Eradicating Poverty

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General Studies 2

• Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

General Studies 3

• Poverty and inclusive growth  

In News:

India may have reduced extreme poverty far more effectively than most of us are aware of. The last official data is eight years old.

• In 2011, 268 million people were surviving on less than $1.90 a day, the World Bank measure for extreme poverty.
• The next round of data on household consumption is likely to come out in June, and it may well show a drastic drop in the number of poor.
• According to the World Data Lab — which monitors global poverty using advanced statistical models — less than 50 million Indians may be living on less than $1.90 a day now. Economists said rapid economic growth and the use of technology for social sector programs have helped make a significant dent in extreme poverty in the country.

The BJP had cited global think tank reports to say that India is moving fast towards a poverty-free situation and gave credit to policies of the Narendra Modi-led government for it.

The Report

The multidimensional poverty index is based on a powerful list of 10 deprivations for poor: Health, child mortality, years of schooling, school attendance, cooking fuel, sanitation, drinking water, electricity, housing and assets.

The MPI measures acute poverty and people experiencing multiple deprivations, for example, those who are both undernourished and do not have safe drinking water, adequate sanitation and clean fuel. These indicators are set to minimum international agreed standards in basic functioning. “While progress has been remarkable, the country still has the largest number of people living in multidimensional poverty in the world (364 million people). If one considers the 364 million people who are MPI poor in 2015-16, 156 million (34.5 per cent) are children. In fact, of all the poor people in India, just over one in four-27.1 per cent-has not yet celebrated their tenth birthday,” it said.

The reality

We were very poor at the time of Independence. The per capita income (at prices then prevailing) was Rs 247. Few had jobs outside agriculture. Literacy was at 17 per cent. Life expectancy at birth was 32 years. All these indicators pointed to massive and widespread poverty.

In 72 years, all indicators have improved. Millions have moved out of agriculture and hold jobs in the organised sector. The literacy rate is 73 per cent, life expectancy at birth is 68 years and per capita income at current prices (2018) is Rs 1,12,835.

Two-fold Approach

A two-fold approach is needed to ameliorate poverty.

First, growth is important: Growth can help to reduce poverty in two ways. As growth occurs, it does affect all sections of the society. However, the extent to which the bottom deciles of the population will benefit will depend upon how fast and inclusive the growth is, and thus, composition of growth also matters.

Second, composition of growth: A strong growth also increases the resources available to the public authorities and this will enable them to increase the social sector expenditures. Due to the very fact that the poverty ratio is still high means that growth by itself will not be adequate to reduce poverty. It is necessary to launch specific programmes which work towards directly helping poorer groups and vulnerable sections.

A comprehensive Social Protection System

When social protection schemes were created in India after Independence, most of the country was reeling from famine, de-industrialisation and multiple deprivations. Half the population was chronically poor, the country had an aggregate food deficit, financial and banking networks were underdeveloped, growth rates were weak, and technology available for program administration was rudimentary. Therefore, India’s policymakers focussed almost exclusively on anti-poverty, protective instruments.

But that India no longer exists, and the country’s social protection system needs to evolve and catch up with the needs of its new demography and risk profile. A comprehensive social protection system requires three types of instruments to work together.

1. First, promotional instruments invest in the ability of families to survive shocks on their own — by enhancing productivity, access to job opportunities and incomes through human capital infrastructure, wage legislation, labour policies, skills training and livelihood interventions.
2. Second, preventive instruments aim to reduce the impacts of shocks before they occur by enabling households to use their savings from good times to tackle losses in tough times. This is mainly done through social insurance programs.
3. Third, protective instruments mitigate the impacts of shocks after they have occurred through tax-financed redistribution from the non-poor to the poor. These programs would classically be called anti-poverty measures as they target social assistance or safety net programs to the poor or destitute, whether in kind or cash.

It’s critical that programs help those vulnerable to poverty to anticipate and manage risks and shocks better, not only attempt to provide aid to relieve deprivations experienced by the poor. Three types of portable tools are needed to prevent the new vulnerable class from falling back into poverty and debt traps — health insurance, social insurance (in case of death, accident and other calamities) and pensions.

Recent policies have taken steps in the right direction. The boost in crop insurance, new pension plans for the elderly, the rise in contributory pensions for those who have the wherewithal to save, and larger coverage of health insurance programs will help India re-balance its social protection architecture to match the needs of the rising numbers of its vulnerable people.

However, the need to re-balance the mix of programs between protection and prevention may not require a dramatic change in the current umbrella social protection budget. Given the huge diversity in the economic profile of India’s states, a variety of approaches will be called for.

Effective safety nets can dramatically reduce the number of poor and the likelihood that poverty will be transmitted from one generation to the next. Strengthening their delivery systems is key, while allowing state governments to choose the optimal mix of preventive and protective programs to suit their state’s needs within an umbrella social protection budget.

If insurance coverage is adequate and expands, many families would not need to rely on safety net transfers in the face of old age or health crises which would otherwise push households into long-term poverty and debt traps. Thus, an increased emphasis on interventions that help anticipate risks should be expected, particularly in medium- and high-growth states.

India is no longer a largely chronically poor country but a more unequal and vulnerable country with pockets of deep poverty. India’s future shared prosperity will depend to a large extent on how its social protection system evolves and catches up with its diversity and demography.

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Connecting the dots:

1. In terms of poverty eradication, what are the challenges faced by India? Elucidate
2. Poverty is a disease which engulfs prosperity if not diagnosed and treated properly. Explain.
3. The challenges posed by poverty and lack of development can be a addressed by focussing upon the vulnerabilities of different social groups. Elucidate.