Poverty in Bihar

70th BPSC GS Paper - 2 , Sec. - II | Bihar Economy

By : Tarun Ranjan (Circle Officer, Govt. of Bihar)

Poverty: Poverty is the deprivation of food, shelter, money and clothing when people can’t satisfy their basic needs. Poverty can be understood simply as a lack of money or morebroadly in terms of barriers to everyday human life. Gandhi says poverty is the worst form of violence. Providing minimum basic needs to the people upliftment of the poorest of the poor (Antyodaya), integrating the poor into the mainstream and achieving a minimum standard of living for all have been the major aims of independent India. World Bank’s document Poverty and Shared Prosperity notes that since growth in the world economy is slowing down, this would have a deleterious effect on poverty reduction. For achieving a given target of poverty reduction therefore, such as what the Sustainable Development Goals (SDG-1) of the UN specify, namely ending poverty (almost) by 2030, income inequality should be reduced. Towards this end, the objective is to increase the share of the bottom 40 percent of the population in total income.

Measures of Poverty-

(1) Absolute Poverty: (Destitution) It refers to the state of severe deprivation of basic human needs.

(2) Relative Poverty: It is defined contextually as Economic inequality in location or society in which people live.

WHAT CAUSES POVERTY?

The causes of poverty lie in the institutional and social factors that mark the life of the poor. The poor are deprived of quality education and unable to acquire skills which fetch better incomes. Also access to health care is denied to the poor. The main victims of caste, religious and other discriminatory practices are poor. These can be caused as a result of -

1. social, economic and political inequality
2. social exclusion
3. unemployment
4. indebtedness
5. Unequal distribution of wealth. Aggregate poverty is just the sum of individual poverty.

Poverty is also explained by general, economy-wide problems, such as-

1. low capital formation
2. lack of infrastructure
3. lack of demand
4. pressure of population
5. lack of social/ welfare nets.

Poverty Line

Poverty Line refers to the minimum income, consumption, or, more generally access to goods and services below which individuals are considered to be poor. The poverty line in India is the expenditure level at which a minimum calorie intake and indispensable non-food purchases are assured. It may be noted that even among the poor, there are differences in the degrees of poverty. So the focus of the government policies should be on the poorest of the poor. Nutrition based poverty lines are used in many countries. Due to various limitations in the official estimation of poverty, scholars have attempted to find alternative methods. For instance, Amartya Sen, noted Nobel Laureate, has developed an index known as Sen Index. There are other tools such as Poverty Gap Index and Squared Poverty Gap.

There are many factors, other than income and assets, which are associated with poverty; for instance, the accessibility to basic education, health care, drinking water and sanitation. They need to be considered to develop Poverty Line. The existing mechanism for determining the Poverty Line also does not take into consideration social factors that trigger and perpetuate poverty such as illiteracy, ill health, lack of access to resources, discrimination or lack of civil and political freedoms.

Why defining poverty line is a controversial issue?

Most of the governments have mothballed the reports of commmittees and panels because this issue is not only politically sensitive but also has deeper fiscal ramifications. If the poverty threshhold is high, it may leave out many needed people; while if it is low, then it would be bad for fiscal health of the government. Third, there is a lack of consensus among states too. We note that some states such as Odisha and West Bengal supported the Tendulkar Poverty Line while others such as Delhi, Jharkhand, Mizoram etc. supported Rangrajan Line. Thus, no one, including NITI aayog wants to bell the cat when it comes to count number of poor in the country.

How poverty is measured in other countries?

In most of European countries, a family with net income of less than 60% of a median net disposable income is counted as poor. In United States, poverty line represents the basic cost of food for a family multiplied by three. A family is counted as poor if its pre-tax income is below this threshold.

Poverty in India

A large section of the rural poor in India are the small farmers. The land that they have is, in general, less fertile and dependent on monsoon. Their survival depends on subsistence crops and sometimes on livestock. With the rapid growth of population and without alternative sources of employment, the per-head availability of land for cultivation has steadily declined leading to fragmentation of land holdings. The income from these small land holdings is not sufficient to meet the family’s basic requirements and to pay back the loans that they have taken for cultivation and other domestic needs. In situations of drought and other natural calamities make them take extreme steps like suicide. A large section of urban poor in India are largely the overflow of the rural poor who migrate to urban areas in search of employment and a livelihood. Industrialisation has not been able to absorb all these people. The urban poor are either unemployed or intermittently employed as casual labourers. Casual labourers are among the most vulnerable in society as they have no job security, no assets, limited skills, sparse opportunities and no surplus to sustain them. Poverty is, therefore, also closely related to nature of employment. Unemployment or under employment and the casual and intermittent nature of work in both rural and urban areas that compels indebtedness, in turn, reinforces poverty. Indebtedness is one of the significant factors of poverty. A steep rise in the price of foodgrains and other essential goods, at a rate higher than the price of luxury goods, further intensifies the hardship and deprivation of lower income groups. The unequal distribution of income and assets has also led to the persistence of poverty in India. All this has created two distinct groups in society: those who posses the means of production and earn good incomes and those who have only their labour to trade for survival. Over the years, the gap between the rich and the poor in India has widened. Poverty is a multi-dimensional challenge for India that needs to be addressed on a war footing.

Poverty Measurement efforts undertaken in India

India is home to over one-third of poor people in the world. If we add the poor of Pakistan and Bangladesh into it, we find that almost half of world poverty exists in just these three nations. The next big concentration of poverty is in the sub-Saharan Africa. However, estimation of poverty has been a contentious issue in India. Historically, first estimation of a poverty line was done by Dadabhai Naoroji in 19th century, though he himself did not use the word “poverty line”.

