Progress In Reducing Poverty In India Economics Essay

With reference to the literature on poverty and development, and using statistical evidence, discuss what progress has been made in reducing poverty in India over the last 15-25 years.

Gandhi claimed that “poverty is the worst form of violence”. It is a word encapsulating the hunger, lack of opportunity, and discrimination felt by millions across the world. India is home to 41% of the worlds poor (Nation Master, 2010), who cohabit with economic success and a rapidly growing middle class. Since being granted independence in 1947, India has embarked on a tumultuous battle with the poverty that plagues the majority of its population.

The progress of poverty reduction within India is a contentious issue. The notable differences between various estimates for 2009 are shown in Graph 1:

The most widely used measures (Table 1) highlight potential conflicts. This is exacerbated by inter-state differences, such as the population living under $1/day ranged from 2% in Panama to 47% in Udaipur. (Banerjee & Deflo, 2007). These differences and implied ignorance of the multidimensional nature of poverty, make targeting the poor and thus accurate poverty reduction a difficult task. Although a significant decline is clear, the progress has been unequal and lagging its potential.

Proportion of Population Below $1 a day

(Data taken from UN Stats, 2010)

Proportion of Population below national poverty line

(based on Uniform Recall Period)

(Data taken from National Commission, India)

Poverty gap ratio at $1 a day (%)

(Taken from United Nations Statistics Division)

Headcount Ratio at $1 a day (% of population)

(Data taken from World Development Indicators, 2010)

1993

49.34 (1994)

36 (1993-4)

13.6 (1994)

41.82

2004

41.6 (2005)

27.5 (2004-05)

10.5 (2005)

34.33

Percentage Change

16%

24%

23%

18%

Table 1.

Economic growth and globalisation are central to the fight against poverty. India’s economic growth has risen from an annual rate of 1.06 in 1991, to 9.67% in 2006 following neo-liberal reforms in 1991, falling to 7.09% in 2008 (WDI, 2008). However, the urban-driven growth has only benefited a minority.

There is no evidence of the ‘trickle down1’ model, and many journalists such as Sainath (The Hindu, 2010) have continuously blamed economic reforms for the stagnated poverty in rural India. The financial crisis and significant fiscal deficit threatens progress of poverty reduction, and the 2010 budget neglected the poor by not increasing the tax limit for those earning rupees 1.6lakh.

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DFID’s website claims “effective government is the single most important determinant of whether people are lifted out of poverty”. India has a federal system, with state control of poverty reduction schemes. Despite installing a system with the potential to be “better able to meet the needs of the poor” (Johnson, 2003), the central and state government clash has resulted in inadequate implementation and power centralised within local elite.

Central government has shown commitment to poverty reduction with the Millennium Development Goals and introduction of National Five Year Plans.

However, government expenditure is criticised as inefficient creating “reliance on targeted transfer payments and subsidies and significant under provision of social services” (Keefer & Khemani, 2004, p1). Pressure to improve statistics causes bias to help the richest of the poor, reducing poverty reduction schemes to “an attractive election slogan” (Rajesh, 2010).

Success is asymmetric, with many states largely under resourced and controlled by privileged members of society with little political will to implement schemes that could harm their own class. Recent improvements include strengthening the role of the ‘Panchayat2’ in 1993, incorporating the poor in policy decisions, ‘The right to information act’ (2005) and Public Hearings3.

The first goal of the MDG is to ‘eradicate extreme poverty and hunger as “under-nutrition greatly impedes a countries’ …potential to reduce poverty” (UNICEF, 2010), forcing individuals into a ‘poverty trap’. India has achieved success in increasing food production (Graph 2) and it is felt that, if distributed equally, would provide for the entire population.

Graph 2, Source: World Development Indicators

However, the Global Hunger Index (2009) placed India in the ‘alarming’ category with 76% of the population living in households who consume per-capita calorie beneath Indian minimum requirement (Deaton and Dreze, 2008). Protection from climate change via increased irrigation of land insulates food production from droughts. The proportion of irrigated land was increasing but has recently stagnated (Graph 3), and the percentage of arable land has fallen (Graph 4).

Graph 3 & 4, Source: Nation Master and World Development Indicators

There is a dichotomy between the excess of food in public storage and the majority of population left hungry. Patnaik (2008, p174) noted the average poor family has 88 grams less food in 2005 than it did in 1991. Schemes notorious for leakage to the non-poor include the Public Distribution scheme. This undermines the success attributed to this scheme in the 2010 budget for keeping prices below 2000 level for those BPL.

