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UNIT 4 POVERTY AND INEQUALITY:
POLICY IMPLICATIONS
Structure
4.0 Objectives
4.1 Introduction
4.2 The Concept of Poverty4.3 Measurement of Poverty
4.3.1 Income Indicators of Poverty
4.3.2 Indicators Covering Income and Non-income Dimensions of Poverty
4.4 Dimensions of Poverty in India
4.4.1 Income Poverty Indicators
4.4.2 Indicators Covering Income and Non-income Dimensions of Poverty
4.5 Concept of Inequality
4.6 Measurement of Inequality
4.6.1 Measures of Inequality of Income
4.6.2 Indicators Covering Inequality in Non-income Aspects of Life
4.7 Levels of Inequality
4.7.1 Levels of Inequality in Income and Consumption
4.7.2 Levels of Inequality in Non-income Aspects of Life
4.8 Policy Implications
4.9 Let Us Sum Up
4.10 Exercises
4.11 Key Words
4.12 Some Useful Books
4.13 Answers or Hints to Check Your Progress Exercises
4.0 OBJECTIVES
After reading this unit, you shall be able to:
define the concept of poverty; state different income and non-income indicators of poverty; assess the dimensions of poverty in India; define the concept of inequality; state the different methods of measurement of inequality of income; explain the levels of inequality; and state the policy implications of poverty and inequalities.
4.1 INTRODUCTIONAs seen in unit 2 earlier, the Indian economy has expanded and diversified
considerably since the advent of planning. The Gross Domestic Product
(GDP) grew at the average annual rate (compound rate) of 3.2 per cent in the
1960s and 1970s. The economy moved to a higher growth path thereafter to
5.8 per cent per annum in the 1980s and 5.7 per cent per annum in the 1990s.
This momentum of growth has more or less been maintained during the first
half of the current decade. The share of the agricultural sector in total GDP
has declined from about 55 per cent to about one-fourth and that of the
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services sector has increased from about 30 per cent to over 50 per cent over
the fifty-year period.
Has such economic expansion and diversification led to the socio-economic
well-being of the people of the country? This does not seem to be the case for
sizeable sections of the people. About one-fourth of the Indian population of
over a billion is poor. A significant proportion of labour force remains
unemployed, there are gross inequalities in distribution of income. In the
present unit and the following unit 5, we address ourselves to these issues of
economic development.
4. 2 THE CONCEPT OF POVERTY
Poverty is a multidimensional concept. Poverty may be defined as a state of
lack of access to the basic needs of income, food, shelter, education, health
services, safe drinking water and sanitation that help an individual lead a
decent, normal and effective existence. Indeed, the list of basic and other
needs may vary, depending upon the society in question and what, in its view,
constitutes normal andeffective existence. The next question that comes up is
about how lack of access is understood. Is a total lack of access to food
(hunger), etc., necessary to be considered as being in a state of poverty? Or is
there a minimum desirable level of access, only below which an individualwill be considered as being poor? These questions lead one to the realm of
estimating the incidence of poverty or the number who are poor and the
related quantitative indices of poverty or deprivation and measures of human
development. We shall deliberate upon these issues in the next section.
4.3 MEASUREMENT OF POVERTY
4.3.1 Income Indicators of Poverty
The first step in estimating the incidence of poverty is to define apoverty line.