1. Dadabhai Naoroji

The history of poverty estimation in India goes back to 19th century when Dadabhai Naoroji’s efforts and careful study led him to conclude subsistence based poverty line at 1867-68 prices, though he never used the word “poverty line”. It was based on the cost of a subsistence diet consisting of ‘rice or flour, dal, mutton, vegetables, ghee, vegetable oil and salt’. According to him, subsistence was what is necessary for the bare wants of a human being, to keep him in ordinary good health and decency. His studies included the scale of diet and he came to a conclusion on the subsistence costs based poverty line that varied from Rs.16 to Rs.35 per capita per year in various regions of India.

2. National Planning Committee

In 1938, Congress president Subhash Chandra Bose set up the National Planning Committee (NPC) with Jawaharlal Nehru as chairman and Professor K. T. Shah as secretary for the purpose of drawing up an economic plan with the fundamental aim to ensure an adequate standard of living for the masses. The Committee regarded the irreducible minimum income between Rs. 15 to Rs. 25 per capita per month at Pre-war prices. However, this was also not tagged something as a poverty line of the country. First Planning Commission working group, the concept of the poverty line was first introduced by a working group of the Planning Commission in 1962 and subsequently expanded in 1979 by a task force. The 1962 working group recommended that the national minimum for each household of five persons should be not less than Rs 100 per month for rural and Rs. 125 for urban at 1960-61 prices. These estimates excluded the expenditure on health and education, which both were expected to be provided by the state.

3. Y K Alagh Committee

Till 1979, the approach to estimate poverty was traditional i.e. lack of income. It was later decided to measure poverty precisely as starvation i.e. in terms of how much people eat. This approach was first of all adopted by the YK Alagh Committee’s recommendation in 1979 whereby, the people consuming less than 2100 calories in the urban areas or less than 2400 calories in the rural areas are poor. The logic behind the discrimination between rural and urban areas was that the rural people do more physical work. Moreover, an implicit assumption was that the states would take care of the health and education of the people. Thus, YK Alagh eventually defined the first poverty line in India.

4. Lakdawala Formula

Till as recently as 2011, the official poverty lines were based entirely on the recommendations of the Lakdawala Committee of 1993. This poverty line was set such that anyone above them would be able to afford 2400 and 2100 calories worth of consumption in rural and urban areas respectively in addition to clothing and shelter. These calorie consumptions were derived from YK Alagh committee only. According to the Lakdawala Committee, a poor is one who cannot meet these average energy requirements. However, Lakdawala formula was different in the following respects in comparison to the previous models:

• In the earlier estimates, both health and education were excluded because they were expected to be provided by the states.
• This committee defined poverty line on the basis of household per capita consumption expenditure. The committee used CPI-IL (Consumer Price Index for Industrial Laborers) and CPI- AL (Consumer Price Index for Agricultural Laborers) for estimation of the poverty line.
• The method of calculating poverty included first estimating the per capita household expenditure at which the average energy norm is met, and then, with that expenditure as the poverty line, defining as poor as all persons who live in households with per capita expenditures below the estimated value. The fallout of the Lakdawala formula was that number of people below the poverty line got almost double. The number of people below the poverty line was 16 per cent of the population in 1993-94. Under the Lakdawala calculation, it became 36.3 per cent.

5. Suresh Tendulkar Committee

In 2005, Suresh Tendulkar committee was constituted by the Planning Commission. The current estimations of poverty are based upon the recommendations of this committee. This committee recommended to shift away from the calorie based model and made the poverty line somewhat broad based by considering monthly spending on education, health, electricity and transport also.

• It strongly recommended target nutritional outcomes i.e. instead of calories; intake nutrition support should be counted.
• It suggested that a uniform Poverty Basket Line be used for rural and urban region. It recommended a change in the way prices are adjusted and demanded for an explicit provision in the Poverty Basket Line to account for private expenditure in health and education.
• Tendulkar adopted the cost of living as the basis for identifying poverty. The Tendulkar panel stipulated a benchmark daily per capita expenditure of Rs. 27 and Rs. 33 in rural and urban areas, respectively, and arrived at a cut-off of about 22% of the population below poverty line. However, this amount was such low that it immediately faced a backlash from all section of media and society. Since the numbers were unrealistic and too low, the government appointed another committee under Prime Minister’s Economic Advisory Council Chairman C. Rangarajan to review the poverty estimation methodology. Brushing aside the Tendulkar Committee. Rangarajan committee raised these limits to Rs. 32 and Rs. 47, respectively, and worked out poverty line at close to 30%. With estimates of Rangarajan committee, Poverty stood at around 30% in 2011-12. The number of poor in India was estimated at 36.3 crore in 2011- 12.

6. Current Status: Arvind Panagariya Task Force

The discussion about Lakdawala Formula, Suresh Tendulkar Committee and Rangarajan Committee make it clear that defining a poverty line in India has been a controversial issue since 1970s. The latest poverty line defined was by Rangarajan Formula. However, this report also did not assuage the critics. The new NDA Government turned down this report also. To define the poverty line, The NDA Government had constituted a 14-member task force under NITI Aayog’s vice-chairman Arvind Panagariya to come out with recommendations for a realistic poverty line. After one and half years work, this task force also failed to reach a consensus on poverty line. In September 2016, it suggested to the government that another panel of specialists should be asked to do this job {if defining poverty line}. Informally, this committee supported the poverty line as suggested by Tendulkar Committee.

There are Various measures of the extent of poverty

1. The head count index: It simply measures the proportion of the population that is counted as poor. Most widely used maesurement tool for poverty estimation.

 Head count index = Number of Poor /Total Number of Population Weakness

1. It does not take the intensity of poverty into account.

2. Survey does not indicate how poor the poor are, and hence does not change if people below the poverty line become poorer.

3. The poverty estimates should be calculated for individuals and not the households. Significance

1. The most common method of measuring and reporting poverty is the headcount ratio, given as the percentage of population that is below the poverty line.

