POVERTY AND ISSUES

RELATED TO IT

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 POVERTY AND ISSUES
RELATED TO IT

The ultimate objective of development which incidence of poverty is measured, and the
planning is human development or to increase Human Consumption Rate has become the main
social welfare and well-being of the people. indicator of poverty.
Increased social welfare of the people requires a
But the UN Human Development Index (HDI)
more equitable distribution of development
captures the multidimensional nature of
benefits along with better living environment.
deprivation in living standards. Income should
Development process therefore needs to
continuously strive for broad-based improvement be regarded as a means to improve human
in the standard of living and quality of life of the welfare, not as an end in itself. Further Human
people through an inclusive development strategy and gender development indicators have been
that focuses on both income and non income used successfully for advocacy, for ranking of
dimensions. The challenge is to formulate geographical spaces and to capture
inclusive plans to bridge regional, social and improvements in human well-being more reliably
economic disparities. Poverty and unemployment than per capita income. The HDI is a simple
are the major hurdles in the goal of inclusive average of three dimension indices, which
development. measure average achievements in a country with
regard to ‘a long and healthy life’, ‘knowledge’
Poverty is a social phenomenon wherein a and ‘a decent standard of living’.
section of society is unable to fulfil even its basic
necessities of life. The UN Human Rights Council Related to this only the Ministry of Women
has defined poverty as “a human condition and Child Development uses the infant mortality
characterized by the sustained or chronic rate (IMR) and life expectancy at age 1 to
deprivation of the resources, capabilities, choices, estimate a long and healthy life; the 7+ literacy
security and power necessary for the enjoyment rate and mean years of education for the 15+
of an adequate standard of living and other civil, age group to estimate knowledge; and estimated
cultural, economic, political and social rights". earned income per capita per year to capture a
decent standard of living.
Types of Poverty
Alkire and Santos in 2010 presented the
The poverty has two aspects: (1) Absolute Multidimensional Poverty Index (MPI), which
poverty (2) Relative poverty. reflects the deprivations that a poor person faces
1. Absolute Poverty: It is a situation in which simultaneously with respect to education, health
the consumption or income level of people is and living standards. This reflects the same three
less than some minimum level necessary to dimensions of welfare as the HDI but the
meet basic needs as per the national indicators are different in each case and are
standards. It is expressed in terms of a linked to the MDGs. The components of MPI are:
poverty line.
1. Education (each indicator is weighted
2. Relative Poverty: It is expressed in the form equally at 1/6)
of comparisons of the levels of income,
nutrition or consumption expenditure of the • Years of Schooling: deprived if no household
poor strata vis-à-vis rich strata of the society. member has completed five years of schooling
It shows the extent of inequality. • Child Enrolment: deprived if any school-
aged child is not attending school in years 1
Dimensions of Poverty
to 8
Although household expenditure levels 2. Health (each indicator is weighted equally
remain the main measure of living standard by at 1/6)
 • Child Mortality: deprived if any child has The recommendations of different committees
died in the family. for estimation of poverty:
• Nutrition: deprived if any adult or child for • Lakdawala Committee
whom there is nutritional information, is
The Lakdawala Committee defined the
malnourished.
poverty line based on per capita consumption
3. Standard of Living (each indicator is expenditure as the criterion to determine the
weighted equally at 1/18). persons living below poverty line. The per capita
• Electricity: deprived if the household has no consumption norm was fixed at Rs.49.09 per
electricity. month in the rural areas and Rs.56.64 per month
in the urban areas at 1973-74 prices at national
• Drinking water: deprived if the household
level, corresponding to a basket of goods and
does not have access to clean drinking water
services anchored in a norm of per capita daily
or clean water is more than 30 minutes walk
calorie intake of 2400 kcal in the rural areas and
from home.
2100 kcal in the urban areas.
• Sanitation: deprived if they do not have an
improved toilet or if their toilet is shared. • Tendulkar Committee Report to Review the
Methodology for Estimation of Poverty
• Flooring: deprived if the household has dirt,
sand or dung floor. The Planning Commission constituted an
Expert Group in December 2005 under the
• Cooking Fuel: deprived if they cook with Chairmanship of Professor Suresh D. Tendulkar
wood, charcoal or dung. to review the methodology for estimation of
• Assets: deprived if the household does not poverty. The Expert Group submitted its report
own more than one of: radio, TV, telephone, in December 2009. While acknowledging the
bike, or motorbike, and do not own a car or multidimensional nature of poverty, the Expert
tractor. Group recommended moving away from
Hence, ‘poverty’ is determined with regard anchoring poverty lines to the calorie - intake
to not only income or expenditure but also access norm to adopting MRP based estimates of
to a number of other necessities. Based on this consumption expenditure as the basis for future
measure, 55% of India’s population in 2005 was poverty lines and MRP equivalent of the urban
classified as poor. poverty line basket (PLB) corresponding to
25.7per cent urban headcount ratio as the new
How Poverty Line is Estimated in India? reference PLB for rural areas. On the basis of the
above methodology, the all-India rural poverty
The history of counting the poor in India can headcount ratio for 2004-05 was estimated at
be dated back to the 19th century. The earliest 41.8 per cent, urban at 25.7 per cent, and all-
effort to estimate the poor was Dadabhai India at 37.2 per cent.
Naoroji’s “Poverty and Un-British Rule in India”
in which he estimated a subsistence-based poverty • Saxena Committee Report to Review the
line at 1867-68 prices. Using the diet prescribed Methodology for Conducting BPL Census
to “supply the necessary ingredients for the in Rural Areas
emigrant coolies during their voyage living in a An Expert Group headed by Dr N.C. Saxena
state of quietude”, which includes “rice or flour, was constituted by the Ministry of Rural
dhal, mutton, vegetables, ghee, vegetable oil and Development to recommend a suitable
salt”, he came up with a subsistence cost based methodology for identification of BPL families in
poverty line, ranging from Rs. 16 to Rs. 35 per rural areas. The Expert Group submitted its report
capita per year in various regions of India. in August 2009 and recommended doing away
Whereas after independence the Planning with score-based ranking of rural households
Commission has been estimating the number of followed for the BPL census 2002. The Committee
people below the poverty line (BPL) at both the recommended automatic exclusion of some
state and national level based on consumer privileged sections and automatic inclusion of
expenditure information collected as part of the certain deprived and vulnerable sections of
National Sample Survey Organization (NSSO) society, and a survey for the remaining
since the Sixth Five Year Plan. population to rank them on a scale of 10.
Automatic Exclusion The amount required for this has to be
determined and those who earn less than this
Households that fulfil any of the following level are considered to be living below poverty
conditions will not be surveyed for BPL census: line. The first stage to identify the poor is to fix
1. Families who own double the land of the the poverty line. This is an imaginary line.
district average of agricultural land per
The usual procedure in India is to decide the
agricultural household if partially or wholly
poverty line keeping that as the yardstick. On
irrigated (three times if completely
the basis of this, in 2004-2005, it was decided
unirrigated).
that a person earning less than Rs. 356.30 in
2. Families that have three or four wheeled rural areas and Rs.538.60 in urban areas, in a
motorized vehicles, such as, jeeps and SUVs. month, falls below the poverty line. Poverty ratio
3. Families that have at least one mechanized can be found out by dividing the number of
farm equipment, such as, tractors, power poor by the total population. Poverty ratio
tillers, threshers, and harvesters. shows the percentage of people living below the
4. Families that have any person who is drawing poverty line.
a salary of over Rs.10,000 per month in a
Recent data shows that the Poverty ratio in
non-government/ private organization or is
the country has declined to 21.9 per cent in 2011-
employed in government on a regular basis
12 from 37.2 per cent in 2004-05 on account of
with pensionary or equivalent benefits.
increase in per capita consumption. According
5. Income tax payers.
to the Commission, in 2011-12 for rural areas,
Automatic Inclusion the national poverty line by using the Tendulkar
methodology is estimated at Rs.816 per capita
The following would be compulsorily included per month in villages and Rs.1,000 per capita
in the BPL list: per month in cities. This would mean that the
1. Designated primitive tribal groups. persons whose consumption of goods and services
2. Designated most discriminated against SC exceed Rs.33.33 in cities and Rs.27.20 per capita
groups, called Maha Dalit groups. per day in villages are not poor. The Commission
3. Single women-headed households. said that for a family of five, the all India poverty
line in terms of consumption expenditure would
4. Households with a disabled person as
amount of Rs.4,080 per month in rural areas
breadwinner.
and Rs.5,000 per month in urban areas. The
5. Households headed by a minor. poverty line however will vary from state to state.
6. Destitute households which are dependent Thus the percentage of persons below poverty
predominantly on alms for survival. line in 2011-12 has been estimated at 25.7 per
7. Homeless households. cent in rural areas, 13.7 per cent in urban areas
8. Households that have a bonded labourer as and 21.9 per cent for the country as a whole.
member. The percentage of persons below poverty line in
The poor are identified using a yardstick of 2004-05 was 41.8 per cent in rural areas, 25.7
expenditure needed to fulfil the basic needs. Thus per cent in cities and 37.2 per cent in the country
the existing poverty line is defined in terms of as a whole. In actual terms, there were 26.93
Per Capita Total Consumer Expenditure (PCTCE) crore people below poverty line in 2011-12 as
at 73-74 prices, adjusted over time for changes compared to 40.71 crore in 2004-05.
in prices keeping the original Poverty Line Basket
World Bank Approach for Calculating
constant. Poverty Line Basket (PLB) is a socially
Poverty
acceptable minimal basket of inter-dependent
basic human needs that are satisfied through the The World Bank uses the “money metric”
market purchases. The all India rural and urban approach, whereby it converts the “one dollar
PLB are derived separately for urban and rural per day” international poverty line into local
areas based on per capita calorie norms of 2400 currencies using “purchasing power parity”
(rural) & 2100 (urban). It is specified in terms of conversion factors. It then uses national
required per capita total household consumer household surveys to identify the number of
expenditure to achieve this level of calorie intake. persons whose local income is lower than the
 associated with the data used under the Bank’s
Poverty in India - Statistics
preferred approach.
- 50% of Indians don’t have proper shelter;
Causes of Poverty in India
- 70% don’t have access to decent toilets;
- 35% of households don’t have a nearby All types of poverty and deprivation in India
water source; are caused by the following factors.