The Task Force on Projections of Minimum Needs and Effective
Consumption Demand of the Planning Commission (1979), used an averageenergy (nutritional energy) requirement norm to define the poverty line. Since
calorie is the unit of energy, the norm used was in terms of calories. The Task
Force estimated the average daily per capita requirements for rural and urban
areas by using the specific calorie allowances recommended by the Nutritional
Expert Group (1968) for population groups of different age groups, sex and
activity. In this manner, the Task Force attempted to capture in the average
norms factors such as age, sex and occupational differences in the daily
calorie requirement of the population. The calorie norms, thus, derived were
rounded off to 2,400 calories per capita per day for rural areas and 2,100
calories per capita per day for urban areas. The monetary equivalents of
these norms were obtained by using: (i) data on the quantity and value of
items of household consumption and (ii) the calorie content of the items offood consumed by population groups belonging to different per capita
expenditure classes with appropriate conversion factors. The Task Force, thus,
estimated, on the basis of the observed consumer behaviour in 1973-74, that,
on an average, a consumer expenditure of Rs. 49.09 per capita per month was
associated with a calorie intake of 2,400 calories per capita per day in rural
areas and Rs. 56.04 per capita per month with a calorie intake of 2,100 per
capita per day in urban areas. In other words, the poverty line was defined as
the per capita expenditure level at which the average per capita per day
calorie intake is 2,400 calories for rural areas and 2,100 calories for urban
areas. This poverty line serves as a cut-off line for separating the poor from
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the non-poor if the distribution of population with per capita expenditure
below the level defined by the poverty line is counted as poor. The proportion
of the poor to the total population is the Poverty Ratio (PR) orthe Head
Count Ratio (HCR). PR or HCR measures the incidence of poverty. It is,
thus, defined as:
numberof peoplebelow poverty lineIncidenceof Poverty PR HCR 100
totalpopulation= = =
It is expressed as a percentage. This is useful for comparing the povertysituation in two areas like the rural and urban areas or different States or the
situation in an area in the year 2005 compared to, say, 1995.
The computation of the poverty line for the base year (1973-74) has been done
with prices of items in the base year. This is, therefore, updated for changes in
prices over time. This is, then, used with the distribution of population by
different per capita consumer expenditure classes available from time to time
from periodic surveys of the NSSO on household consumption to arrive at
estimates of the number of the poor and the poverty ratio for subsequent years.
The measurement of poverty described above, namely, the poverty ratio or the
head count ratio, is simply the proportion of the number of people below the
poverty line in the population. This ratio, however, does not make anydistinction within the broad category of the poor on the basis of their actual
levels of consumption and deprivation. Consequently, the poverty ratiofails to
capture the depth and severity of poverty in an adequate manner. A measure
developed for this purpose is the Poverty Gap (PG) Index. The PG Index
calculates the total shortfall of consumption below the poverty line, per capita
of the totalpopulation. This is, then, expressed as a percentage of the poverty
line. It can also be calculated as:
(Poverty line Per capita consumption of the poor)PG Index Poverty Ratio 100
Povertyline=
More comprehensive measures of the severity of poverty arethe Squared
Poverty Gap (SGP) andthe Sen Index(SI). We shall not go into the formulaefor these measures except to observe that: (i) SGP is not PG x PG, (ii) it
possesses the properties of both the Poverty Ratio and the Poverty Gap Index
and (iii) in addition, it also captures the extent of variation in the levels of
consumption of the poor. It is, however, sensitive to measurement errors at the
bottom of the per capita expenditure scale. The Sen Index takes note of the
shortfall in average consumption of the poor from the poverty line as well as
the inequality in consumption among the poor.
4.3.2 Indicators Covering Income and Non-income
Dimensions of Poverty
Poverty Ratios (PR) and measures related to PR provide a composite picture
of people whose per capita consumption expenditure is below the level of per
capita consumption expenditure corresponding to the basket of commodities
constituting the desired minimum. These do not, however, provide a complete
picture of the extent of deprivation or, alternatively, the state of well-being of
the population. These are rooted in calorie consumption and do not say
anything about several other factors that shape living standards, like: (a) the
health status of the population like longevity, overall mortality, infant
mortality, maternal mortality (mortality of women arising from child birth and
related causes) and morbidity (prevalence of diseases) and in general, access
to health services, (b) the nutritional status, (c) the educational status and
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(d) the living environment like housing, access to safe drinking water and
sanitation as also pollution-free air and water resources. Attempts have been
made to capture these aspects in alternative measures of poverty. Let us have a
brief look at them.
a) The Human Development Index (HDI) and the Human Poverty Index
(HPI)
As discussed in unit 3, the UNDP has been preparing Human Development
Reports (HDRs) and making estimates of the Human Development Index
(HDI) for different countries since 1990. The HDI incorporates three mostcritical and socially usefulchoices, viz.,
i) the choice to lead a long and healthy life;
ii) the choice to acquire knowledge; and
iii) to have access to the resources needed for a decent level of living.