2. One of the undesirable features of the headcount ratio is that it ignores the depth of poverty; if the poor becomes poorer, the headcount index does not change.

2. The poverty gap index: It is a measure of the intensity of poverty. It is defined as the average poverty gap in the population as a proportion of the poverty line. Poverty gap index provides a clearer perspective on the depth of poverty by estimating the depth of poverty by considering how far, on the average, the poor are from that poverty line and is an improvement over the poverty measure headcount ratio which simply counts all the people below a poverty line, in a given population, and considers them equally poor. By definition, poverty gap index is a percentage between 0 and 100%. Sometimes it is reported as a fraction, between 0 and 1. A theoretical value of zero implies that all the extremely poor people are exactly at the poverty line. A theoretical value of 100% implies all the extremely poor people have zero income.

3. The squared poverty gap (poverty severity) index: It is related to poverty gap index. It is calculated by averaging the square of poverty gap ratio. By squaring each poverty gap data, the measure puts more weight the further a poor person's observed income falls below the poverty line. The squared poverty gap index is one form of a weighted sum of poverty gaps, with the weight proportionate to the poverty gap.

4. Sen index is related to poverty gap index (PGI). Appraisal of Government measures From 2014, a scheme called Pradhan Mantri Jan-Dhan Yojana is available in which people in India are encouraged to open bank accounts. Besides promoting savings habit, this scheme intends to transfer all the benefits of government schemes and subsidies to account holders directly. Each bank account holder is also entitled to Rs. 2 lakh accident insurance and Rs. 30,000 life insurance cover.

Poverty alleviation programs in India

India has been conducting various poverty alleviation programs. Employment programmes and skill-building.

Jawahar Gram Samriddhi Yojana: The JRY was meant to generate meaningful employment opportunities for the unemployed and underemployed in rural areas through the creation of economic infrastructure and community and social assets.

Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) 2005: The Act provides 100 days assured employment every year to every rural household. One-third of the proposed jobs would be reserved for women. Under the programme, if an applicant is not provided employment within 15 days s/he will be entitled to a daily unemployment allowance.

National Rural Livelihood Mission: Ajeevika (2011): It evolves out the need to diversify the needs of the rural poor and provide them jobs with regular income on monthly basis. Self Help Groups are formed at the village level to help the needy.

National Urban Livelihood Mission: The NULM focuses on organizing urban poor in Self Help Groups, creating opportunities for skill development leading to market-based employment and helping them to set up self-employment ventures by ensuring easy access to credit.

Pradhan Mantri Kaushal Vikas Yojana: It will focus on the fresh entrant to the labour market, especially the labour market and class X and XII dropouts.

Food and shelter

Food for Work Programme: It aims at enhancing food security through wage employment. Foodgrains are supplied to states free of cost, however, the supply of food grains from the Food Corporation of India (FCI) godowns has been slow.

Annapurna: This scheme was started by the government in 1999–2000 to provide food to senior citizens who cannot take care of themselves and are not under the National Old Age Pension Scheme (NOAPS). This scheme would provide 10 kg of free food grains a month for the eligible senior citizens. They mostly target groups of ‘poorest of the poor’ and ‘indigent senior citizens’.

Pradhan Mantri Awaas Yojana: It has two components: Pradhan Mantri Awaas Yojana (Grameen) and Pradhan Mantri Awaas Yojana (Urban). It was launched in 2015. It unites schemes like Ujjwala yojana (provides LPG to BPL), access to toilets, water, drinking water facilities and Saubhagya Yojana (electricity).

Other schemes like Integrated Child Development Program, Midday Meal scheme etc are also providing food to the needy sections like children and women.

Access to credit

Pradhan Mantri Kisan Samman Nidhi: This scheme aims to provide financial assistance to provide working capital support to all the landholding farmers. This brings in the idea of universal basic income for the farmers in India.

Pradhan Mantri Jan Dhan Yojana: It aimed at direct benefit transfer of subsidy, pension, insurance etc. and attained the target of opening 1.5 crore bank accounts. The scheme particularly targets the unbanked poor.

Integrated Rural Development Programme (IRDP): It was introduced in 1978-79 aimed at providing assistance to the rural poor in the form of subsidy and bank credit for productive employment opportunities through successive plan periods.

Challenges

• Incidence of extreme poverty continues to be much higher in rural areas than in urban areas.
• Despite rapid growth and development, an unacceptably high proportion of our population continues to suffer from severe and multidimensional deprivation.
• While a large number of poverty alleviation programmes have been initiated, they function in silos. There is no systematic attempt to identify people who are in poverty, determine their needs, address them and enable them to move above the poverty line.
• The resources allocated to anti-poverty programmes are inadequate and there is a tacit understanding that targets will be curtailed according to fund availability. For instance, Mahatma Gandhi National Rural Employment Guarantee Act does not provide the guaranteed 100 days of work in many states.
• There is no method to ensure that programmes reach everybody they are meant for.
• Lack of proper implementation and right targeting
• There has been a lot of overlapping of schemes.
• Every year a huge number is added to the population pool of the country. This renders the scheme ineffective.

Way Forward

The World Health Organization has described poverty as the greatest cause of suffering on earth. Poverty eradication should not be the goal of the government but the goal of the government policies should be to create prosperity. Both monetary and non-monetary measures of poverty are needed to better inform the policies intended to address the needs and deprivations faced by poor populations.

Accelerating rural poverty reduction:

It’s not just about agricultural growth, which has long been considered the key driver of poverty reduction. Rural India is not predominantly agricultural and shares many of the economic conditions of smaller urban areas.

Capitalizing on the growing connectivity between rural and urban areas, and between the agriculture, industry and services sectors, has been effective in the past.

Creating more and better jobs

Future efforts will need to address job creation in more productive sectors, which has until now been lukewarm and has yielded few salaried jobs that offer stability and security.