- 85% of villages don’t have a secondary a) Colonial Exploitation:

school; Colonial rule in India is the main reason of
- Over 40% of these same villages don’t have poverty and backwardness in India. The Mughal
proper roads connecting them. era ended about 1800. The Indian economy was
purposely and severely de-industrialized through
national poverty lines. Both the dollar a day and colonial privatizations. British rule replaced the
$1.25 measures indicate that India has made wasteful warlord aristocracy by a bureaucratic-
steady progress against poverty since the 1980s, military establishment. However, colonial
with the poverty rate declining at a little under exploitation caused backwardness in India. In
one percentage point per year. This means that 1830, India accounted for 17.6 per cent of global
the number of very poor people who lived below industrial production against Britain's 9.5 per
a dollar a day in 2005 has come down from 296 cent, but, by 1900, India's share was down to
million in 1981 to 267 million in 2005. However, 1.7 per cent against Britain's 18.5 per cent. This
the number of poor people living under $1.25 a view claims that British policies in India,
day has increased from 421 million in 1981 to exacerbated by the weather conditions led to
456 million in 2005. This indicates that there are mass famines, roughly 30 to 60 million deaths
a large number of people living just above this from starvation in the Indian colonies.
line of deprivation (a dollar a day) and their Community grain banks were forcibly disabled,
numbers are not falling. land was converted from food crops for local
There have been many criticisms against the consumption to cotton, opium, tea, and grain
World Bank’s approach to measuring poverty. for export, largely for animal feed.