The countries are ranked in order of the value of the HDI.
HDR also presents estimates ofHuman Poverty Index (HPI). This being a
measure of deprivation, HPI makes use of the following for the three areas of
choices referred to above:
i) Proportion of populationnotexpected to survive beyond 40 years;
ii) Adult illiteracy rate; and
iii) (a) Percentage of population without sustainable access to an improved
water source; and (b) Percentage of children aged 5 or below who are
underweight for their age.
The National Human Development Report, 2001 prepared by the Indian
Planning Commission follows the framework of human development adopted
in the UNDP HDR. It presents estimates of HDR for 1981 and 1991 for the
country and different States and Union Territories. It also gives estimates of
HDI for 2001 for the country and for 15 major States. Estimates of HDI for
the other States and Union Territories could not be prepared due to lack ofcomparable data for these States for 2001.
b) Gender-related Development Index (GDI) or Gender Equality Index
(GEI)
The Human Development Index (HDI) that we have discussed so far is based
on indicators reflecting economic, educational and health attainments of the
population. It does not, however, reflect gender-based disparities in such
attainments. Gender-based discrimination is prevalent in every society
developed or not to a lesser or greater degree. Such discrimination results in
a higher incidence of poverty in the female population than in the male
population, in whatever manner we measure poverty. Gender-related
Development Index (GDI) or Gender Equality Index (GEI) seeks to reflectgender disparity in human development. This will help to focus attention on
aspects of development planning that fail to reduce gender discrimination.
This index is estimated as a proportion of economic, educational and health
attainments of females to that of males. The common set of variables for
which the attainments of females and males are compared is the same set that
is used in estimating HDI.
c) Capability Poverty Measure (CPM)
UNDP HDR 1996 had also developed a Capability Poverty Measure (CPM)
for different countries. Three indicators, (i) the percentage of children under 5
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who are underweight (ii) the percentage of births unattended by trained health
personnel and (iii) the percentage of women aged 15 years and above who are
illiterate, were used for computing CPM.
Check Your Progress 1
Note: i) Space is given below each question for your answer.
ii) Check your answer(s) with those given at the end of the unit.
1) In what way is the PG Index more useful in assessing the poverty
situation?
2) What are the indicators which take note of income as well as non-income
aspects of poverty?
3) What are the indicators on which Human Development Index and the
Human Poverty Index estimated by the NHDR, 2001 of the Planning
Commission are based?
4) What are the indicators of Capability Poverty Measure (CPM) prepared by
NCAER?
4.4 DIMENSIONS OF POVERTY IN INDIA
4.4.1 Income Poverty Indicators
The incidence of poverty has declined from 56.4 per cent in 1973-74 to 27.1
per cent in 1999-00 in rural areas and from 49 per cent to 23.6 per cent during
the same period in urban areas (See Table 4.1). The decline is from about 55
per cent to 26 per cent for the country as a whole. While the number of the
rural poor declined, the rise in the number of the urban poor had been more
than compensating for it till 1994. Thereafter, the number of urban poor has
also declined. As of 2000, a little over one-fourth of the population of the
country is poor.These 260 million people do not have the purchasing power
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needed to meet the specific standard of calorie intake with some margin for
non-food consumption needs. About three-fourths of these are in the
countryside. About one-half of the population of Orissa and about two-fifths
of the population of Bihar and Madhya Pradesh do not have even this
minimum level of purchasing power (Table 4.2). Rural as well as urban
poverty is most severe in Orissa, with almost of its rural population and two-
fifths of its urban population being poor (Table 4.2).