Focusing on women and Scheduled Tribes

The most worrying trends are the low participation of women in the labour market and the slow progress among scheduled tribes.

India’s women have been withdrawing from the labour force since 2005and less than one-third of working-age women are now in the labour force. As a result, India today ranks last among BRICS countries, and close to the bottom in South Asia in female labour force participation.

Scheduled Tribes started with the highest poverty rates of all of India’s social groups, and have progressed more slowly than the rest.

Women and Scheduled Tribes are at risk of being locked out of India’s growth and prosperity.

Improving human development outcomes for the poor

The recent past shows that some problems, such as undernutrition and open defecation, are endemic and not only confined to the poor but others too, and have not improved with economic growth.

Better health, sanitation and education will not only help raise the productivity of millions, they will also empower the people to meet their aspirations, and provide the country with new drivers of economic growth.

Together with mooting the discussion on the need to provide a universal basic income, infrastructural and skill development combined with effective implementation of welfare policies will go a long way in eradicating poverty in the country.

How to reduce poverty in Bihar?

• Bihar’s turnaround under the leadership of Nitish Kumar – from a badly governed, economically backward state, to the fastest growing state in India – has received widespread attention. This turnaround story assumes greater significance because Bihar’s economic decline and divergence from rest of the India had been an extremely long and continuous process, rarely reversed by major economic and political changes that transformed many other states of India. The permanent settlement regime imposed by the colonial government sowed the seeds of Bihar’s decline, and continues to hinder its development even now (see Banerjee & Iyer 2005). Even after the independence, the central government adopted several discriminatory policies such as freight equalisation, which led to the further economic marginalisation of Bihar. Successive state governments in Bihar also contributed to its economic decline by plundering public resources and ignoring the state’s developmental needs.
• Bihar’s average economic growth since 2005, when the current government came to power, has been more than 11 per cent, which is often termed a ‘miracle’ considering the extremely low level of economic growth under previous regimes. This spectacular economic progress has, however, recently been questioned for its negligible impact on poverty reduction (Acharya, 2013).
• According to National Sample Survey (NSS) data, the percentage of people living below the poverty line (BPL) was 54.5 per cent in 2004-05, which reduced only marginally to 53.5 per cent in 2009-10. This is surprising as many states with lower economic growth saw much higher poverty reduction during this period. While many commentators use this evidence to jump to the conclusion that Bihar has pursued a growth model that benefitted only the rich, a closer look at the data suggest that it would be a mistake to take the poverty figures of 2009-10 seriously. This is mainly because 2009 was not a ‘normal’ year as Bihar (and many other states) faced severe drought that resulted in 11 per cent reduction in agricultural output, which in turn lowered the income level of around 76 per cent of households that are dependent on agriculture and allied activities for their livelihood.
• Poverty estimates based on the 2011-12 round of NSS data, recently released by the Planning Commission of India, is consistent with this hypothesis. It shows that percentage of BPL population in Bihar is only 33.74 per cent, which means a massive 20 percentage point reduction within two years. This is incredibly high and can be true only if 2009-10 was an outlier year.
• Let’s therefore disregard the estimates of 2009-10 and compare the estimates of 2004-5 with 2011-12 for further analysis. How do we rate Bihar’s 20-percentage-point reduction in poverty over a period of seven years, when Bihar’s average growth rate during that time was almost 10 per cent? On ranking 20 bigger states of India in terms of total poverty reduction during this period, we find that Orissa tops the list with 24 percentage points, followed by Maharashtra, Bihar, Andhra Pradesh and Rajasthan, all of which report an approximately 20 percentage points’ reduction in the poverty ratio. The good news is that Bihar is in the top three states in terms of total poverty reduction, which dispels the myth that Bihar’s growth had little impact on poverty reduction.
• However, Bihar’s performance is not as impressive as its growth rate: many other states with lower rates of economic growth managed similar reductions in the poverty level. Clearly, Bihar needs to make its economic growth more pro-poor.
• Given the fact that two thirds of Bihar’s population is dependent on agriculture, boosting agricultural growth is likely to be the most effective way of enhancing the poverty-reducing effects of economic growth. The government of Bihar has prepared a long-term roadmap for agriculture that attempts to address some of the challenges, but it seems that the biggest constraint to agricultural growth in the state is the government’s inability to implement land reforms. West Bengal, Bihar’s neighbouring state, which was also under the permanent settlement regime under the colonial government and faced similar problems in the agriculture sector, managed to implement land reforms in late 1970s that have had a major impact on agricultural growth for decades (Banerjee et al 2002).
• The Government of Bihar did set up a land reforms commission in 2006 but has not been able to implement its recommendations due to strong opposition from the upper castes who continue to wield immense political power. Admittedly, it might not be politically feasible for the current government to take up radical land reforms measures such as land redistribution. But it is possible to strategically implement some of the less sensitive land reforms on a priority basis: updating land records, tenancy registration, and better enforcement of tenants’ interests. Even these second best reforms, as Besley & Burgess (1999) have shown, are associated with significant poverty reduction. The tenancy reforms lead to poverty reduction through various channels. First, increased tenurial security leads to higher investment in land, which raises long-term productivity and the income level of the cultivators. Second, tenancy registration allow the sharecroppers/tenants to avail benefits of several government programmes that are generally available only for owner cultivators. Third, these reforms also result in higher agricultural wages, which improves the welfare of landless households.
• Bihar’s economic growth, which was more than 14 per cent in the last financial year, continues to defy the recessionary forces that India is facing. However, the extent to which this spectacular growth translates into poverty reduction depends on the government’s ability to remove binding constraints for agricultural growth.

 

70th BPSC Mains Practice Question

1. According to NITI Aayog, 'Multidimensional Poverty' is high in Bihar.  Explain the factors responsible for it.  Which of the latest schemes being implemented by the government to overcome poverty in Bihar?