Firstly, the Bank’s method is unreliable b) Lack of Investment for the Poor:
because its results are excessively dependent on There is lack of investment for the
the chosen PPP base year. The Bank compares development of poorer section of the society. Over
the consumption expenditure of a person in one the past 60 years, India decided to focus on
country and year with that of another person creating world class educational institutions for
from another country and year, by using national the elite, whilst neglecting basic literacy for the
CPIs that deflate or inflate the two national majority. This has denied the illiterate population
currency amounts into “equivalent” amounts of - 33 per cent of India - of even the possibility of
a common base year, and then using PPPs for escaping poverty. There is no focus on creating
this base year to compare the resulting national- permanent income-generating assets for the poor.
currency amounts. PPPs of different base years Studies on China (2004) also indicated that since
and the CPIs of different countries each weigh universal and free healthcare was discontinued
prices of underlying commodities differently, as in 1981, approximately 45 million (5 per cent of
they reflect distinct global and national its 900 million rural population) took on
consumption patterns. As a result, comparisons healthcare-related debts that they could not repay
over space and time together are path dependent: in their lifetimes. Since then, the government has
if they are undertaken in different ways they reintroduced universal health care for the
may lead to different results. population. Given India's greater reliance on
private healthcare spending, healthcare costs are
Secondly, consumption patterns vary from
a significant contributor to poverty in India.
country to country for reasons of tastes, as actual
consumption patterns are strongly influenced by c) Social System in India:
prices and by the existing income distribution. The social system is another cause of poverty
Thirdly, the Bank’s estimates of global poverty in India. The social subsystems are so strongly
involve errors due to measurement problems interlocked that the poor are incapable of
overcoming the obstacles. A disproportionally Issues Related to Poverty
large number of poor people are lower caste
Hindus. According to S. M. Michael, Dalits 1. Poverty and Health:
constitute the bulk of poor and unemployed. Approximately 1.2 billion people in the world
Many see Hinduism and its structure, called the live in extreme poverty (less than one dollar per
caste system, as a system of exploitation of poor, day). Poverty creates ill-health because it forces
low ranking groups by more prosperous, high people to live in environments that make them
ranking groups. In many parts of India, land is sick, without decent shelter, clean water or
largely held by high ranking property owners of adequate sanitation. The poorest people in most
the dominant castes that economically exploit societies almost always experience higher
low ranking landless labourers and poor artisans, morbidity levels, die younger (on average) and
all the while degrading them with ritual emphasis experience higher levels of child and maternal
on their so-called, God-given inferior status. mortality.
d) Over-reliance on Agriculture: In health many dimensions are inter-
In India there is high level of dependence on dependent. Maternal malnutrition may
primitive methods of agriculture. There is a contribute to child malnutrition for example.
surplus of labour in agriculture. Farmers are a When malnutrition affects a young girl’s
large vote bank and use their votes to resist development this may later lead to subsequent
reallocation of land for higher-income industrial reproductive health problems which may later
projects. While services and industry have grown affect her own children. Thus, over time
at double digit figures, the agriculture growth vulnerability is increased. This may be
rate has dropped from 4.8 per cent to 2 per cent. experienced through reduced income and
About 60 per cent of the population depends on accumulation, increased expenditures and
agriculture, whereas the contribution of indebtedness, reduced child’s education and
agriculture to the GDP is about 18 per cent. The increased malnutrition, as well as other long term
agricultural sector has remained very impacts on social capital.
unproductive. There is no modernization of
agriculture despite some mechanization in some 2. Poverty, Food Insecurity and Gender:
regions of India. Poverty and food security are complex and
multidimensional in nature. Food security has
e) Heavy Population Pressures:
both economic and physical dimensions; the
Although demographers generally agree that former referring to economic access and the latter
high population growth rate is a symptom rather to physical availability of food grains in sufficient
than cause of poverty and add to poverty. quantities required for an active and healthy life
Mahmood Mamdani aptly remarked "people are and the official definition and measurement of
not poor because they have large families. Quite income/consumption poverty in India is
contrary, they have large families because they anchored in a physical norm for food insecurity.
are poor". However this is a general argument in
developing countries that population growth is Poverty leads to under nutrition and food
a major obstacle to development and cause of insecurity by limiting poor people's access to food.
poverty. About three-fourth of India's population living
in the rural sector is reeling under abject poverty,
f) High Unemployment:
illiteracy, ill-health, unemployment, low quality
There is high degree of underutilization of of life and so on. Whereas, food insecurity in
resources. The whole country suffers from a high turn cause poverty, vulnerability and livelihood
degree of unemployment. India is marching with insecurity.
jobless economic growth. Employment is not
growing, neither in the private sector, nor in the The basic requirement for survival is sufficient
public sector. The IT sector has become elitist, nutrition which not only enables a person to live
which does not improve the poverty situation in a healthy life but also enables him/her to
the country. Disguised unemployment and participate actively in improving his economic
seasonal unemployment is very high in the and social well being. Chronic diseases due to
agricultural sector of India. It is the main cause malnourishment put a heavy toll on creative
of rural poverty in India. abilities of people. In particular, childhood
malnutrition hampers proper growth of children, children or fewer adults but because female head
which finally becomes an impediment to their earns less. The lower earning power of women
physical, intellectual and emotional development. heads can be due to their lower education, and
their restricted access to land and credit. This
It is widely accepted that poverty is currently
inability to acquire resources also results in
the principal root cause of food insecurity at the
women making inappropriate or inefficient
level of households. It is also clear that in several
choices. They may face greater time and mobility
societies, households are not homogenous entities,
constraints, which can result in an apparent
since within a household, women and girl
“preference” for working fewer hours for pay,
children often tend to be relatively more
for “choosing” lower-paying jobs that are
undernourished. Gender constitutes the most
nevertheless more compatible with childcare etc.
profound differentiating division. A gendered
Women also face discrimination in getting access
analysis of poverty reveals not simply its unequal
to jobs or resources due to the existing gender
incidence but also that both cause and effect are
norms of the society. Female labour force
deeply gendered. Women face a greater risk of
participation is highest among the poorest
poverty than men. The gender disparity is most
households in countries such as India, Pakistan,
visible among female- headed households, notably
and Bangladesh, where social norms mainly
lone mothers and single pensioners. Food security
constrain women to very insecure and poorly
at the level of each individual is hence important.
paid work in the informal sector. India suffers
Millennium Development Goals (MDG)
severe deprivations in education and health -
recognizes that hunger and food insecurity are
especially in the Northern states, where caste,
the core afflictions of poor people, and specifically
class, and gender inequities are particularly
sets out to halve the proportion of extremely poor
strong. Human development cannot be achieved
and hungry people in the world. Amartya Sen
without taking the role of women into account.
added a new dimension to food security and
Poverty often hits women and women-headed
emphasised the “access” to food through what
households the hardest, and women have fewer
he called ‘entitlements' – a combination of what
economic and political opportunities to improve
one can produce, exchange in the market along
their well-being and that of their families.
with state or other socially provided supplies.
4. Poverty and Discrimination:
Thus the 1995 World Food Summit declared,
“Food security at the individual, household, It has been observed that poor people are
regional, national and global levels exists when vulnerable to a number of discrimination.
all people, at all times, have physical and Vulnerability creates impediment in the
economic access to sufficient, safe and nutritious implementation of various development
food to meet their dietary needs and food programmes. Some groups may be at risk of
preferences for an active and healthy life”. becoming poor because of inherent vulnerabilities
(i.e., different types of discrimination based on
The declaration further recognizes that
class, gender, caste, ethnicity, or factors such as
“poverty eradication is essential to improve access
disability, region of residence and family
to food”.
configuration). Furthermore, certain combinations
3. Feminisation of Poverty: of vulnerability may be strongly correlated with
In agriculture women become heads of farms poverty, such as female-headed households or
or households due to male migration. Left-behind families living in remote and isolated mountainous
female farm managers are becoming increasingly regions or some castes from specific occupational
prevalent in many parts of the developing world background. Such correlations between
as labour mobility has increased dramatically, vulnerabilities and poverty make it necessary to
both nationally and internationally due to pay special attention to these segments of
unequal urbanization and industrialization. population. Exclusion based on caste, whatever
Women farmers are poorer because they have economic group a person belongs to, would imply
similar economic burdens compared to men but social exclusion. Because of a vast range of
less access to the productive resources (land, deprivations, certain castes have been restricted
cattle, and labour). Female-headed households to their traditional occupations or to other low
have lower incomes not because they have more wage unskilled work. For policy makers, it is
important to go beyond the narrow definition of between increasing international trade and
poverty based on income indicators only and take investment flows and faster economic growth,
note of social exclusion too. higher living standards, accelerated innovation,
diffusion of technological and management skills,
5. Poverty and Unemployment: and new economic opportunities.
Unemployment leads to poverty and poverty
But on the flip side globalization increases
in turn leads to unemployment. An unemployed
poverty because, first, the benefits of globalization
person has no means to earn money and cannot
are not equally distributed and tend to be
fulfil his own and his family’s basic needs. He
concentrated among a relatively small number
and his family cannot avail quality education,
of countries, particularly the more advanced ones.
medical facilities and has no means to create
The poorest countries such as the least developed
income-earning assets. Such circumstances often
countries in Africa have not been able to
compel indebtedness. Consequently, an
sufficiently harvest the benefits of globalization.
unemployed person exaggerates poverty for his
Second, most efforts have been placed in
family due to indebtedness. This confirms the
facilitating free trade flows, particularly in
positive relationship between unemployment and
products which are of importance to the
poverty. If government wants to alleviate poverty,
developed countries, as part of the globalization
then it should aim at creating new employment
process. Other dimensions of globalization like
opportunities. As a result, more people will get
labour market standards, the environment,
employed and perhaps their income will rise.
sustainable development and poverty alleviation
This rise in income will improve their access to
have received much less attention. Third,
quality education, better healthcare and other
globalization has also led to an increased
basic amenities. Further, these newly employed
vulnerability among many countries to
people will experience appreciation in their living
international economic conditions
standards and can create income-earning assets.
The combined result of all these factors leads to Linkage between Poverty and Development
alleviation of poverty. Hence, there exists a
relationship between unemployment and poverty. Economic growth is the most powerful
instrument for reducing poverty and improving
6. Poverty and Globalization: the quality of life in developing countries. Thus
1991 was the year when India embraced Poverty is inter-related to problems of
globalization and started, like many countries, underdevelopment. In rural and urban
its market liberalization coupled with communities, poverty can be very different. In
privatization and deregulation while ensuring urban areas people often have access to health
macroeconomic stability. Where China has been and education but many of the problems caused
one of the few countries that have successfully by poverty are made worse by things like
managed their transition to the global market, overcrowding, unhygienic conditions, pollution,
the picture is more mixed with India, with lots unsafe houses, etc. In rural areas there is often
of ups and downs. The Indian society is so poor access to education, health and many other
diverse that the rapid and unequal growth has services but people usually live in healthier and
brought overwhelming inequalities. safer environments.
Globalization has helped raise the standard Growth can generate virtuous circles of
of living for many people worldwide. It has also, prosperity and opportunity. Strong growth and
however, driven many deeper into poverty. Small employment opportunities improve incentives for
businesses and third world countries are not parents to invest in their children’s education by
capable of updating their technology as often as sending them to school. This may lead to the
their larger, wealthier counterparts. Unable to emergence of a strong and growing group of
compete with multinational firms and wealthy entrepreneurs, which should generate pressure
nations, small businesses and third world for improved governance. Strong economic
countries are forced to do business locally, not
growth therefore advances human development,
growing and reaching their full potential.
which, in turn, promotes economic growth. A
The economic arguments in favour of typical estimate from cross-country studies reveal
globalization stress the positive relationships that a 10 per cent increase in a country’s average
income will reduce the poverty rate by between
Access to resources;
20 and 30 per cent.
A fairer equitable distribution of income. The
basic salary of the least paid worker should
Some examples:
be adequate to maintain his nuclear family;
1. China alone has lifted over 450 million
people out of poverty since 1979. Evidence
Increases in basic freedoms and guaranteed
shows that rapid economic growth between security of all citizens; respect and responsible
1985 and 2001 was crucial to this enormous relationship with ecosystem.
reduction in poverty. Poverty Alleviation Measures in India
2. India has seen significant falls in poverty
since the 1980s. This has been strongly Since Independence, the government is
related to India’s impressive growth record following a three-pronged strategy for poverty
over this period. eradication, which comprises:
3. Mozambique illustrates the rapid reduction a) Economic growth and overall development.
in poverty associated with growth over a b) Human development with emphasis on
shorter period. Between 1996 and 2002, the health, education and minimum needs, inclu-
economy grew by 62 per cent and the ding protection of human rights and raising
proportion of people living in poverty the social status of the weak and poor.
declined from 69 per cent to 54 per cent.
c) Directly-targeted programmes for poverty
But under different conditions, similar rates alleviation through employment generation,
of growth can have very different effects on training and building up asset endowment
poverty, the employment prospects of the poor of the poor.
and broader indicators of human development.
Economic growth enables expansion of
The extent to which growth reduces poverty
productive employment and generation of
depends on the degree to which the poor
resources, which are vital to support any form
participate in the growth process and share in
of intervention for eradication of poverty. Since
its proceeds. Thus, both the pace and pattern of
growth matters for reducing poverty. 1991 India has undertaken trade reforms,
financial sector reforms, and removal of controls,
A successful strategy of poverty reduction which primarily were introduced with the
must have at its core measures to promote rapid objective of improving efficiency and productivity
and sustained economic growth. The challenge to accelerate growth. The ultimate objective of
for policy is to combine growth promoting policies such reforms was ensuring the expeditious
with policies that allow the poor to participate eradication of poverty. Adequate precautions
fully in the opportunities unleashed and so were taken to protect the poorer sections of the
contribute to that growth. This includes policies society against the short-term effects of these
to make labour markets work better, remove changes. This was done mainly through
gender inequalities and increase financial increased allocation of resources for programmes
inclusion. for poor in the national plan and sharpening the
Thus India’s most recent development plan focus of such programmes on the poor. The
has the main objective of raising economic Central support for human resource and social
growth and making growth more inclusive. development in the country has progressively
increased through the 1990s. The Central
Sustainable development in the developing
Government’s expenditure (plan and non-plan)
countries should include the following:
on education, health, family welfare, nutrition,

