(Online Course) GS Concepts : Indian Economy – Poverty and Inequality Concepts, Data Policy and Analysis

Subject : Economy
Chapter : Indian Economy

Topic: Poverty and Inequality Concepts,
Data Policy and Analysis

Question. Write a short notes on Poverty.

Ans. Poverty is deprivation of basic needs that determine the
quality of life-food clothing, shelter, safe drinking water etc. It also
includes the deprivation of opportunities to health, education, skills,
employment etc.
Many different factors have been cited to explain why poverty occurs. No single
explanation has gained universal acceptance. The factors responsible for poverty

  • Historical factors, for example imperialism and

  • Overpopulation.

  • Growth is not fast enough to eradicate poverty.

  • Models of growth may be unsuitable for poverty
    alleviation. For example, capital-intense growth in a labour surplus

  • Poverty itself, preventing investment and development.

  • Widespread reliance on traditional methods of
    agriculture. About 60% of the population depends on agriculture whereas the
    contribution of agriculture to the GDP is 20%.While services and industry
    have grown at double digit figures, agriculture growth rate has dropped from
    4.8% to 2%.

  • Geographic factors, for example lack of fertile land and
    access to natural resources.

  • Anti-poverty schemes not being effective due to
    institutional and other inadequacies

  • War, including civil-war, genocide.

  • Lack of education and skills.

  • gender discrimination

  • Matthew effect— the phenomenon, widely observed across
    advanced welfare states, that the middle classes tend to be the main
    beneficiaries of social benefits and services, even if these are primarily
    targeted at the poor.

Matthew effect refers to those already having an asset base
benefiting from it while those without it continue to be denied the same.

Dear Candidate, This Material is from
General Studies Mains Study Kit for Civil Services Main Examinations. For Details

Types of Poverty

Human Poverty is the lack of essential human capabilities
literacy and nutrition.
Income Poverty: The lack of sufficient income to meet minimum consumption needs.
The World Bank defines extreme poverty as living on less than one US$ per day,
and moderate Poverty as less than $2 a day.

Question. Briefly discuss the governments initiative to
Eradicate Poverty

Ans. The strategy of the Government includes the following

  • The main plank to anti-poverty strategy is reducing
    poverty through the promotion of economic growth In India, after reforms
    began in 1991 when growth rates increased Poverty levels fell quite steeply
    (NSSO 2005).

  • Socioeconomic Planning

  • Food security through the nation wide PDS- largest in the

  • Progressive taxation to gamer fiscal Resources for
    Spending on poor.

  • Social safety net like the, National Social Assistance
    Programme (NSAP).

  • Open Society in Which Poverty is recognize as a national
    challenge and earnest efforts are made to tackle it (Amartya Sen).

  • Anti-poverty programmes – MGNREGA 2005.

  • Massive social sector expenditure for skill building

  • Decentralization through PRJ5 and Nagarapalikas for
    better delivery models.

Question. Define Poverty Line?

Ans. It is the level of income below which one cannot afford
to purchase all the resources one requires to live. People who have an income
below the Poverty line have no disposable income.
When comparing Poverty across Countries the Purchasing power parity exchange
rates are used. These are used because poverty levels otherwise would change
with the normal exchange rates. Thus, ‘living for under $1 a day’ should be
understood as having a daily total consumption of goods and services comparable
to the amount of goods and services that can be bought in the U.S. for $1.
Poverty lines are defined as the per capita monetary, requirement an individual
needs, to afford the purchase of a basic bundle of goods only food or food and
other goods. The value of this basic basket of goods can be determined in many
ways, for example:
Absolute Poverty is a fixed measure in terms of a minimum calorific requirement
plus essential non-food components if any. It is used in India. Individuals are
considered as poor if the per capita real income/consumption of the household
which they belong is below the benchmark poverty line. In India monetary
requirement to consume 2100 calories in urban areas and 2400 calories in rural
areas per day per person is the absolute poverty line- monthly per capita
consumption expenditure below Rs. 356.35 for rural areas and Rs. 538.60 for
urban areas.
Relative Poverty line set the line in relation to another variable: the average
expenditure or income in a country, for example the line is derived as 60
percent of the country’s per capita income.

Question. What is Headcount Ratio?

Ans. The most common standard indicator is the incidence of
poverty (also called Poverty rate or headcount rate). This describes the
percentage of the population whose per capita incomes are below the poverty
line, that is, the population that cannot afford to buy a basic basket of items.
In many instances, a different poverty line—a much more austere one that
generally only includes food items—is applied to derive the extreme poverty

Question. What do you understand by Poverty Gap?

Ans. PG is a measure of the intensity of poverty among the
poor: the difference between the mean income among the poor and the poverty
line. This indicator measures the magnitude of poverty as well as its intensity
number of poor and how poor they are. The Poverty Gap Index is the combined
measurement of incidence of poverty and depth of poverty. PG is also called the
Foster-Greer-Thorbecke (FGT) index. It is the gap between the average poverty
among the poor and the poverty line.

Question.What is Misery Index?

Ans. The misery index was initiated by Chicago Economist
Robert Barro in the 1970’s. It is the unemployment rate added to the inflation
rate. It is assumed that both a higher rate of unemployment and a Worsening of
inflation cause and intensify the misery. A combination of rising inflation and
more people of out of work (“stagflation”) implies a deterioration in economic
performance and a rise in the misery index.

Planning Commission and Poverty

The Planning Commission as the Nodal agency in the Government
of India for estimation of poverty has been estimating the number and Percentage
of poor at – national and state levels. Estimates of poverty are made from the
large sample survey data on household Consumer expenditure conducted by the
National Sample (NSSO) of the Ministry of Statistics and Programme

The Planning Commission estimated that 2 7.5% of the
population was living below the poverty line in.2004-2005 do from 51.3% in
1977-1978, and 36% in 1993-1994 The source for this was the 61st round of the
National Sample Survey (NSS) and the criterion used was monthly per capita
consumption expenditure below Rs. 356.35 for rural areas and Rs. 538.60 for
urban areas 75% of the poor are in rural areas with most of them comprising
daily wagers self-employed households and landless labourers.

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