The vast subsidy programme has been criticised by the WHO (Business Standard, 2010) for economic distortion and corruption. The nutritional status of children, although achieving successes such as the Mid Day Meal Scheme reaching universal coverage in 2006, has ultimately failed, having the largest number of stunted children in the world (UNICEF, 2009). Progress is slow, with the proportion of underweight children stagnated at 46% between 1998-9 and 2005-06 and the highest mortality rate of children globally (Deaton, 2008 p1).

Healthcare in India has achieved improvements in accessibility but little in quality. The domination of private healthcare which the poor often lack access to, signifies quality of Government healthcare. Declining total public health expenditure has previously thwarted success, although this is reversing with a 14% increase on last year.

Impractical demands required by the poor to access schemes include the ‘reimbursement’ nature of the Janarogya yojana scheme4. The Revised National Tuberculosis programme claimed 100% coverage in 2006, although 1/5 of global tuberculosis incidents still occurred in India (World Health Organisation, 2008). Cases of anaemia in women & children have risen, and PWC found public health facilities to be “inefficient, inadequately managed and staffed (with) poorly maintained medical equipment” (2007, p5).

Successes include the number of cases of leprosy and cataract being halved between 1993-2000. The rural health mission and extension of health insurance to those under the NREGA5 provide hope for future progress.

Access to clean water and sanitation has improved as shown below,

Graph 5, Source: World Development Indicator

These are state responsibilities and thus it is not surprising that “government installations for supply of water were found to be either defunct or inaccessible” (Consultations With The Poor India, 1999). Successful schemes have included Nirmal Gram Puraskar6, which reward villages achieving ‘defecation free’ status. As a nation, progress is insufficient with 700 000 children under 5 dying of diarrhoea annually (World Bank, 2003).

Education plays arguably the most vital role within poverty reduction. India has achieved success in increasing literacy rates (Graph 6) and access and attendance rates to primary education. The latter is most notable with the recent ‘Right to Education’ Act 2010 guaranteeing universal education for ages 6-14 years. Public provision of education is particularly poor, with insufficient infrastructure (Graph 8) & lack of teachers.

Education has encouraged social mobilisation with a ‘campaign mode’ since the 1990’s. Private schools are common, especially in urban areas, due to the poor standard of public provision, but those receiving government recognition often do not fulfil conditions specified.

Graph 6: Source: World Development Indicators

The gender gap in education has dramatically improved in the previous decade

(Graph 7).

Graph 7, Source: Development Indicators)

Education has helped women out of poverty, giving them “internal strength..to face life…and ability to influence society”(Palanithurai, 2004 p290). Their increased skill-sets are behind self-help group such as SEWA7 who have started banks, campaigns and credit institutions catering directly for the needs of women. It is more likely that neo-literate mothers would ensure their children become literate, emphasising education as a long term solution.

Graph 8, Source: Povcal.net

Job security should provide the poor with a stable income, basic rights and ability to plan a future. Graph 9 shows the country’s failure in this, with an increase in unemployment.

Graph 9, Source: World Development Indicators

Employment for people below the poverty line decreased from 68% in 1992 to 39.1% in 2005 (World Development Indicators). National statistics however show unemployment decreasing in all albeit urban females. The public sector provides employment and self-employment schemes such as the National Rural Employment Guarantee Act. However due to poor implementation, overpopulation and lack of skills, 90% of the labour force are forced into the informal sector “without a job or social security, living in abject poverty” (http://www.reuters.com/article/latestCrisis/idUSDEL218894 2007).

The recognition of this sector, in measures such as the ‘Street Vendors Bill’ 20098 and the ‘National Commission for Enterprises in the Unorganised Sector9, is part of an aim of empowerment. Increased wages of 69% between 1983 and 1999 (All India, 2009), the raising of the national floor level of minimum wage 2009 and successes of groups such as SEWA Delhi of removing the middle man in the supply chain, are all steps to alleviating workforces out of poverty. Lack of resources, infrastructure, specialised skills, access to finance and collateral, and discrimination are barriers still faced.

Graph 10 shows the success in reducing poverty in rural and urban areas.

Graph 10, Source: World Development Indicators

Urban-based growth, increased globalisation, switch from food to cash crop, unpredictable weather and debt caused by increased production costs and decreasing prices for commodities have contributed to a greater extent of poverty amongst rural populations. The Rural Housing Programme was set up to solve the housing problem, although had achieved less than half its target for last year, Implementers are often from the ruling elite resulting in scandals such as the ‘Bihar Fodder’ scandal10. Decreased government expenditure on agriculture and irrigation fell following the 1991 reforms, depicted in table 2.