Increases in real income especially for the sanitation, rural development, social welfare, etc.
‘wretched of the earth’. This implies poverty has increased tremendously.
alleviation;
Some programmes are discussed as follows:

Improvements in health and nutritional
status especially children and young mothers 1. MGNREGA
who are vulnerable to most preventable Mahatma Gandhi National Rural
diseases; Employment Guarantee Act (MGNREGA) was

Education achievement; launched from Anantpur in Andhra Pradesh on
February 2, 2006. The Act has been instrumental
Wages are to be paid according to the
in raising the productivity, increasing the Minimum Wages Act, 1948 for agricultural
purchasing power, reducing distress migration, labourers in the State, unless the Centre
creating durable assets while ensuring liveli- notifies a wage rate which will not be less
hood opportunities for the needy and poor in than 60 (US$1.10) per day. Equal wages will
rural India. be provided to both men and women.

The Act is aimed at enhancing the livelihood
Wages are to be paid according to piece rate
and security of people in rural areas by or daily rate. Disbursement of wages has to
guaranteeing 100 days of wage-employment in be done on weekly basis and not beyond a
a financial year to a rural household whose adult fortnight in any case.
members volunteer to do unskilled manual work.
At least one-third beneficiaries shall be
These works include water conservation, drought women who have registered and requested
proofing, irrigation, land development, work under the scheme.
rejuvenation of traditional water bodies, flood
Work site facilities such as crèche, drinking
control and drainage work, rural connectivity water, shade have to be provided.
and work on the land of SC/ST/BPL/IAY
The shelf of project for a village will be
beneficiaries/land reform beneficiaries/ recommended by the gram sabha and
individual small and marginal farmers. approved by the zilla panchayat.
Provisions under MGNREGA:
At least 50% of works will be allotted to
Gram Panchayats for execution.