    

Poverty in Bihar

70th BPSC GS Paper - 2 , Sec. - II | Bihar Economy

By : Tarun Ranjan (Circle Officer, Govt. of Bihar)

Poverty: Poverty is the deprivation of food, shelter, money and clothing when people can’t satisfy their basic needs. Poverty can be understood simply as a lack of money or morebroadly in terms of barriers to everyday human life. Gandhi says poverty is the worst form of violence. Providing minimum basic needs to the people upliftment of the poorest of the poor (Antyodaya), integrating the poor into the mainstream and achieving a minimum standard of living for all have been the major aims of independent India. World Bank’s document Poverty and Shared Prosperity notes that since growth in the world economy is slowing down, this would have a deleterious effect on poverty reduction. For achieving a given target of poverty reduction therefore, such as what the Sustainable Development Goals (SDG-1) of the UN specify, namely ending poverty (almost) by 2030, income inequality should be reduced. Towards this end, the objective is to increase the share of the bottom 40 percent of the population in total income.

Measures of Poverty-

(1) Absolute Poverty: (Destitution) It refers to the state of severe deprivation of basic human needs.

(2) Relative Poverty: It is defined contextually as Economic inequality in location or society in which people live.

WHAT CAUSES POVERTY?

The causes of poverty lie in the institutional and social factors that mark the life of the poor. The poor are deprived of quality education and unable to acquire skills which fetch better incomes. Also access to health care is denied to the poor. The main victims of caste, religious and other discriminatory practices are poor. These can be caused as a result of -

1. social, economic and political inequality
2. social exclusion
3. unemployment
4. indebtedness
5. Unequal distribution of wealth. Aggregate poverty is just the sum of individual poverty.

Poverty is also explained by general, economy-wide problems, such as-

1. low capital formation
2. lack of infrastructure
3. lack of demand
4. pressure of population
5. lack of social/ welfare nets.

Poverty Line

Poverty Line refers to the minimum income, consumption, or, more generally access to goods and services below which individuals are considered to be poor. The poverty line in India is the expenditure level at which a minimum calorie intake and indispensable non-food purchases are assured. It may be noted that even among the poor, there are differences in the degrees of poverty. So the focus of the government policies should be on the poorest of the poor. Nutrition based poverty lines are used in many countries. Due to various limitations in the official estimation of poverty, scholars have attempted to find alternative methods. For instance, Amartya Sen, noted Nobel Laureate, has developed an index known as Sen Index. There are other tools such as Poverty Gap Index and Squared Poverty Gap.

There are many factors, other than income and assets, which are associated with poverty; for instance, the accessibility to basic education, health care, drinking water and sanitation. They need to be considered to develop Poverty Line. The existing mechanism for determining the Poverty Line also does not take into consideration social factors that trigger and perpetuate poverty such as illiteracy, ill health, lack of access to resources, discrimination or lack of civil and political freedoms.

Why defining poverty line is a controversial issue?

Most of the governments have mothballed the reports of commmittees and panels because this issue is not only politically sensitive but also has deeper fiscal ramifications. If the poverty threshhold is high, it may leave out many needed people; while if it is low, then it would be bad for fiscal health of the government. Third, there is a lack of consensus among states too. We note that some states such as Odisha and West Bengal supported the Tendulkar Poverty Line while others such as Delhi, Jharkhand, Mizoram etc. supported Rangrajan Line. Thus, no one, including NITI aayog wants to bell the cat when it comes to count number of poor in the country.

How poverty is measured in other countries?

In most of European countries, a family with net income of less than 60% of a median net disposable income is counted as poor. In United States, poverty line represents the basic cost of food for a family multiplied by three. A family is counted as poor if its pre-tax income is below this threshold.

Poverty in India

A large section of the rural poor in India are the small farmers. The land that they have is, in general, less fertile and dependent on monsoon. Their survival depends on subsistence crops and sometimes on livestock. With the rapid growth of population and without alternative sources of employment, the per-head availability of land for cultivation has steadily declined leading to fragmentation of land holdings. The income from these small land holdings is not sufficient to meet the family’s basic requirements and to pay back the loans that they have taken for cultivation and other domestic needs. In situations of drought and other natural calamities make them take extreme steps like suicide. A large section of urban poor in India are largely the overflow of the rural poor who migrate to urban areas in search of employment and a livelihood. Industrialisation has not been able to absorb all these people. The urban poor are either unemployed or intermittently employed as casual labourers. Casual labourers are among the most vulnerable in society as they have no job security, no assets, limited skills, sparse opportunities and no surplus to sustain them. Poverty is, therefore, also closely related to nature of employment. Unemployment or under employment and the casual and intermittent nature of work in both rural and urban areas that compels indebtedness, in turn, reinforces poverty. Indebtedness is one of the significant factors of poverty. A steep rise in the price of foodgrains and other essential goods, at a rate higher than the price of luxury goods, further intensifies the hardship and deprivation of lower income groups. The unequal distribution of income and assets has also led to the persistence of poverty in India. All this has created two distinct groups in society: those who posses the means of production and earn good incomes and those who have only their labour to trade for survival. Over the years, the gap between the rich and the poor in India has widened. Poverty is a multi-dimensional challenge for India that needs to be addressed on a war footing.

Poverty Measurement efforts undertaken in India

India is home to over one-third of poor people in the world. If we add the poor of Pakistan and Bangladesh into it, we find that almost half of world poverty exists in just these three nations. The next big concentration of poverty is in the sub-Saharan Africa. However, estimation of poverty has been a contentious issue in India. Historically, first estimation of a poverty line was done by Dadabhai Naoroji in 19th century, though he himself did not use the word “poverty line”.

