Poverty and Inclusive Growth in India

Poverty and Inclusive Growth in India

Mains Exam: General Studies Paper 3

(Sustainable and Inclusive Development)

August 23, 2023

Foreword:

  • There have been significant structural changes in the Indian economy in recent years. Inclusive growth is a key policy priority, whereby the benefits of development are shared by a large section of the population. Inclusive growth is essential for reducing poverty and other inequalities and for rapid economic growth. The availability and accessibility of physical, social and economic infrastructure is essential as an important strategy and policy intervention in combating poverty.
  • The agenda of sustainable development is a collective effort for equitable, inclusive socio-economic development to meet the universal aspirations of the world including India. Global poverty has been a cause of concern for policy analysts because of its scope and intensity.

Poverty in India:

  • Nearly half of the world's poor live in South Asia. In 2003, 534 million people in South Asia lived on less than a dollar a day in 2003, of which 300 million lived in India.
  • In the year 2004-2005, in the estimates of national poverty line in India, 27.5 percent i.e. more than a quarter of the population was below the poverty line.
  • In numerical terms, there were 302 million poor in India, a large proportion of whom were ultra-poor in terms of essential living standards.
  • According to the international poverty line, income of one dollar per day, about 34 percent of India's population was poor. Assuming an income of $2 a day as the poverty threshold, this would be about 80 per cent.
  • Currently, about 60 percent of India's approximately 1300 million population lives on less than the World Bank's average poverty line of $3.10 a day, while 21 percent i.e. about 250 million population is living on less than two dollars per day income level.
  • According to the Suresh Tendulkar Committee, 43 Crore i.e. 37.2 percent of the population was below the poverty line.

International Agency Oxfam

  • As India emerged as a global economic power in the era of neoliberalism, the rich in the country got richer and the poor mostly remained poor.
  • According to the 2017 report of the international agency Oxfam, ten percent of the rich in India had 80 percent of the country's wealth, 16 people had the same wealth as 600 million people and the top one percent had about 58 percent of the country's wealth.

Multidimensional Poverty Index (MPI)

  • In efforts to eradicate poverty, India's NITI Aayog has developed a Multidimensional Poverty Index (MPI) based on the National Family Health Survey (NFHS), which identifies multidimensional poverty at the national level, 36 states and union territories and 707 administrative districts .
  • This is the first of its kind index, which simultaneously measures deprivation in the dimensions of health and nutrition, education and standard of living.
  • The latest National Multidimensional Poverty Index has been prepared on the basis of NFHS-5 for the year 2019-21 and shows India's success in reducing multidimensional poverty as compared to the year 2015-16.
  • It presents poor population proportions and multidimensional poverty intensity at the national, state and district levels based on the methodology developed by the 'Oxford Poverty and Human Development Initiative' and the United Nations Development Programme.
  • The estimation of poverty mainly depended on the income level. But the MPI looks at multidimensional deprivations in health, education and living standards.
  • Non-income dimensions of poverty such as infant and maternal mortality rates, literacy levels and gender disparities reflect deep poverty.
  • The three equally important dimensions of the MPI, health, education and standard of living, contain a total of twelve indicators.
  • It will ensure that 'no one is left behind' by helping in fact-based decision making, policy making and targeted interventions for poverty alleviation efforts.
  • With MPI, India will be able to ensure inclusive growth by gaining a deeper understanding of the complexities of poverty.
  • With one-sixth of the world's population, India understands its role and responsibility in inclusive development. In the first MPI 2015-16, about 64.5 crore i.e. 55.4 per cent Indians were below the poverty line.
  • India through its macro-socio-economic policies has given priority to social security measures to ensure access to essential services like housing, electricity, food, sanitation and to protect the marginalized sections. This led to a sharp decline of 9.89 percentage points in the share of the multidimensional poor in India from 24.85 per cent in 2015-16 to 14.96 per cent in 2019-2021. The improvement in MPI scores shows that multidimensional poverty in India has almost halved.
  • Between 2015-16 and 2019-21, 13.6 crore population has come out of multidimensional poverty.
  • Also, the intensity of poverty, which measures the average deprivation among people living in multidimensional poverty, decreased from 47.14 per cent to 44.39 per cent.
  • The sharpest decline in the proportion of multidimensional poor was observed in Uttar Pradesh, Bihar, Madhya Pradesh, Odisha and Rajasthan.
  • The sharpest decline in the multidimensional poor in rural areas from 32.59 per cent in 2015-16 to 19.28 per cent in 2019-21.
  • Poverty in urban areas decreased from 8.65 per cent in 2015-16 to 5.27 per cent in 2019-21. Disparities still exist between rural and urban areas in multidimensional poverty. But, at the same time, it is also true that the MPI of rural areas showed a faster decrease than that of urban areas.
  • In 2015-16, Bihar, the state with the largest population of poor, saw the sharpest decline in its MPI value.
  • In the year 2019-21, the multidimensional poverty ratio decreased from 51.89 percent to 33.76 percent. After that the sharpest decline is in Madhya Pradesh and Uttar Pradesh by 20.63 and 22.93 percent respectively.
  • In terms of numbers, Uttar Pradesh is the first state with 3.43 crore people coming out of multidimensional poverty in the last five years, followed by Bihar with 2.25 crore and Madhya Pradesh with 1.36 crore.

Conclusions:

  • Improvements in nutrition, schooling, sanitation and access to cooking fuel have a significant role in the decline in MPI. The past five years have seen sharp improvements in all the twelve indicators including all three dimensions – health, education and standard of living. Overall, improvements in nutrition, years of schooling, sanitation, etc. have led to a decline in the MPI value, although there is still room for more.
  • Also important is better macroeconomic management of the economy, which has the potential to change the shape of poverty in an instant. In a progressive and stable macro-economy, the national MPI will enable us to evaluate the existing methods of poverty estimation and the effectiveness of poverty alleviation programs and suggest options for strategic interventions based on lessons learned from program implementation. There is still need for meaningful interventions in infrastructure, financial inclusion and social sector to reduce poverty.

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Mains Exam Question

Explain the situation of poverty in India in the context of sustainable and inclusive development.