Adult members of a rural household, willing
to do unskilled manual work, are required
Permissible works predominantly include
to make registration in writing or orally to water and soil conservation, afforestation
the local Gram Panchayat. and land development works.

The Gram Panchayat after due verification
A 60:40 wage and material ratio has to be
will issue a Job Card. The Job Card will bear maintained. No contractors and machinery
the photograph of all adult members of the is allowed.
household willing to work under NREGA
The Central Govt. bears 100 per cent wage
and is free of cost. cost of unskilled, manual labour and 75 per

The Job Card should be issued within 15 cent of the material cost, including the wages
days of application. of skilled and semi skilled workers.

A Job Card holder may submit a written
Social Audit has to be done by the Gram
application for employment to the Gram Sabha.
Panchayat, stating the time and duration for
Grievance redressal mechanisms have to be
which work is sought. The minimum days put in place for ensuring a responsive
of employment have to be at least fourteen. implementation process.

The Gram Panchayat will issue a dated The MGNREGA achieves twin objectives of
receipt of the written application for rural development and employment. The
employment, against which the guarantee MGNREGA stipulates that works must be
of providing employment within 15 days targeted towards a set of specific rural develop-
operates. ment activities such as: water conservation and
harvesting, afforestation, rural connectivity, flood

Employment will be given within 15 days of
control and protection like construction and
application for work, if it is not then daily
repair of embankments, etc. Digging of new
unemployment allowance as per the Act, has
tanks/ponds, percolation tanks and construction
to be paid, liability of payment of of small check dams are also given importance.
unemployment allowance is of the States. The workers are given work such as land leveling,

Work should ordinarily be provided within tree plantation, etc.
5 km radius of the village. In case work is
Recent initiatives under the MGNREGA:
provided beyond 5 km, extra wages of 10%
are payable to meet additional transportation a) The basket of permissible activities has been
and living expenses. expanded to make it more meaningful.
 b) Electronic fund management system (eFMS)
Empowering the community to tackle the
in all states has been initiated in a phased issues of urban poverty through suitable self
manner to reduce delay in payment of wages. managed community structures like
c) Additional employment over and above 100 Neighbourhood Groups (NHGs), Neighbour-
days per household in notified drought- hood Committees (NHC), Community
affected talukas/ blocks is now permissible. Development Society (CDS), etc.
d) Provision has been made for seeding in SJSRY have five major components, namely:
Aadhaar into the MGNREGA Workers a) Urban Self Employment Programme (USEP)
records to prevent leakage. aims at providing gainful employment to
e) Convergence of the MGNREGA with the urban youth.
Total Sanitation Campaign (TSC) has been
b) Urban Women Self-help Programme (UWSP)
undertaken.
aims at providing assistance by way of
2. Swarna Jayanti Shahari Rozgar Yojana subsidy to urban poor women for setting up
With a view to provide gainful employment gainful group enterprises with SHG-Bank
to the urban unemployed and underemployed linkage.
through encouraging the setting up of self- c) Skill Training for Employment Promotion
employment ventures or provision of wage amongst Urban Poor (STEP-UP) focus on
employment, a new urban poverty alleviation providing assistance for skill formation/
programme, namely, Swarna Jayanti Shahari upgradation of the urban poor to enhance
Rozgar Yojana (SJSRY) was launched by the their capacity to undertake self-employment
Government of India on 01.12.1997. as well as access better salaried employment.
This scheme subsumed the earlier three urban d) Urban Wage Employment Programme
poverty alleviation programmes, namely Urban (UWEP) aims at providing wage employment
Basic Services for the Poor (UBSP), Nehru to beneficiaries living below the poverty line
RozgarYojana (NRY) and Prime Minister’s within the jurisdiction of urban local bodies
Integrated Urban Poverty Eradication by utilising their labour for construction of
Programme (PMIUPEP). socially and economically useful public
assets.
An independent evaluation of SJSRY was
carried out by the Ministry of Housing & Urban e) Urban Community Development Network
Poverty Alleviation in 2006 to assess the impact (UCDN) aims at promoting community
of the scheme in improving the conditions of the organizations and structures such as
urban poor. Based on the study findings, lessons Neighbourhood Groups (NHGs), Neighbour-
learnt in implementation and feedback received hood Committees (NHCs), and Community
from State Governments, Urban Local Bodies and Development Societies (CDSs) to facilitate
other stakeholders, a revision of the Guidelines sustainable local development.
of the SJSRY scheme has been made, with effect The following major changes have been
from the year 2009-2010. included under the revamped scheme:
The main objectives of the new revamped SJSRY a) For special category States (8 NER States and
are: 3 other hilly States i.e. Arunachal Pradesh,

Addressing urban poverty alleviation Assam, Manipur, Meghalaya, Mizoram,
through gainful employment to the urban Nagaland, Sikkim, Tripura, Jammu &
unemployed or underemployed poor by Kashmir, Himachal Pradesh and
encouraging them to set up self-employment Uttarakhand), the funding pattern for the
ventures (individual or group), with support Scheme between Centre and the States, has
for their sustainability; or undertake wage been revised from 75 :25 to 90:10.“
employment; b) For the beneficiary under the Urban Self