1. Dadabhai Naoroji

The history of poverty estimation in India goes back to 19th century when Dadabhai Naoroji’s efforts and careful study led him to conclude subsistence based poverty line at 1867-68 prices, though he never used the word “poverty line”. It was based on the cost of a subsistence diet consisting of ‘rice or flour, dal, mutton, vegetables, ghee, vegetable oil and salt’. According to him, subsistence was what is necessary for the bare wants of a human being, to keep him in ordinary good health and decency. His studies included the scale of diet and he came to a conclusion on the subsistence costs based poverty line that varied from Rs.16 to Rs.35 per capita per year in various regions of India.

2. National Planning Committee

In 1938, Congress president Subhash Chandra Bose set up the National Planning Committee (NPC) with Jawaharlal Nehru as chairman and Professor K. T. Shah as secretary for the purpose of drawing up an economic plan with the fundamental aim to ensure an adequate standard of living for the masses. The Committee regarded the irreducible minimum income between Rs. 15 to Rs. 25 per capita per month at Pre-war prices. However, this was also not tagged something as a poverty line of the country. First Planning Commission working group, the concept of the poverty line was first introduced by a working group of the Planning Commission in 1962 and subsequently expanded in 1979 by a task force. The 1962 working group recommended that the national minimum for each household of five persons should be not less than Rs 100 per month for rural and Rs. 125 for urban at 1960-61 prices. These estimates excluded the expenditure on health and education, which both were expected to be provided by the state.

3. Y K Alagh Committee

Till 1979, the approach to estimate poverty was traditional i.e. lack of income. It was later decided to measure poverty precisely as starvation i.e. in terms of how much people eat. This approach was first of all adopted by the YK Alagh Committee’s recommendation in 1979 whereby, the people consuming less than 2100 calories in the urban areas or less than 2400 calories in the rural areas are poor. The logic behind the discrimination between rural and urban areas was that the rural people do more physical work. Moreover, an implicit assumption was that the states would take care of the health and education of the people. Thus, YK Alagh eventually defined the first poverty line in India.

4. Lakdawala Formula

Till as recently as 2011, the official poverty lines were based entirely on the recommendations of the Lakdawala Committee of 1993. This poverty line was set such that anyone above them would be able to afford 2400 and 2100 calories worth of consumption in rural and urban areas respectively in addition to clothing and shelter. These calorie consumptions were derived from YK Alagh committee only. According to the Lakdawala Committee, a poor is one who cannot meet these average energy requirements. However, Lakdawala formula was different in the following respects in comparison to the previous models:

• In the earlier estimates, both health and education were excluded because they were expected to be provided by the states.
• This committee defined poverty line on the basis of household per capita consumption expenditure. The committee used CPI-IL (Consumer Price Index for Industrial Laborers) and CPI- AL (Consumer Price Index for Agricultural Laborers) for estimation of the poverty line.
• The method of calculating poverty included first estimating the per capita household expenditure at which the average energy norm is met, and then, with that expenditure as the poverty line, defining as poor as all persons who live in households with per capita expenditures below the estimated value. The fallout of the Lakdawala formula was that number of people below the poverty line got almost double. The number of people below the poverty line was 16 per cent of the population in 1993-94. Under the Lakdawala calculation, it became 36.3 per cent.

5. Suresh Tendulkar Committee

In 2005, Suresh Tendulkar committee was constituted by the Planning Commission. The current estimations of poverty are based upon the recommendations of this committee. This committee recommended to shift away from the calorie based model and made the poverty line somewhat broad based by considering monthly spending on education, health, electricity and transport also.

• It strongly recommended target nutritional outcomes i.e. instead of calories; intake nutrition support should be counted.
• It suggested that a uniform Poverty Basket Line be used for rural and urban region. It recommended a change in the way prices are adjusted and demanded for an explicit provision in the Poverty Basket Line to account for private expenditure in health and education.
• Tendulkar adopted the cost of living as the basis for identifying poverty. The Tendulkar panel stipulated a benchmark daily per capita expenditure of Rs. 27 and Rs. 33 in rural and urban areas, respectively, and arrived at a cut-off of about 22% of the population below poverty line. However, this amount was such low that it immediately faced a backlash from all section of media and society. Since the numbers were unrealistic and too low, the government appointed another committee under Prime Minister’s Economic Advisory Council Chairman C. Rangarajan to review the poverty estimation methodology. Brushing aside the Tendulkar Committee. Rangarajan committee raised these limits to Rs. 32 and Rs. 47, respectively, and worked out poverty line at close to 30%. With estimates of Rangarajan committee, Poverty stood at around 30% in 2011-12. The number of poor in India was estimated at 36.3 crore in 2011- 12.

6. Current Status: Arvind Panagariya Task Force

The discussion about Lakdawala Formula, Suresh Tendulkar Committee and Rangarajan Committee make it clear that defining a poverty line in India has been a controversial issue since 1970s. The latest poverty line defined was by Rangarajan Formula. However, this report also did not assuage the critics. The new NDA Government turned down this report also. To define the poverty line, The NDA Government had constituted a 14-member task force under NITI Aayog’s vice-chairman Arvind Panagariya to come out with recommendations for a realistic poverty line. After one and half years work, this task force also failed to reach a consensus on poverty line. In September 2016, it suggested to the government that another panel of specialists should be asked to do this job {if defining poverty line}. Informally, this committee supported the poverty line as suggested by Tendulkar Committee.

There are Various measures of the extent of poverty

1. The head count index: It simply measures the proportion of the population that is counted as poor. Most widely used maesurement tool for poverty estimation.

 Head count index = Number of Poor /Total Number of Population Weakness

1. It does not take the intensity of poverty into account.

2. Survey does not indicate how poor the poor are, and hence does not change if people below the poverty line become poorer.

3. The poverty estimates should be calculated for individuals and not the households. Significance

1. The most common method of measuring and reporting poverty is the headcount ratio, given as the percentage of population that is below the poverty line.

