INDIAN ECONOMY: POVERTY AND INFLATION

• Poverty and inflation are of first rank importance in the Indian economy.
• In 1993-94, 320 million persons (35.97% of the population) were living below the poverty line: 37.27% in rural areasand 32.36% in urban areas.
• About 5% of the population is unemployed.
• 24 paise of every rupee earned by the government goes into paying interest on debt.
• 107% of India’s GDP is spent by the central and state governments on non-merit subsidies (e.g., water supply, higher education, irrigation, electricity).
• These figures present a shocking image of poverty, income, and wealth in India.
• Key debates include:
  • How much of the nation’s wealth and income should be spent on poverty and unemployment alleviation?
  • How can economic development be accelerated?
  • How can economic inequalities be removed?
  • How much should be spent on public services and welfare schemes?
  • Should welfare schemes be a minimal safety-net for the poor or a comprehensive system of security for all?
  • Are social inequalities the result of economic inequalities or differential income distribution?
• Poverty and inequality are not the same.
• Example: A person with an income of Rs 15,000 per annum with a wife and child is not as poor as someone earning Rs 25,000 per annum with a family of 5-6 children.
• Income refers to the flow of economic resources, while wealth is the total stock of economic resources.
  • Examples of income: salary, wages, rent, interest, pension, income from self-employment, dividends from company shares.
  • Examples of wealth: immovable property, gold, shares, bonds.
• Understanding inequality and poverty requires considering the concepts of poverty, income, wealth, and inequality.

Concept of Poverty

• Poverty can be defined as either absolute or relative.
• Absolute poverty is “insufficiency in basic necessities of existence,” meaning the lack of adequate food, clothing, or shelter.
• The poverty line describes poverty in subsistence terms, i.e., the minimum necessary for maintaining physical health.
• Henry Bernstein (1992) identified four dimensions of poverty:
  • Lack of livelihood strategies
  • Inaccessibility to resources (money, land, credit)
  • Feeling of insecurity and frustration
  • Inability to maintain social relations due to lack of resources.
• Three precepts used to define poverty:
  1. The amount of money required to subsist.
  2. Living below a minimum subsistence level and living standard at a given time and place.
  3. The comparative state of well-being of a few and the deprivation of the majority.
• The first view defines poverty in terms of a minimum income required for subsistence, focusing on physiological needs like survival, safety, and security.
  • Physiological needs include food, nutrition, shelter, and health care.
  • The poverty line is drawn based on the minimal nutritional standards of calorie intake.
  • In India, the poverty line is based on daily per capita calorie intake: 2,400 calories for rural and 2,100 calories for urban areas.
  • In 1993-94, a rural person needed Rs 229 per month and an urban person needed Rs 264 per month to meet basic needs.
  • The concept of minimum subsistence level differs from minimum adequacy level and minimum comfort level.
• In the United States, in 1963, a family of four earning $2,500 was considered below the minimum subsistence level.
• In 1993-94, 18.1% of India’s population was below the minimum subsistence level (Rs 264 per month).
• The poor can be classified into four sub-groups:
  1. Destitutes (spending < Rs 137/month).
  2. Extremely poor (spending < Rs 161/month).
  3. Very poor (spending < Rs 201/month).
  4. Poor (spending < Rs 246/month).
• The second view maintains that poverty involves the lack of material goods necessary for physical survival, health, and a minimum subsistence level.
  • This includes a minimum amount of food, housing, clothing, and health care.
  • At the 1993-94 price level, a person required Rs 259 per month in rural areas and Rs 294 in urban areas.
• Gross and Miller (1946) linked poverty to income, assets/material possessions, and the availability of services.
• However, in the U.S., many families below the poverty line had assets like telephones, TVs, and washing machines.
• Poverty cannot be solely linked to income or material possessions, as prices and inflation affect poverty.
• The third view defines poverty as a condition of falling below the minimum standards of subsistence for a society.
  • It emphasizes the absence of enough money to secure life’s necessities.
  • Inequality plays a crucial role in defining poverty, as it measures the difference between those at the bottom and the rest of society.
• Miller and Roby (1970) considered poverty as inequality, where absolute poverty can be reduced by putting money in the hands of the poor, but inequality persists.
• Sociologically, poverty is linked to deprivation and the inability to access basic needs such as food, health, housing, education, and recreation.
• Rein (1968) identified three elements of poverty:
  • Subsistence (resources to maintain health and physical efficiency).
  • Inequality (comparing those at the bottom of income levels with the more privileged).
  • Externality (social consequences of poverty for the rest of society).
• Social consequences of poverty include living in poor neighborhoods, lack of education, low-paying jobs, and poor health, creating a vicious circle of poverty.
• Thomas Gladwin (1967) emphasized the importance of inequality or the social concept of poverty.

Manifestation of Measurement of Poverty

• Malnutrition: Below a limit of 2,100 to 2,400 calories per day.
• Low consumption expenditure: Below Rs 259 per person per month at 1993-94 price level.
• Low income: Below Rs 520 per person per month at 1993-94 price level.
• Chronic illness or poor health.
• Illiteracy.
• Unemployment and/or underemployment.
• Unsanitary housing conditions.
• Poverty of a society expressed in terms of:
  • Poor resources.
  • Low national income.
  • Low per capita income.
  • High disparity in income distribution.
  • Weak defence.
• Poverty-linked characteristics of households that increase the risk of being poor:
  • Absence of a full-time wage-earner in the household.
  • Households where men are above 60 years age.
  • Households headed by a female.
  • Households with more than six children of less than 18 years of age.
  • Households whose heads are living on daily wages.
  • Households whose members have less than primary education.
  • Households with members without work experience.
  • Households having members only with part-time employment