Supporting skill development and training Employment Programme (USEP) component
programmes to enable the urban poor have of the Scheme, the education limit criteria of
access to employment opportunities opened “not educated beyond 9th standard” has
up by the market or undertake self been removed and now no minimum or
employment; and maximum educational qualification level has
 been prescribed for the purpose of eligibility Finance, RBI, and other stakeholders will
of assistance.“ monitor the Scheme. This Committee will be
c) For the self-employment (individual meeting at least once in every three months.
category), the project cost ceiling has been
At the State level also, a State Level
enhanced to Rs. 2.00 Lakhs from the earlier Monitoring Committee having members from
Rs. 50000/ - and the subsidy has also been the Banks, Micro Finance Institutions, Civil
enhanced to 25% of the project cost (subject Society, and other stakeholders will be set
to a maximum of Rs. 50000/-), from the up to effectively monitor the Scheme. This
earlier 15% of the project cost (subject to a Committee will be meeting at least once in
maximum of Rs. 7500/-).“ every three months.
d) For the group enterprises set up by urban
At the Urban Local Body level an Urban
poor women, the subsidy has been made as Poverty Alleviation & Livelihood
35% of the project cost or Rs. 300,000/- or Development Cell will coordinate and
Rs. 60,000/- per member of the Group, implement the scheme with a suitable
whichever is less. The minimum number monitoring system put in place.
required to form a women group has been 3. Slum Development Programmes
reduced from 10 to 5. The revolving fund
According to the 2001 Census, there are 40.6
entitlement per member has also been
million persons living in slums in 607 towns/
enhanced from the existing Rs. 1000/- to Rs.
cities, accounting for 22.8 per cent of the
2000/-.
population of these cities. Absence of master
e) Under the Urban Wage Employment plans, multiplicity of agencies working without
Programme (UWEP) component, which is coordination, insufficient availability of land for
applicable to the towns having population housing needs of the urban poor, failure to
less than 5 Lakhs as per 1991 census, the provide facilities for street vendors and hawkers,
60:40 Material labour ratio for the works are some of the reasons for the persistence of
under UWEP, flexibility of 10% (either side) urban slums.
is now accorded to the States/UTs.
Various Schemes: National Slum
f) The Skill Training of the Urban poor
Development Programme (NSDP), Night Shelters,
component has been restructured and quality
Two Million Housing Scheme, Accelerated Urban
skill training will be provided to the urban
Water Supply Programme (AUWSP), and Low-
poor linking it with certification, imparted
Cost Sanitation — provide for a wide range of
preferably on Public-Private Partnership
services to the urban poor, including
(PPP) mode, with the involvement of reputed
slumdwellers. They include identification of the
institutions like IITs, NITs, Poly-techniques,
urban poor, formation of community groups,
ITIs, other reputed agencies, etc. The average
involvement of NGOs, self-help/thrift and credit
expenditure ceiling per trainee has been
activities, training for livelihood, credit and
enhanced from Rs.2600/- to Rs.10000/.“
subsidy for economic activities, housing and
g) 3% of the total Scheme allocation will be sanitation, environmental improvement,
retained at the Central level for special/ community assets, wage employment and
innovative projects to be undertaken to convergence of services.
implement a time-bound targeting to bring a
specific number of BPL families above the Valmiki-Ambedkar Awas Yojana
poverty line through self-employment or skill (VAMBAY) was introduced in 2001-02 to provide
development. a shelter or upgrading the existing shelter to BPL
people in urban slums. Twenty per cent of the
Implementation & Monitoring total allocation under VAMBAY is provided for

At the National level the Ministry of Housing sanitation and community toilets to be built for
& Urban Poverty Alleviation shall be the the urban poor and slum dwellers
nodal Ministry for implementation of SJSRY. 4. National Social Assistance Programme

At the Central level, a Steering Committee The National Social Assistance Programme
headed by Secretary (HUPA) and having (NSAP) was launched as a Centrally sponsored
members from the States/UTs, Ministry of scheme (CSS) in 1995, with the aim of providing
social assistance benefit to poor households in 5. Indira Awaas Yojana
the case of old age, death of primary breadwinner Housing is one of the components considered
and maternity. The programme supplements the to be vital for human survival and, therefore,
efforts of the state governments with the objective essential for socio-economic development. As part
of ensuring minimum national levels of well-being of the efforts to meet the housing needs of the
and the Central assistance is an addition to the rural poor, the scheme of Indira Awaas Yojana
benefit that the states are already providing on (IAY) is being implemented in the country.
social protection schemes. NSAP has the
following components: According to salient features of Indira Awaas
Yojana (IAY) the funding of IAY is shared
Indira Gandhi National Widow Pension between the Centre and States in the ratio of
Scheme’ (IGNAPS): A pension of Rs. 300 per 75:25. In case of North-East States, the funding
month to be granted to widows aged 40–59 living ratio between the centre and the States is 90:10
below poverty-line conditions. Pradhan of Gram respectively. For Union Territories (UTs), entire
panchayat shall review the list of widows and funds of IAY are provided by the Centre.
report in case of any re-marriage
A rural Below Poverty Line(BPL) family is
Indira Gandhi National Disability Pension given grant of Rs. 45000/- in plain areas and
Scheme (IGNDPS): A pension of Rs. 300 per Rs.48,500/- in hilly/difficult areas for
month to be granted to physically/mentally construction of a house. The IAY houses have
handicapped individuals aged 18–59, living below also been included under the differential rate of
poverty-line conditions. The central govt has interest (DRI) scheme for lending by
planned to increase the amount from Rs.300 to Nationalized Banks upto Rs.20,000/- per unit at
Rs.1000 and reduce the disability percentage from an interest rate of 4% in addition to financial
80% to 40%. assistance provided under IAY.
Indira Gandhi National Old Age Pension The criteria for allocation funds to the States
Scheme (IGNOAPS): It provides for old age & UTs involve assigning 75% weightage to
pension of Rs. 200/- per month to persons above housing shortage and 25% to poverty ratio. The
the age of 60 years and for persons above the allocation amongst districts is based on
age of 80 years the amount of pension has been 75% weightage to housing shortage and
raised to Rs. 500/- per month. 25%weightage to SC/ST component. Further,
National Family Benefit Scheme: In case of 60% of the IAY allocation is meant for benefiting
the death of the "primary breadwinner" of a SC/ST families, 3% for physically handicapped
household living below poverty line conditions, and 15% for minorities.
a lump sum grant of Rs. 20,000 (from fiscal 2012- The dwelling units are invariably allotted in
13) is provided to the household. The primary the name of a female member of the beneficiary
breadwinner as specified in the scheme, whether household. Alternatively, it can be allotted in the
male or female, had to be a member of the name of both husband and wife. In case there is
household whose earning contributed substan- no eligible female member in the family, a house
tially to the total household income. The death can be allotted to a male member of the
of such a primary breadwinner occurring whilst family.
he or she was in the age group of 18 to 64 years
6. Jawahar Gram Samridhi Yojana (JGSY)
i.e., more than 18 years of age and less than 65
years of age, makes the family eligible to receive The Jawahar Rozgar Yojana (JRY) has been
grants under the scheme.' recast as the Jawahar Gram Samridhi Yojana
(JGSY) with effect from 1.4.1999 to impart a
Annapurna Scheme: The scheme provides thrust to creation of rural infrastructure. While
food security in the form of 10 kg of foodgrains the JRY resulted in creation of durable assets,
per month free of cost to destitute senior citizens the overriding priority of the programme was
with little or no regular means of subsistence the creation of wage employment. It was felt
from his/ her own source of income or through that a stage had come when rural infrastructure
financial support from family members or other needed to be taken up in a planned manner and
sources. given priority. The Gram Panchayats can
effectively determine their infrastructure needs institutions will utilize funds efficiently and
and the responsibility of implementing the improve the deplorable conditions of the poor is
programme has been entrusted to the Gram an illusion. There are too many impediments to
Panchayats. The funds are directly released to poverty reduction: bribery, political influence in
the Gram Panchayats by the DRDAs/Zilla the allocation of land and/or credit, diffused
Parishads. The JGSY is implemented as a CSS focus and priorities, poor execution, a shortage
with funding in the ratio of 75:25 between the of rural infrastructure, and social inequality,
Centre and the States. The primary objective of among other factors.
JGSY is creation of demand driven community
Corruption and misallocation of development
village infrastructure including durable assets at
funds are ultimately the result of failed
the village level and assets to enable the rural
governance.
poor to increase the opportunities for sustained
employment. The secondary objective is Thus the major reasons for failure of poverty
generation of supplementary employment for the alleviation programmes are:
unemployed poor in the rural areas. The wage
employment under the programme is given to I. Planning process is faulty:
Below Poverty Lines (BPL) families.
Identifying the ‘poor’