2. One of the undesirable features of the headcount ratio is that it ignores the depth of poverty; if the poor becomes poorer, the headcount index does not change.

2. The poverty gap index: It is a measure of the intensity of poverty. It is defined as the average poverty gap in the population as a proportion of the poverty line. Poverty gap index provides a clearer perspective on the depth of poverty by estimating the depth of poverty by considering how far, on the average, the poor are from that poverty line and is an improvement over the poverty measure headcount ratio which simply counts all the people below a poverty line, in a given population, and considers them equally poor. By definition, poverty gap index is a percentage between 0 and 100%. Sometimes it is reported as a fraction, between 0 and 1. A theoretical value of zero implies that all the extremely poor people are exactly at the poverty line. A theoretical value of 100% implies all the extremely poor people have zero income.

3. The squared poverty gap (poverty severity) index: It is related to poverty gap index. It is calculated by averaging the square of poverty gap ratio. By squaring each poverty gap data, the measure puts more weight the further a poor person's observed income falls below the poverty line. The squared poverty gap index is one form of a weighted sum of poverty gaps, with the weight proportionate to the poverty gap.

4. Sen index is related to poverty gap index (PGI). Appraisal of Government measures From 2014, a scheme called Pradhan Mantri Jan-Dhan Yojana is available in which people in India are encouraged to open bank accounts. Besides promoting savings habit, this scheme intends to transfer all the benefits of government schemes and subsidies to account holders directly. Each bank account holder is also entitled to Rs. 2 lakh accident insurance and Rs. 30,000 life insurance cover.

Poverty alleviation programs in India

India has been conducting various poverty alleviation programs. Employment programmes and skill-building.

Jawahar Gram Samriddhi Yojana: The JRY was meant to generate meaningful employment opportunities for the unemployed and underemployed in rural areas through the creation of economic infrastructure and community and social assets.

Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) 2005: The Act provides 100 days assured employment every year to every rural household. One-third of the proposed jobs would be reserved for women. Under the programme, if an applicant is not provided employment within 15 days s/he will be entitled to a daily unemployment allowance.

National Rural Livelihood Mission: Ajeevika (2011): It evolves out the need to diversify the needs of the rural poor and provide them jobs with regular income on monthly basis. Self Help Groups are formed at the village level to help the needy.

National Urban Livelihood Mission: The NULM focuses on organizing urban poor in Self Help Groups, creating opportunities for skill development leading to market-based employment and helping them to set up self-employment ventures by ensuring easy access to credit.

Pradhan Mantri Kaushal Vikas Yojana: It will focus on the fresh entrant to the labour market, especially the labour market and class X and XII dropouts.

Food and shelter

Food for Work Programme: It aims at enhancing food security through wage employment. Foodgrains are supplied to states free of cost, however, the supply of food grains from the Food Corporation of India (FCI) godowns has been slow.

Annapurna: This scheme was started by the government in 1999–2000 to provide food to senior citizens who cannot take care of themselves and are not under the National Old Age Pension Scheme (NOAPS). This scheme would provide 10 kg of free food grains a month for the eligible senior citizens. They mostly target groups of ‘poorest of the poor’ and ‘indigent senior citizens’.

Pradhan Mantri Awaas Yojana: It has two components: Pradhan Mantri Awaas Yojana (Grameen) and Pradhan Mantri Awaas Yojana (Urban). It was launched in 2015. It unites schemes like Ujjwala yojana (provides LPG to BPL), access to toilets, water, drinking water facilities and Saubhagya Yojana (electricity).

Other schemes like Integrated Child Development Program, Midday Meal scheme etc are also providing food to the needy sections like children and women.

Access to credit

Pradhan Mantri Kisan Samman Nidhi: This scheme aims to provide financial assistance to provide working capital support to all the landholding farmers. This brings in the idea of universal basic income for the farmers in India.

Pradhan Mantri Jan Dhan Yojana: It aimed at direct benefit transfer of subsidy, pension, insurance etc. and attained the target of opening 1.5 crore bank accounts. The scheme particularly targets the unbanked poor.

Integrated Rural Development Programme (IRDP): It was introduced in 1978-79 aimed at providing assistance to the rural poor in the form of subsidy and bank credit for productive employment opportunities through successive plan periods.

Challenges

• Incidence of extreme poverty continues to be much higher in rural areas than in urban areas.
• Despite rapid growth and development, an unacceptably high proportion of our population continues to suffer from severe and multidimensional deprivation.
• While a large number of poverty alleviation programmes have been initiated, they function in silos. There is no systematic attempt to identify people who are in poverty, determine their needs, address them and enable them to move above the poverty line.
• The resources allocated to anti-poverty programmes are inadequate and there is a tacit understanding that targets will be curtailed according to fund availability. For instance, Mahatma Gandhi National Rural Employment Guarantee Act does not provide the guaranteed 100 days of work in many states.
• There is no method to ensure that programmes reach everybody they are meant for.
• Lack of proper implementation and right targeting
• There has been a lot of overlapping of schemes.
• Every year a huge number is added to the population pool of the country. This renders the scheme ineffective.

Way Forward

The World Health Organization has described poverty as the greatest cause of suffering on earth. Poverty eradication should not be the goal of the government but the goal of the government policies should be to create prosperity. Both monetary and non-monetary measures of poverty are needed to better inform the policies intended to address the needs and deprivations faced by poor populations.

Accelerating rural poverty reduction:

It’s not just about agricultural growth, which has long been considered the key driver of poverty reduction. Rural India is not predominantly agricultural and shares many of the economic conditions of smaller urban areas.

Capitalizing on the growing connectivity between rural and urban areas, and between the agriculture, industry and services sectors, has been effective in the past.

Creating more and better jobs

Future efforts will need to address job creation in more productive sectors, which has until now been lukewarm and has yielded few salaried jobs that offer stability and security.

