India Report

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India is defined as an ’emerging and developing economy

‘1. For the purpose of this paper I will be discussing what progress has been made in reducing poverty in India over the last two decades. Poverty can be defined by ‘a condition in which a person or community is deprived of, or lacks the essentials for a minimum standard of well-being and life.

‘2 Our understanding can be further developed by the concept of a poverty-line. This is the threshold of ‘the money an individual needs to achieve the minimum level of welfare’ and have an adequate standard of living. As a summary measure, the updated World Bank international poverty line of $1. 25 a day in 2005 PPP shows that there has been a decrease in global poverty numbers. The revised World Bank statistics estimate that ‘global poverty rates fell from 52% in 1981 to 26% in 2005

‘4. Consequently, statistical estimates for India also show a decline in poverty levels; the population percentage living below $1. 25 a day declined from ‘60% in 1981 to 42% in 2005

5’. We note that 41. 01% of the world’s extreme poverty (under $1. 00 a day) is concentrated within India. It is important to distinguish that ‘India’s income poverty line is the monetary equivalent of a minimum daily calorie intake – 2400 calories per person in rural areas and 2100 calories per person in urban areas.

‘7 Therefore, poverty statistics may vary depending on the measures used. For the purposes of this paper UN data and the $1. 00 a day poverty line will be used unless mentioned otherwise. India’s Poverty Gap Ratio gives us a better understanding (See appendix 1).

India’s PGR fell from 13. 6% in 1994 to 10. 5% in 2005. Furthermore, the total population below the poverty line has fallen from 36% in 1994 to 28. 6% in 2000. 9 The CIA World Fact-book puts this figure at 25% in 2007.

10 Whilst the absolute levels of poverty are decreasing, there is increasing disparity between urban poverty and rural poverty. Academics also acknowledge that India ‘has recorded impressive gains in many areas and significant reductions in the intensity of poverty, but there is still much ground to cover in terms of ending human deprivations.

’11 Finally, there needs to be a clear distinction made between Poverty Alleviation (PA) and Human Development (HD).

PA can be defined as ‘any process which seeks to reduce the level of poverty in a community, or amongst a group of people or countries.

’12 Greater clarity can be found if we think in terms of reducing number of people under the poverty line. Furthermore, ‘the objective of [human] development is to create an enabling environment for people to enjoy long, healthy and creative lives.

’13 This includes greater access to knowledge, nutrition and health services, more secure livelihoods, security against crime and physical violence. This first section of this paper aims to explore the progress made in decreasing rural poverty.

The second section focuses solely on HD factors which effectively alleviate urban poverty. The bulk of the rural poor are constructed by agricultural wage earners, small and marginal farmers and casual workers engaged in non-agricultural activities.

14 Furthermore, statistics show ‘as late as 1993-94, about 70% of the population was dependent for work on agriculture in rural areas.

’15 Therefore, the rural poor are more affected by changes in food prices and agricultural conditions. In reference to Millennium Development Goal 1 (MDG1: eradicating poverty and hunger)

16 there has been much progress made in rural India.

Kumar notes that in times of bad harvests stronger urban food demand lead to a flow of food-grains to urban areas which decreases the availability of food in rural areas. This tends to push food-grain prices up in rural areas.

17 As a result there is a double marginalization problem; poor harvests mean the rural poor face decreasing employment and income levels, and higher food prices push them further below the poverty line. In 1997 the Targeted Public Distribution System (TPDS) was launched which ‘aims to protect the poor from the adverse effects of a rise in prices and ensures food and nutrition security at affordable prices.

18 It was estimated that through the TPDS 60m families under the poverty line would benefit from a quantity of about 720,000 tonnes of subsidized food grains which was earmarked annually.

For example, in 1987-88 poor harvests affected by severe droughts led to the aforementioned double marginalization problem. In this instance public action took the form of drought-relief works and depletion of buffer stocks to meet the demands of the PDS.

‘As a result, rural food prices did not rise to that extent, and this protected the rural poor. However, this was not so in 1991-92 when the decline in gricultural output accentuated rural poverty. The decline in agricultural output adversely affected rural incomes, but at the same time, a steep rise in the open market prices of wheat and rice worsened their situation.

’20 This lack of consistency in reform and welfare programs means that many people in rural poverty often ‘yo-yo’ around the poverty line.