Table 4.1: Poverty Ratio and the Number of Poor
Poverty Ratio (per cent) No. of Poor (million)Year
Rural Urban Combined Rural Urban Combined
(1) (2) (3) (4) (5) (6) (7)
1973-74 56.4 49.0 54.9 261.3 60.0 321.3
1977-78 53.1 45.2 51.3 264.3 64.6 328.9
1983 45.7 40.8 44.5 252.0 70.9 322.9
1987-88 39.1 38.2 38.9 231.9 75.2 307.1
1993-94 37.3 32.4 36.0 244.0 76.3 320.3
1999-00 27.1 23.6 26.1 193.2 67.0 260.2
Source:
1) Report of the Tenth Five Year Plan (2002-07) Steering Committee on Urban
Development, Urban Housing and Urban Poverty, 2001, Planning Commission.
2) National Human Development Report, 2001, Planning Commission.
Table 4.2: Poverty in India: 1999-00
Rural Urban Total
Sl.
No.
State No. Poor Poverty
Ratio
No. Poor Poverty
Ratio
No. Poor Poverty
Ratio
(Million) (Per cent) (Million) (Per cent) (Million) (Per cent)
(1) (2) (3) (4) (5) (6) (7) (8)
Major States
1. Andhra Pr. 5.81 11.05 6.09 26.63 11.90 15.77
2. Assam 9.22 40.04 0.24 7.47 9.46 36.09
3. Bihar 37.65 44.30 4.91 32.91 42.56 42.6
4. Gujarat 3.98 13.17 2.81 15.59 6.79 14.07
5. Haryana 1.19 8.27 0.54 9.99 1.73 8.74
6. Himachal Pr. 0.48 7.94 0.03 4.63 0.51 7.63
7. Karnataka 5.99 17.38 4.45 25.25 10.44 20.04
8. Kerala 2.1 9.38 2.01 20.27 4.14 12.72
9. Madhya Pr. 21.73 37.06 8.12 38.44 29.85 37.43
10. Maharashtra 12.51 23.72 10.29 26.81 22.80 25.02
11. Orissa 14.37 48.01 2.54 42.83 16.91 47.15
12. Punjab 1.02 6.35 0.43 5.75 1.45 6.16
13. Rajasthan 5.51 13.74 2.68 19.85 8.18 15.28
14. Tamil Nadu 8.05 20.55 5.00 22.11 13.05 21.12
15. Uttar Pradesh 41.2 31.22 11.79 30.89 52.99 31.15
16. West Bengal 18.01 31.85 3.34 14.86 21.35 27.02
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Other States
17. Arunachal Pr. 0.38 40.04 0.02 7.47 0.40 33.47
18. Goa 0.01 1.35 0.06 7.52 0.07 4.40
19. Jammu & Ka. 0.30 4.00 0.05 1.98 0.35 3.48
20. Manipur 0.65 40.04 0.07 7.47 0.72 28.54
21. Meghalaya 0.79 40.04 0.03 7.47 0.82 33.87
22. Mizoram 0.14 40.04 0.04 7.47 0.18 19.47
23. Nagaland 0.52 40.04 0.03 7.47 0.55 32.67
24. Sikkim 0.20 40.04 0.004 7.47 0.205 36.55
25. Tripura 1.25 40.04 0.05 7.47 1.30 34.44
26. A & N Islands 0.06 20.55 0.02 22.11 0.08 20.99
27. Chandigarh 0.01 5.75 0.04 5.75 0.05 5.75
28. D & N Ha. 0.030 17.57 0.003 13.52 0.033 17.14
29. Delhi 0.01 0.40 1.14 9.42 1.15 8.23
30. Pondicherry 0.06 20.55 0.18 22.11 0.24 21.67
31. Lakshadweep 0.003 9.38 0.008 20.27 0.011 15.6
India 193.24 27.09 67.01 23.62 260.25 26.10
Source: National Human Development Report, 2001, Planning Commission.
