician can be broken only by creation of people’s development councils. It is only then that a poverty eradication programmed has a chance of success.

(ii) The government has failed to make necessary changes and implementation in anti-poor laws and policies and for the benefit of rural laborers social security schemes should be enforced. Minimum Wages Act, 1948 and Bonded Labour (Abolition) Act, 1976 should be enforced strictly.

(iii) Consistent with the poverty eradication programme jobs for 10 to 15 million persons per years need to be created. The government has now taken three major programmes, NERP, RLEGP, IRDP for the purpose.

(iv) It is necessary to provide an institutional framework in which the village people, more especially the small farmers and landless agricultural labourers, are given the authority and responsibility to execute the programme.

POVERTY ELIMINATION PROGRAMME

At present, main employment generation and poverty alleviation programmes are as follows:

1 Aam Admi Bima Yojana (AABY): In the year 2007, AABY has been been framed by Government for rural landless households in the age of 18 to 59 years. In this yojana head of family or one earning member of the family will be insured. The Central Government will bear 50 percent of the premium of 200 per person per year and the remaining 50 percent premium will be borne by the State Government. In case of natural death 30,000 and in case of accidental death 75,000 are provided in this yojana.

2. Rajiv Rinn Yojana (RRY): This yojana is a central sector scheme applicable in all the urban areas of the country and provides for interest subsidy of 5% (500 basis points) on loans granted to economically weaker sections and low income groups to construct their houses or extend the existing ones.

3. National Social Help Programme : This programme was launched on August 15, 1995 with the objective of providing social help to the poor families suffering from old age, death of earning member of the family. It was a 100 percent centrally sponsored programme. It comprises of three schemes National Old Age Pension Scheme, National Family Benefit Scheme and National Maternity Benefit Scheme.

See ‘National Rural Livelihood Mission’, ‘National Urban Livelihood Mission’. «Support to Training and Employment Programme’, ‘Prime Minister’s Employment Generation Programme’ and ‘Mahatama Gandhi National Rural Employment Gurantee Act in Chapter : 10 ‘Unemployment.

Proverty Notes study Material

EXERCISE QUESTIONS

Long Answer Questions

1 What is meant by poverty? Explain the problem of poverty in India.

2. What are the causes of poverty in India ? Suggest remedy to solve the problem.

3. What are the causes of poverty in India? What steps have been taken to reduce the poverty in our country?

4. What is meant by line of poverty ? Explain the poverty alleviation programmes in India.

5. What is the meaning of poverty? Throw light on the causes of poverty in India. What steps have been taken by the government to solve this problem?

Short Answer Questions

1 What do you understand by poverty line?

2. What are the main causes of poverty in India ?

3. What is meant by line of poverty?

4. What steps government has taken to solve poverty problem in India ?

Objective Questions

(I) Select the Correct Alternatives :

1 The main cause of poverty is :

(a) increase in employment opportunities

(b) increase in population

(c) increase in economic development

(d) none of these.

2. The measure to eliminate poverty is to :

(a) increase in price

(b) natural calamities

(c) social backwardness

(d) rapid economic development.

3. The percentage of poor people to total population is known as:

(a) poverty ratio

(b) employment ratio

(c) price rise ratio

(d) none of these.

[Ans. 1. (b), 2. (d), 3. (a).]

(II) Write True or False :

1 The main cause of poverty in India is its less development.

2. Still most of the poor people have not been benefitted by the banking facilities.

3. Equitable distribution of income in India encourages poverty.

4. Increase in saving and investment reduces employment.

(Ans. 1. True, 2. True, 3. False, 4. False.)

(III) Fill in the Blanks :

1 India is ………… in natural resources.

2. “Garibi Hatao’ programme is initiated in ……….. in India.

3. Rapid industrialisation may ………… production and employment opportunities.

4. The major cause of poverty in India are to be found in the ………. structure prevailing in the country side.

Proverty Notes study Material