More comprehensive poverty alleviating provisions include the Integrated Rural Development Programme (IRDP) which was launched in 1978 and universalised in 1980. It has provided assistance to rural poor in the form of subsidies and bank credit for productive employment opportunities.

21 The IRDP enables those in rural poverty to cross the poverty line by providing productive assets and inputs to targeted areas. The assets are provided through financial assistance in the form of subsidy by the government and credit advanced by financial institutions.

22 The core concept of the IRDP is on self-help through learning new vocational skills and income generating activities. However, the IRDP was not without its problems, and it suffered from insufficient investments, lack of bank credit, overcrowding in certain projects, and a lack of market linkages.

They were seen as standalone welfare programs rather than a comprehensive package.

Following Planning

Commission recommendations in 1999, the IRDP and other welfare programmes were merged into a single programme known as Swarnajayanti Gram Swarozgar Yojana (SGSY). ‘The SGSY is conceived as a holistic programme of micro-enterprise development in rural areas with emphasis on organising the rural poor into self-help groups, capacity-building, planning of activity clusters, infrastructure support, technology, credit and marketing linkages.

23 The SGSY helps those in poverty help themselves by providing a framework of infra-structure and income-generating training. Further poverty alleviation measures in rural India have included Wage Employment Programmes, Food for Work Programmes and Employment Assurance Schemes.

These provide employment opportunities during poor agricultural seasons, as well as times of floods, droughts and other natural disasters. These schemes aim to create rural infrastructure which supports further economic activity. These programmes also put an upward pressure on market wage rates by attracting people to public works programmes, thereby reducing labour supply and pushing up demand for labour.

’24 But there is inefficient resource allocation and too little resources are spread over too many areas. Help with rural housing has also been given. The Indira Awaas Yojana (IAY) scheme aims to provide financial assistance to the rural poor below the poverty line for construction of a house.

25 ‘Overall the scheme has benefited thousands of poor households in the state, most of whom had no or very poor accommodation.

Before coverage under IAY in the state, 4% surveyed beneficiaries were houseless, 80% had katcha house [made of mud, thatch, or other low quality material] and only 2% had a ‘pacca’ house [bricks and mortar]. Whereas, after coverage under IAY, 31% had a ‘pacca’ house, 57% ‘semi-pacca’ house and none had a ‘katcha’ house.

’26 Whilst it is recognised that the IAY scheme has been successful, it does have weaknesses; around 7% of beneficiaries who had an annual income of Rs. 30,000 or more were selected whereas some families with an annual income of less than Rs. 0,000 were left out. This indicates that families above the poverty line were also given benefits under the scheme whereas some families in extreme poverty were left uncovered despite applications to the IAY.

27 Finally, ‘the provision of free houses has meant that other loan-based schemes have not been able to takeoff.

’28 The prospect of free/subsidized housing takes priority over risky loan-based schemes. On the whole there has been an increased commitment to poverty eradication which was backed by an increased allocation of resources to benefit the poor. As a result, rural non-agricultural employment increased substantially, and real wages went up sharply.

’29 The relative success of the anti-poverty strategy can be gauged from the decline in poverty levels from 40% in 1985 to 37. 3% in 1994 to 30. 2% in 2000 in the rural areas 30 (see Appendix 2). Whilst this figure is still high by international standards, it is a step towards eradicating poverty in rural India. Progress has been stunted by inadequate resources and funding, but channelling sufficient funding towards the poorest rural states such as Orissa and Uttar Pradesh will help eradicate poverty in rural India.

On the other hand urban poverty has evolved considerably. Although the urban population under the poverty line has fallen from 32. 4% in 1994 to 24. 7% in 2000

31 (see Appendix 2) we must note that urban poverty is relatively different. Urban poverty alleviation stems from human development factors. This includes addressing ‘problems of housing and shelter, water, sanitation, health, education, social security and livelihoods… Poor people live in slums which are overcrowded, often polluted and lack basic civic amenities like clean drinking water, sanitation and health facilities.

Most of them are involved in informal sector activities where there is constant threat of eviction, removal, confiscation of goods and almost non-existent social security cover.

’32 The targeted focus of this section is on slums and housing, employment and education, and infrastructure. The 64th Round NSS reports there are over 80m poor people living in the cities and towns of India. The Ministry of Urban Development estimate the slum population is also increasing and has risen from 27. 9m in 1981 to over 61. 8m in 2001.