Incidence of Poverty among the Scheduled Castes and Tribes. Poverty ratios
for these two groups for 1993-94 and 1999-00 are shown in Table 4.3.
Roughly, two-fifths of the Scheduled Castes and Scheduled Tribes are poor,
although there has been some reduction in the incidence of poverty in these
groups of population over the six-year period (1993-94 to 1999-00). But
incidence of poverty among Scheduled Tribes residing in rural areas is still
very high. About one-half of these people are poor.
Table 4.3: Incidence of Poverty among Scheduled Castes and Tribes
(1993-94 & 1999-00)
Group 1993-94
R U
1999-00
R U
General Population 37 32 27 24
Scheduled Castes 48 49 36 38
Scheduled Tribes 52 41 46 35
Source: Tenth Five Year Plan 2002-2007 Vol. II, Planning Commission.
We referred earlier to the inadequacy of the poverty ratio in measuring the
depth and severity of poverty. The poverty ratio does not give any idea of the
distribution of the poor by levels of consumption. It does not say anything
about, for instance, the number of the poor whose consumption levels are justabout half of the poverty line consumption level. We have seen earlier how
the Poverty Gap (PG) Index is able to take note of these aspects and show the
magnitude of the effort required to raise the levels of consumption of all the
poor below to the consumption level signified by the poverty line. We also
noted that the Squared Poverty Gap (SPG) and the Sen Index (SI) are more
comprehensive measures that reflect the severity of poverty. The position in
India in the decade of 1990s, as reflected by the three measures, is shown in
Table 4.4. We note that while the Poverty Ratio, the PG Index and the Sen
Index have declined in 2000 to about 70 per cent of their levels in 1994, the
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SPG Index has come down more sharply to about two-thirds its level in 1994.
The depth and severity of poverty has declined as fast as incidence of poverty.
Table 4.4: Some Alternative Indices of Poverty 1993-94 & 1999-00
1993-94 1999-00Poverty
Index Rural Urban Combined Rural Urban Combined
(1) (2) (3) (4) (5) (6) (7)
PG Index 8.2 6.7 7.8 5.8 5.0 5.6SPG 2.7 2.3 2.6 1.7 1.6 1.7
Sen Index 11.4 9.3 10.9 8.1 7.0 7.8
Source: Sundaram, K., Keynote Address in the 38th Session of the Indian
Econometric Conference, January, 2002.
4.4.2 Indicators Covering Income and Non-income
Dimensions of Poverty
We have so far looked at levels of poverty as reflected in the poverty ratios.
We noted earlier that poverty ratios do not reflect certain aspects of the living
standards like health, education and nutrition and that the Human
Development Index (HDI), the Human Poverty Index (HPI) and the
Capability Poverty Ratio (CPM) are some of these attempts. Let us know what
do these say about levels of living?
a) Human Development Index (HDI) and the Human Poverty Index
(HPI)
Indias rank on the basis of HDI is 127 out of 177 countries, according to the
UNDP Human Development Report (UNDP HDR), 2004. HDI for India has
increased by about 40 per cent between 1975 and 2001. Norway is at the top
of the table of country-wise HDI values and Sierra Leone at the bottom. HDI
for the developing countries as a whole is well above that for India. Pakistans
rank is 165 and Sri Lankas is 34. HPI, 2001 for India is less than that for ourneighbours except Sri Lanka, Myanmar and Mauritius, according to UNDP
HDR, 2004. Indias rank on the basis of HPI according to the UNDP HDR
2004 is 53 out of about 100 countries. Mauritius, Sri Lanka and Myanmar are
relatively better off than India.