Focusing on women and Scheduled Tribes

The most worrying trends are the low participation of women in the labour market and the slow progress among scheduled tribes.

India’s women have been withdrawing from the labour force since 2005and less than one-third of working-age women are now in the labour force. As a result, India today ranks last among BRICS countries, and close to the bottom in South Asia in female labour force participation.

Scheduled Tribes started with the highest poverty rates of all of India’s social groups, and have progressed more slowly than the rest.

Women and Scheduled Tribes are at risk of being locked out of India’s growth and prosperity.

Improving human development outcomes for the poor

The recent past shows that some problems, such as undernutrition and open defecation, are endemic and not only confined to the poor but others too, and have not improved with economic growth.

Better health, sanitation and education will not only help raise the productivity of millions, they will also empower the people to meet their aspirations, and provide the country with new drivers of economic growth.

Together with mooting the discussion on the need to provide a universal basic income, infrastructural and skill development combined with effective implementation of welfare policies will go a long way in eradicating poverty in the country.

How to reduce poverty in Bihar?

• Bihar’s turnaround under the leadership of Nitish Kumar – from a badly governed, economically backward state, to the fastest growing state in India – has received widespread attention. This turnaround story assumes greater significance because Bihar’s economic decline and divergence from rest of the India had been an extremely long and continuous process, rarely reversed by major economic and political changes that transformed many other states of India. The permanent settlement regime imposed by the colonial government sowed the seeds of Bihar’s decline, and continues to hinder its development even now (see Banerjee & Iyer 2005). Even after the independence, the central government adopted several discriminatory policies such as freight equalisation, which led to the further economic marginalisation of Bihar. Successive state governments in Bihar also contributed to its economic decline by plundering public resources and ignoring the state’s developmental needs.
• Bihar’s average economic growth since 2005, when the current government came to power, has been more than 11 per cent, which is often termed a ‘miracle’ considering the extremely low level of economic growth under previous regimes. This spectacular economic progress has, however, recently been questioned for its negligible impact on poverty reduction (Acharya, 2013).
• According to National Sample Survey (NSS) data, the percentage of people living below the poverty line (BPL) was 54.5 per cent in 2004-05, which reduced only marginally to 53.5 per cent in 2009-10. This is surprising as many states with lower economic growth saw much higher poverty reduction during this period. While many commentators use this evidence to jump to the conclusion that Bihar has pursued a growth model that benefitted only the rich, a closer look at the data suggest that it would be a mistake to take the poverty figures of 2009-10 seriously. This is mainly because 2009 was not a ‘normal’ year as Bihar (and many other states) faced severe drought that resulted in 11 per cent reduction in agricultural output, which in turn lowered the income level of around 76 per cent of households that are dependent on agriculture and allied activities for their livelihood.
• Poverty estimates based on the 2011-12 round of NSS data, recently released by the Planning Commission of India, is consistent with this hypothesis. It shows that percentage of BPL population in Bihar is only 33.74 per cent, which means a massive 20 percentage point reduction within two years. This is incredibly high and can be true only if 2009-10 was an outlier year.
• Let’s therefore disregard the estimates of 2009-10 and compare the estimates of 2004-5 with 2011-12 for further analysis. How do we rate Bihar’s 20-percentage-point reduction in poverty over a period of seven years, when Bihar’s average growth rate during that time was almost 10 per cent? On ranking 20 bigger states of India in terms of total poverty reduction during this period, we find that Orissa tops the list with 24 percentage points, followed by Maharashtra, Bihar, Andhra Pradesh and Rajasthan, all of which report an approximately 20 percentage points’ reduction in the poverty ratio. The good news is that Bihar is in the top three states in terms of total poverty reduction, which dispels the myth that Bihar’s growth had little impact on poverty reduction.
• However, Bihar’s performance is not as impressive as its growth rate: many other states with lower rates of economic growth managed similar reductions in the poverty level. Clearly, Bihar needs to make its economic growth more pro-poor.
• Given the fact that two thirds of Bihar’s population is dependent on agriculture, boosting agricultural growth is likely to be the most effective way of enhancing the poverty-reducing effects of economic growth. The government of Bihar has prepared a long-term roadmap for agriculture that attempts to address some of the challenges, but it seems that the biggest constraint to agricultural growth in the state is the government’s inability to implement land reforms. West Bengal, Bihar’s neighbouring state, which was also under the permanent settlement regime under the colonial government and faced similar problems in the agriculture sector, managed to implement land reforms in late 1970s that have had a major impact on agricultural growth for decades (Banerjee et al 2002).
• The Government of Bihar did set up a land reforms commission in 2006 but has not been able to implement its recommendations due to strong opposition from the upper castes who continue to wield immense political power. Admittedly, it might not be politically feasible for the current government to take up radical land reforms measures such as land redistribution. But it is possible to strategically implement some of the less sensitive land reforms on a priority basis: updating land records, tenancy registration, and better enforcement of tenants’ interests. Even these second best reforms, as Besley & Burgess (1999) have shown, are associated with significant poverty reduction. The tenancy reforms lead to poverty reduction through various channels. First, increased tenurial security leads to higher investment in land, which raises long-term productivity and the income level of the cultivators. Second, tenancy registration allow the sharecroppers/tenants to avail benefits of several government programmes that are generally available only for owner cultivators. Third, these reforms also result in higher agricultural wages, which improves the welfare of landless households.
• Bihar’s economic growth, which was more than 14 per cent in the last financial year, continues to defy the recessionary forces that India is facing. However, the extent to which this spectacular growth translates into poverty reduction depends on the government’s ability to remove binding constraints for agricultural growth.

 

70th BPSC Mains Practice Question

1. According to NITI Aayog, 'Multidimensional Poverty' is high in Bihar.  Explain the factors responsible for it.  Which of the latest schemes being implemented by the government to overcome poverty in Bihar?