Agriculture and Allied Activities

1990-91

1.22%

2002-03

0.79%

Irrigation and Flood Control

1990-91

1.25%

2002-03

0.94%

Table 2, Source: Accessed at (http://rupe-india.org/39/shaping.html), on 14/04/2010

The decline resulted in a decrease in this sectors percentage of GDP, with no significant decline in the populations’ reliance on this sector for employment. The negative effect this had on the rural sector instigated however caused a move toward a ‘pro-farm budget’ since 2007. Currently agriculture constitutes 60% of the countries employment, and accounts for 26% of output and thus greater progress is needed. (World Bank, 2009).

The failure to address the needs of the rural poor resulted in migration and an ‘urbanisation of poor’, with an increase of 33.9 million people between 1981 and 2001(World Development Indicator). This is shown by Graph 11.

Graph 11, Source: World Development Indicators

This dramatic increase has put a strain on resources and reversed poverty reduction in urban cities. Schemes to increase the skill-base of the poor and increase income security include JRY. Corruption prevails with officials using state-funded labourers, subjecting them to little or no pay. Impractical demands on the poor have limited access to schemes such as the New Housing Scheme Loan 199911. Increased privatisation, poor targeting such as in the NREGS scheme and a market driven over demand focused nature of schemes have resulted in poverty reduction not reaching levels possible. A recent attempt to decrease poverty includes a slum-mapping campaign which forms part of the government’s target of achieving a slum-free India in five years.

Overall, population growth (Graph 12) has strained resources, affecting all areas of poverty alleviation.

Graph 12, Source: World Development Indicators Database

Attempts to control this trend have focused on increasing female education and access to family planning clinics and contraception. Measures to include men have proved successful with schemes such as the ‘Husband Craft Programme’, which reported success rates at adopting family planning measure of 71% of those attending centres with husbands, as opposed to 15% without. Falling fertility rates are graphed below.

Graph 13, Source: World Development Indicators

India’s battle with poverty has both been the cause and effect of growing inequality (Graph 14). This inequality between gender, caste, sex and state strengthens the elitist bias, in the provision of public services for example, and thus its barrier to improvement.

Graph 14, Source: CIA World Factbooks

Thus, despite being one of the world largest democracies, discrimination is still prominent. The main social security systems to look after the vulnerable sections of society are the NOAPS, NFBS and Annapurn12, and their success are tabled below.

Year

Coverage of Beneficiaries

NOAPS

NFBS

Annapurna

2002-03

7471509

85209

796682

2003-04

6534000

209456

958669

2004-05

8079386

261981

850768

2005-06

8002561

272828

857079

2006-07

8645371

171232

750319

Table 3, Source: (http://rural.nic.in/nsap_1.htm)

Measures such as Reservation in government, employment and education have made modest progress. Some claim this measure is inefficient as wealthier members of these classes take up reserved posts. Oppression of women is within “religious doctrines and practices, within the education and legal systems and within families”

( http://www.life-education-centre.org/eng/01_bginfo_07.htm, 2010) . World Bank rated women in India in 2009 in terms of access to land, bank, loans and property as having full restriction (World Bank, 2010). Self-selective abortion has increased in recent years by technology developments, thus India suffers from a ‘deficit’ of women (Sen, 1992). The futility of government schemes results from that “legal protection has little effect in the face of prevailing patriarchal tradition” (Coonrod, 1998). Women’s representation in parliament has remained virtually unchanged since 2000, and the improved but low and stagnated numbers of households with a female head are shown in Graph 15.

Graph 15, Source: GenderStats

The recognition globally that ‘poverty has a woman’s face’ (http://www.endpoverty2015.org/goals/gender-equity ) has led many schemes alluded to in other sections to target this section of society, seeing improvements such as the percentage of women employed in the organised sector (Graph 16).

Graph 16, Source: India’s National Commission

Through education, financial liberalisation and increased health, women are gaining the power and skills needed to fight poverty in the long run.

Scheduled Castes and Tribes account for 24% of the population but account for a staggering 60% of the country’s poor. Modest success is felt through reservation, although measures such as the ‘Employment of Manual Scavenging and Construction of Dry Latrines Act’ have proved futile and largely ignored. Many Dalit’s are segregated, with access to basic services refused and a lack of any political or social power. However increasing awareness through the landmark ‘Bhotmange’13 case, a growing ‘Dalit revolution’, the recent election of an ‘untouchable’ and India’s increased presence on the global stage drawing international attention to discrimination, are all stepping stones to empowering this oppressed sector out of poverty.

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Land reform initiatives are a political and economic tool for poverty alleviation to rid the country of its semi-feudal agrarian system. Measures such as land ceilings, regulation of tenancies, computerising land records and consolidating landholdings has had mixed success, some resulting in perverse consequences, misuse of loopholes & corruption. Failure of these policies to impact on the India’s growing landless labour is due to initiatives being subject to the deficiency of state-run schemes. The extent of land reform success within India is summarised by the statement that “India’s 35 years of ceilings…(has) transferred less than 1% of agricultural areas to target groups” (cited by Deininger and Binswanger, 1999).