Defining ‘poor’
Why Poverty Alleviation Programmes have
Failed in India?
Processing of the identification involves too
many stages.
The Govt. of India has many schemes for the
poor and for their welfare. Overall assessment of
Lack of technology upgradation.
the CAG and other governing bodies has found,
Ideally the programme should be broad
the scheme that has been implemented by the based. (benefitting the large number of
Indian Government has many loopholes where people)
the executives and operatives take the benefit.
Disjointed programmes- not integrated.
Governments, international agencies and II. Implementation of programmes:
donors have spent billions of dollars to address

Corrupt officials/ staffs.
poverty. For example, in rural India, the
government spends significant funds on subsidies
Lack of involvement of people.
(for electricity, fertilizer, fuels, etc.), food rations,
Local politics. (selection of beneficiaries)
price supports, land allocation/distribution, job
Improper follow up of programmes/ review
training and financial assistance for initiatives in or revision.
agriculture and small businesses. Loans from the
World Bank and other international agencies and III. Lack of support from the credit and
bilateral aid supplement domestic government marketing system:
resources. But who has benefited from all these
Role of local money lenders and banks.
programmes and assistance? The beneficiaries are
Inability to sustain income generated from
usually corrupt officials who manage and the asset credited.
distribute funds, and landlords and powerbrokers
who directly or indirectly extract benefits for What Should be Done to Improve Poverty
themselves. In India, over 90% of the agricultural Alleviation Programmes?
land is owned and partly cultivated by less than
10% of the rural population who are termed Poverty alleviation programmes have been
farmers; others are mostly labourers. designed to address different facets of rural
Governments allocate land to the poor, but they poverty. Micro credit-linked programmes provide
are unable to utilize it because of limited water a package of services, including credit and
resources, bad soil conditions, and/or the inability subsidy to set up micro enterprises. Wage
to secure credit. Larger subsidies benefit bigger employment programmes address the issue of
farmers, but the poor do not gain much directly transient poverty. Besides, schemes for infra-
from any government programs.““The structure development and provision of basic
presumption that with more money, corrupt and services contribute to the well being of the
inefficient governments and bureaucratic rural people.
 Thus successful implementation of these Comparison Between India and China on
programmes requires appropriate policy Poverty Reduction
framework, adequate funds, and effective
delivery mechanism. The success of these China and India are making immense strides
programmes ultimately depends on the capability in development. While growth in both countries
has been impressive, there is now much concern
of the delivery system to absorb and utilise the
about whether this growth is yielding sufficient
funds in a cost-effective manner. An effective
poverty reduction. This can be compared by using
and responsive district level field machinery with
the poverty data in both the nations.
a high degree of commitment, motivation,
professional competence and, above all, integrity In September 2011, the Indian Planning
has been recognized as one of the prerequisites Commission presented new estimates for the
for successful implementation of an anti poverty country’s poverty lines in urban and rural areas,
strategy. setting these thresholds at 965 and 781 rupees
per capita per month (or about 32 and 26 rupees
An effective governance system has to ensure
per capita per day), respectively.
people’s participation at various stages of
formulation and implementation of the Since the early 1990s, India’s official poverty
programmes, transparency in the operation of estimates have been made on the basis of the
the schemes and adequate monitoring. methodology recommended by the Lakdawala
Committee, established in 1993. These poverty
International experience shows that greater lines are based on per capita consumption levels
functional and financial devolution to local associated with a commodity bundle that yielded
governments results in higher allocation of a specified level of caloric intake believed in 1973-
resources for social sectors which are 74 to be appropriate: 2,400 and 2,100 kilocalories
accompanied by efficiency gains in resource use. per capita per day for rural and urban areas,
Such trends in social spending have been respectively.
witnessed in many Indian States as well.
In December 2005, the Planning Commission
Panchayati Raj Institutions (PRIs) have been appointed a committee to review the Lakdawala
given a constitutional role in the governance of poverty lines. In 2009, the Tendulkar Committee
the country. Functional responsibilities for subjects (chaired by Suresh Tendulkar) concluded that
that are central to the well being of the some changes were necessary, and recommended
communities have been devolved on the PRIs by locating the poverty line in the consumption levels
the Constitution. Truly empowered PRIs can play observed in the 2004-05 National Sample Survey,
an important role in improving the efficiency and after correcting for the rural–urban price
effectiveness of the schemes and reducing differential.
leakages.
The new estimates increased the poverty
The Non Governmental Organisations headcount ratio for rural areas from 28 per cent
(NGOs) and Community Based Organizations using the 1993 methodology to nearly 42 per
(CBOs) have been playing an active role in cent using the Tendulkar methodology, which is
building up people’s awareness and providing very close to figures reported using the World
support to the governmental agencies and the Bank’s US$1.25 per day poverty line. By the new
Panchayati Raj Institutions in executing projects estimates, more than 327 million Indians in rural
for development in rural areas. The NGOs can areas are living in poverty, an increase of 105
play an important role in capacity building, million people in absolute terms.
access to information, organisation of rural poor But the Tendulkar Committee reported an
in self help groups and increasing their observed calorie intake of 1,999 and 1,776
awareness and capabilities. All these initiatives kilocalories per day for those near the new
have good governance as their ultimate goal. It poverty line in rural and urban areas,
is expected that through the accelerating respectively. These levels of calorie intake are
convergence of all these favourable factors it will regarded as low relative to the minimum dietary
be possible for the country to achieve the goals energy requirement recommended in the report of
of inclusive growth as envisaged in XIIth FYP. a joint Food and Agricultural Organization/
 % 1993 Methodology based Tendulkar Methodology World Bank Poverty Lines
on calorie norm (PPP of 2005)
rural urban combined rural urban combined US $1.25 US $2
1993-94 37.3 32.4 36 50.1 31.8 45.3 49.4 81.7
2004-05 28.3 25.7 27.5 41.8 25.7 37.2 41.6 75.6