Inter-State Variations
Estimates of HDI for 2001 and those of HPI for 1991 for different States and
Union Territories are shown in Table 4.5. Let us first look at the extent of
deprivation across the country as revealed by HPI. Note that new areas get
added to the list of high poverty areas given earlier on the basis of poverty
ratio. The entire Northeastern Region except Mizoram, Rajasthan, Madhya
Pradesh, Uttar Pradesh, Bihar, Orissa and Dadra and Nagar Haveli have arelatively high level of poverty as denoted by HPI. States and Union
Territories with a relatively low level of human development are generally
seen to have a relatively high incidence of poverty (HPI). This inverse
relationship is seen to be very strong if we take into consideration only the 16
major States listed.
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Table 4.5: Human Poverty Indices (HPI) and Human Development Indices
(HDI) for States & Union Territories, 1991 & 2001
Sl.
No.
States & Union
Territories
HPI1991
%
Rural
HPI 1991
%
Urban
HPI 1991
%
Total
HDI
1991
HDI
2001
(1) (2) (3) (4) (5) (6) (7)
1. Chandigarh 25.07 15.07 15.96 0.674 Ne
2. Delhi 21.02 17.99 18.22 0.624 Ne
3. Kerala 24.57 17.23 22.73 0.591 0.638
4. Goa 15.58 13.78 36.10 0.575 Ne
5. A & N Islands 28.80 16.32 25.24 0.574 Ne
6. Pondicherry 25.86 19.57 22.52 0.571 Ne
7. Mizoram 37.19 14.07 26.47 0.548 Ne
8. Daman & Diu 23.88 15.82 19.90 0.544 Ne
9. Manipur 43.84 26.51 39.82 0.536 Ne
10. Lakshadweep 15.67 12.26 13.89 0.532 Ne
11. Nagaland 45.00 23.56 41.30 0.486 Ne
12. Punjab 28.04 18.47 25.25 0.475 0.537
13. Himachal Pr. 21.67 9.91 20.90 0.469 Ne
14. Tamil Nadu 30.31 18.61 26.45 0.466 0.531
15. Maharashtra 29.30 17.65 24.73 0.452 0.523
16. Haryana 31.64 18.57 28.41 0.443 0.509
17. Gujarat 31.83 20.87 28.05 0.431 0.479
18. Sikkim 38.14 17.80 38.59 0.425 Ne
19. Karnataka 35.28 21.59 30.99 0.412 0.478
20. West Bengal 42.43 23.22 37.35 0.404 0.472
21. Jammu & Kashmir 34.94 17.67 30.95 0.402 Ne
22. Tripura 46.32 21.97 42.71 0.389 Ne
INDIA 42.25 23.03 37.42 0.381 0.472
23. Andhra Pradesh 43.19 25.12 38.34 0.377 0.416
24. Meghalaya 55.81 20.15 49.41 0.365 Ne
25. Dadra & Nagar Hv. 45.66 21.95 43.64 0.361 Ne
26. Assam 49.32 22.52 46.29 0.348 0.386
27. Rajasthan 51.17 26.73 44.73 0.347 0.424
28. Orissa 47.97 28.29 45.22 0.345 0.404
29. Madhya Pradesh 45.43 25.69 40.79 0.328 0.394
30. Arunachal Pradesh 50.75 25.65 47.40 0.328 Ne
31. Uttar Pradesh 50.02 32.62 46.65 0.314 0.388
32. Bihar 53.65 29.70 50.48 0.308 0.367
Ne: not estimated.
Source: National Human Development Report, 2001, Planning Commission.
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b) Gender-related Development Index (GDI) or Gender Equality Index
(GEI)
UNDP HDR 2003 estimates GDI 2001 for India as 57.4 per cent and Indias
rank with reference to this index as 103 out of 175 countries. In other words,
the attainment of women in the three dimensions covered by HDI is only
about three-fifths of those of men. The attainment of women in human
development dimensions covered by NHDR HDI (income, health and
education) is only about two-thirds of that of men. Gender equality was the
highest in Kerala (87.2 per cent) followed by Manipur (80.2 per cent),Meghalaya (79.9 per cent), Himachal Pradesh (78.3 per cent) and Nagaland
(78.3 per cent) in the 1980s. It was the highest in Himachal Pradesh (85.8 per
cent) in the 1990s and the least in Bihar (46.9 per cent). Estimates of GEI
showed that women were generally better off in Southern India than in the
Indo-Gangetic Plain, especially in Bihar and UP.
c) Capability Poverty Measure (CPM)
NHDR 2001 provides the basic data required for making estimates somewhat
similar to the estimates of CPM. These estimates are given in Table 4.6. The
extent of inadequate physical growth among women and children is alarming.