The 1980’s saw an expansion of rural banking with schemes such as Integrated Rural Development programme contributing to “a significant transfer of funds to the rural poor” (Ramachandran and Swaminathan, 2004 p6). This was reversed by neo-liberal policies of the 1990’s which phased out directed credit programmes, contracted rural banks and created reliance on the micro-finance sector. It is predicted that 87% of the rural poor do not have access to formal finance (the Rural Finance Access Survey, 2003). Government attempts to improve the situation have included interest rate restrictions and caps on small loans although many criticise these for stifling access to finance for the poor. The microfinance scheme has had considerable success especially in the case of credit co-operatives. Self help groups for women such as SEWA set up businesses and banks with repayments of over 99%. Men have also set up ‘Brothers Banks’. A savings habit formed, reducing vulnerability to uncertain income streams. The Bank-Self Help Group linkage programmes succeeded in channelling new wealth into poverty reducing ventures. Irrespective of government policy, the informal sector has dominated credit provision especially in rural areas. Loans are provided by money-lenders, who charge an average 48% interest and entrap families in lifelong debt (Basu, 2004). Children are forced into labour and inherit family debt, and an increasing number of farmers commit suicide leaving families without a bread-winner, which by the nature of the death can not be covered by insurance. Generally, it is claimed that to truly reduce poverty, the formal sector needs to better cater to the needs of the poor.

Whilst power of progress remains in the hands of the elite, who are typically from oppressive members of society, poverty will retain its grip on India’s poor. It is supposed that India’s population suffers from long term poverty due to the large proportion and time span of those living in poverty. Schemes have failed due to exclusion of poor in planning, discrimination, insufficient funding, weak planning and co-ordination and an absence of successful monitoring. Corruption is rife with an estimated 15% of resources allocated reaching its intended location (Kundu, 2010). Fears of the Maoist rebels recruiting disaffected members of society, the financial crisis and natural disasters also pose serious threats to future progress. The extent of poverty remains divided by state, caste and gender although progress has been made in reducing this gap. Successes in the provision of education and healthcare have been made, as well as improvements not mentioned such as the provision of transport links. There is growing recognition of the damage that past policies have had, especially on the rural classes. With its successful economy and large workforce, India has the potential to lift its population out of poverty, but an assessment of the success of the past 15-25 years has ultimately proved disappointing.

Acronyms

BPL= Below the Poverty Line

JRY= Jawahar Rozgar Yojana

MDG= Millenium Development Goal

SEWA= Self Employed Women’s Association

WDI= World Development Indicator

WHO= World Health Organisation

Appendix

I am including further explanation of terms that may be unclear:

Trickle Down Model

This is an economic theory used in India to advocate the focus of growth in the urban sector, as it would eventually ‘trickle down’ to the rural sector of society.

Panchayat

A village council

Public Hearings

Janarogya Yojana Scheme

This is India’s first medical insurance scheme which was set up in 1996-7. It covers people between ages 5 and 70 for up to 30 and 60 days for pre- and post- hospitalisation expenses respectively.

NREGA/ MGNREGA

This is the Mahatma Gandhi National Rural Employment Guarantee Act, which was enacted in 2006 which guaranteed one hundred days of employment in every financial year to any household in rural areas who want to do public work related unskilled manual work at minimum wage.

Nirmal Gram Puraskar

This was introduced in conjunction with the Total Sanaction Campaign to reward those who have made significant improvement in ensuring full sanitation coverage.

SEWA

This is the Self Employed Women’s Association started in 1972. it encompasses self-employed women workers.

Street Vendors Bill’ 2009

This bill was introduced to ‘provide for protection of livelihood of urban street vendors and to regulate street vending’. It is designed to protect and improve the rights and lives of street vendors, who make up the majority of the informal sector in urban areas in India.

Bihar Fodder’ scandal

This occurred in 1996 and involved the embezzlement of large amount of money from the Government treasury located in Bihar by government officials which was meant to be used for Poverty Alleviation Schemes. It involved accounting for non-existent livestock.

New Housing Scheme Loan 1999

Annapurna

This scheme tries to provide food security for the senior citizens of society who were not covered by the National Old Age Pension Scheme.

The Bhotmange Case

This is a landmark case for the Dalit section of society in India which occurred in 2006. It started from an oppressed Dalit villager reporting physical abuse to the police and a resulting arrest of an upper caste member. This provoked around 40 villagers to plan an attack and murder of the family. The family were paraded naked through the street, violently abused and gang raped. The result was that 6 people were awarded the death penalty as punishment.