United Nations University/World Health years. The infant mortality rate is fifty per
Organization Expert Consultation. thousand in India, compared with just seventeen
in China; the mortality rate for children under
However, China has been very successful in
five is sixty-six per thousand for Indians and
reducing extreme deprivation. In the early 1980s,
nineteen for the Chinese; and the maternal
94 percent of China’s rural population and 44.5
mortality rate is 230 per 100,000 live births in
percent of its urban population lived on less than
India and thirty-eight in China. The mean years
US$1.25 a day. By 2005, the percentage of people
of schooling in India were estimated to be 4.4
in poverty had fallen to 26 percent in rural areas,
years, compared with 7.5 years in China. China’s
and to just 1.7 percent in urban areas. This
adult literacy rate is 94 per cent, compared with
represents a fall of 627 million people, from 835
India’s 74 per cent according to the preliminary
million in 1981 to 207.7 million in 2005.
tables of the 2011 census. As a result of India’s
Remarkably, the fall in the number of China’s
effort to improve the schooling of girls, its literacy
poor exceeds the number still living in poverty in
rate for women between the ages of fifteen and
sub-Saharan Africa (about 388 million people)
twenty-four has clearly risen; but that rate is still
and Latin America (47.6 million people). But it
not much above 80 per cent, whereas in China
also suffers from serious drawbacks as - China’s
it is 99 per cent. One of the serious failures of
official poverty lines have been derived based on
India is that a very substantial proportion of
a bundle of items dominated by food grains that
Indian children are, to varying degrees,
have not been updated adequately to reflect
undernourished (depending on the criteria used,
changes in consumption patterns nor adjusted
the proportion can come close to half of all
to take into account inflationary trends in both
children), compared with a very small proportion
food and non-food items. The result was one of
in China. Only 66 per cent of Indian children are
the lowest rural poverty lines in the developing
immunized with triple vaccine (diphtheria/
world. In December 2011, the Chinese
pertussis/tetanus), as opposed to 97 per cent in China.
government announced it would lift the country’s
rural poverty line from 1,274 yuan per year in The data also shows that Higher GNP has
2010 to 2,300 yuan, an increase of over 80 certainly helped China to reduce various
percent. This, once adjusted by the purchasing indicators of poverty and deprivation, and to
power parity of 2005, is equivalent to expand different features of the quality of life.
approximately US$1.80 per day, a threshold well Thus there is a need to encourage sustainable
above the US$1.25 used by the World Bank for economic growth in India in order to improve
international poverty comparisons. living standards today and in the future
(including taking care of the environment in
Thus above data clearly shows that though
which we live).
economic growth is important for enhancing
living conditions, its reach and impact depend But most importantly there is a need to
greatly on what we do with the increased income. redefine the poverty lines both in China and India
The relation between economic growth and the because:
advancement of living standards depends on

First, it signals a policy shift from “trickle
many factors, including economic and social
down” economics that emphasizes growth,
inequality and, what the government does with
pure and simple, towards the notion
the public revenue that is generated by economic
of inclusive or pro-poor growth.
growth. Some statistics about China and India,
drawn mainly from the World Bank and the
Second, by lifting the official poverty lines,
United Nations, show that: Life expectancy at the two countries have increased, in
birth in China is 73.5 years; in India it is 64.4 principle, the number of people that are
 eligible to receive support from social
Spatial inequalities are particularly increasing
protection policies. across China, with western and interior rural
If social protection programmes in the two communities experiencing much weaker
countries prove to be effective in facilitating effects from economic growth than the
poverty exit, this could lead to a significant eastern coastal provinces. The national Gini
reduction in global poverty, even if less progress coefficients are higher than both the rural
is made in sub-Saharan Africa, Latin America, and urban Ginis, indicates that the rural–
and the rest of East and South Asia. However, urban divide is driving the growing levels of
the two giants face important challenges in that inequity in the country. This can be
process. understood by analyzing the fiscal policies
in both the nations. Tax rates in China and
The challenges are: India are low, with most revenues coming

India and, especially, China have enjoyed from indirect taxes. This also reflects the low
rapid economic growth, with a median share of government revenues as percentage
growth rate of 6 percent and 10 percent in of GDP, which oscillates around 20 per cent.
This is in contrast with the average of 50 per
the 1980-2010 period, respectively. This has
cent observed in OECD countries. Tax
catapulted the growth in per capita gross
systems in both countries remain limited to
national income (GNI) in the two countries.
maximizing redistributive policies — and to
A significant part of the domestic investment
a large extent they will also limit the capacity
in China, about 20 per cent of GDP, has
of these countries to tackle extreme
gone to infrastructure projects, which is
deprivation in the coming years.
nearly 10 times more than in India. That has

China and India also face significant
facilitated the accelerated rate at which the
challenges in terms of employment
Chinese economy has transited from
generation. Rising unemployment is a driving
agricultural to manufacturing production. In
factor in the incidence of poverty in urban
India, the transition has been towards the
areas in China, which has been exacerbated
information technology (IT) off-shore service
by market-oriented structural reforms and
industry, with as much as 60 per cent of the
large migration flows of unskilled workers
labour force remaining engaged in traditional from rural areas to the cities. Migrant
farming activities. Thus economic growth is workers face exclusion from formal
a necessary condition to rising per capita employment arrangements and state benefits
income, but it is nonetheless insufficient to such as housing, health and school subsidies,
guarantee a steady trend towards poverty as well as income support from social
reduction. In China, for instance, the protection schemes. But India is facing service
relationship between economic growth and sector growth which is not able to provide
poverty reduction is far from being linear, sustained growth, as large unskilled labour
with episodes of high economic performance force remains poor and disconnected from
in the 1990s accompanied with increases in the booming economy.
the poverty rates. In India, since the late 1990s
Social protection in the two countries remains
the country has experienced the fastest highly fragmented. In China, the Minimum
economic growth, and yet the speed at which Living Subsidy Scheme (also known as Di
poverty is being reduced has decelerated. Bao) was introduced in 1997 to support the
This highlights the importance of public urban unemployed poor who had been
interventions in making growth more affected by the market-based structural
inclusive. Indeed, it is now well understood reforms. The programme remains limited, as
that policies designed to maximize growth it excludes those not registered with the civil
can only trickle down to the poor if they are affairs department office, these are mainly
accompanied by wealth redistribution, migrant rural workers who move to the city
employment opportunities, investments in in search of livelihoods. In the mid 2000s,
human capital and the provision of social the Di Bao was gradually extended to rural
protection for the most vulnerable groups in areas to cover nearly 42 million rural people,
society. but the size of the transfers are unlikely to
 reduce the incentives to migrate to the cities. disability pensions, and income transfers for
The rural Di Bao, together with the urban schooling and healthcare accessibility, to
Di Bao, cover nearly 150 million people, unemployment schemes such as the NREGS that
which represents the second-largest social rely on self-selection for the identification of
protection programme worldwide in terms beneficiaries — and therefore exclude those who
of scale and coverage, just behind India’s are unable to participate in the scheme due to
National Rural Employment Guarantee disability, illness or age. The programmes also
Scheme (NREGS). are unevenly distributed across the country, with
The MGNREGA provides a guarantee of 100 many states and communities yet to be covered.
days of waged employment per year to More co-ordination and institution building are
unemployed unskilled workers, currently clearly needed, but at the same time, social
covering nearly 48 million households, or about protection will only provide a sustained process
240 million people. In fact, India’s social of poverty reduction if it is supported by growth,
protection system is complex but incomplete. It redistributive policies, improvements in public
spans from categorical and means-tested age and service provision and employment opportunities.