33 This has been exacerbated by population growth and mass rural migration to urbanized cities.

Therefore, one could conclude that whilst slums do not house all of the urban poor – most of the urban poor are found to be living in slums. Studies show that the percentage of slums having no toilet is as high as 54%. It is seen that most free communal toilets built by state government or local bodies are unusable because of the lack of maintenance. Significantly, 80% of the slums are dependent on municipal bodies for the disposal of sewage while the remaining 20% have no provision for disposal of sewage.

34 Income disparities are increasing prevalent in urban towns and cities – in 1997 the urban Gini Coefficient was 36. 2.

35 Slum alleviation measures have not been very successful and have made little progress. Initial measures were to forcibly demolish all slums – in a 1975 law, ‘all land encroached by squatters can be considered vacant, and all slums covered by the Act can be removed. ‘ After a public backlash there was a shift in focus from removing slums to upgrading them and providing them with basic amenities such as local water taps and public toilets. However, this has had mixed success. The Slum Upgrading Programme (SUP) funded by the World Bank in 1985 covered only 22,000 households and was terminated in 1994.

Moreover, the Slum Rehabilitation Scheme in 1995 (an election promise that would provide free tenements to 4m slum dwellers) ended with only 19,000 tenements completed.

36 The problem is that most anti-poverty programmes involve local bodies, private agencies, and non-government organizations (NGO). The government funds constitute only a part of the total resources, whilst the remaining is expected to come from other sources. The governmental engagement has been lacklustre and so the effects of slum poverty have worsened. The government needs to be play a more proactive role to provide for the poor rather than relying on and facilitating the Market.

’37 Another factor is employment. Deindustrialisation in urban areas has displaced factory/industry workers who are now casual workers/gainfully unemployed. This has resulted in the overall employment share of informal sector increasing from roughly 1/3 of employment in 1976-77 to more than 3/4 of the total workforce.

38 Most casual workers are unable to capitalize on growing urban employment opportunities because they do not have adequate education and skills.

Policy ideas have centred on the idea of converting the vast pool of human resources into productive assets by promoting entrepreneurship. This approach develops people’s enterprise in urban areas and provides economically viable opportunities.

39 This is a two-pronged approach which encapsulates both education and providing access to credit markets. Being literate and educated is a pre-requisite for entrepreneurial spirit, but this knowledge is dysfunctional unless sufficient credit provisions are made to fulfil ideas.

Evidence of educational progress is seen with increasing female (male) youth literacy rates from 49. 3% (73. 5%) in 1991 to 77. 1% (86. 7%) in 2007.

40 Furthermore, primary school completion rate has increased from 63. 8% in 1991 to 85. 7% in 2006.

41 However, there is room for improvement. The MDG focus is solely on primary education – but it is noted that ‘secondary and higher education consolidates the gains received from primary education, provides skills that could be useful in the labour market and can keep people above poverty line without such a danger of falling back into the poverty trap.

42 Now that there is a high rate of primary schooling, focus must now shift towards secondary education to further eradicate poverty. Access to credit markets is provided through urban microfinance and social banking.

This provides liquidity to poor individuals who are entrepreneurs or self-employed, e. g. a rickshaw driver who needs to rent a rickshaw. ‘Economic Development Associates (2004) observed that about 80 per cent of the micro finance clients are without any formal savings, and 91 per cent, without formal credit.

43 The first series of targeted credit programmes were launched in 1989. In particular, the Swarna Jayanti Shahari Rozgar Yojana (SJSRY) is the first comprehensive scheme where women and children were targeted as critical beneficiaries of setting up gainful self-employment ventures. The Indian state bank has also recognised the lack of credit access and is starting to provide satellite branches for the sole provision of urban microfinance credit.

Whilst there has been a provision of ‘no-frills’ bank accounts by Indian banks, a lack of knowledge, increased paperwork and a lack of willingness on the behalf of the bank to bother with small marginal accounts means these measures have not reached their full social potential. ‘While the state’s poverty alleviation approach has steadily expanded from the mere provision of basic amenities and services to facilitating creation of income earning opportunities. Read also what is not a physical security measure for your home

’44 there is much more do be done in terms of human development.

Whilst the urban poor are better off compared to the rural (in terms of absolute poverty levels) their quality of life may not be much different. Rural poverty is relatively easy to solve; the provision of food and income creation opportunities that offset agricultural downturns make a significant positive contribution to the rural poor. However, the urban poor are affected by weak infra-structure and deep rooted institutional problems. To alleviate these problems the government needs to show a long term financial commitment with both resources and policies.

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