Table 4.6: Some Measures Relevant to Capability Poverty: 1998-99(Percentage)
Measure INDIA
Highest Value
among States &
Union Territories
Lowest Value
among States &
Union Territories
Children who are
underweight for age
47.0 55.1
(Madhya Pradesh)
20.6
(Sikkim)
Children who areunderweight for height
15.5 24.3
(Orissa)
5.3
(Haryana)
Children who are not
tall enough for their age
45.5 55.5
(Uttar Pradesh)
18.1
(Goa)Women with BMI less
than 18.5 kg./m2
35.8 48.0
(Orissa)
10.7
(Arunachal Pradesh)
Source: National Human Development Report, 2001, Planning Commission.
We have considered several measures of poverty and estimates of the levels of
poverty based on these. One set of measures is income based. The most
important among these is the poverty ratio, which gives the incidence of
poverty with reference to the (lack of the) purchasing power required to afford
the minimum desirable standard of calorie consumption. Another set attempts
to capture the extent of deprivation that the poor suffer in the matter of access
to food, safe drinking water, sanitation, medical attention, shelter, education
and health and nutrition to ensure longevity. The third consists of those thatmeasure levels of human development in the population, as this is one of the
important instruments for tackling poverty. A part of this set is also the one
that looks at gender disparity in human development. The fourth is based on
the lack of the capability to attain a specified minimum desirable standard of
living. And we find that the inability to access the basic needs of living and
the low levels of human development and capability usually form part of a
vicious circle. Only a development policy that is capable of cutting this
vicious circle can effectively solve the problem of poverty.
Let us now turn our attention to the problem of inequality.
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Check Your Progress 2
Note: i) Space is given below each question for your answer.
ii) Check your answer(s) with those given at the end of the unit.
1) What is hunger ratio?
2) Describe the trends with reference to incidence of poverty.
3) What is the incidence of poverty among scheduled castes and tribes?
4.5 CONCEPT OF INEQUALITY
While the concept of poverty is rooted in the lack of access or a low level
of access to food, nutrition, shelter, education and other services, inequality
is related to unequal access or different degrees of access of different
individuals or groups of individuals to these opportunities, services and
benefits. Inequality is, thus, a more general concept than poverty. It looks attherelative levels of access of different groups to development opportunities
and benefits. The different levels of access in the concept of inequality also
include the low level of access below which people are considered poor. In
fact, the low level of access or the limit (like for example, the calorie limit for
consumption) that may be set for defining poverty will itself include a number
of lower levels of access.
4. 6 MEASUREMENT OF INEQUALITY
4.6.1 Measures of Inequality of Income
a) Lorenz Curve
The most simple way to represent inequalities is called the Lorenz Curve. To
draw a Lorenz Curve, we take the cumulative percentages of the population
and their corresponding shares in the total income of all individuals. On x-
axis, we represent shares in population and on y-axis the corresponding shares
in total income. The resultant graph called the Lorenz Curve (LC).
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Lorenz Curves on Consumer Expenditure - Rural and Urban India: 1999-00
Lorenz Curve: 1999-00
0
20
40
60
80
100
120
0 10 20 30 40 50 60 70 80 90 100
Population Shares
Shareof
Consumption
eg.
LineU
R
We notice that the points of the curve corresponding to eg. Line in the
figure lie on a straight line from the origin in the southwest corner of thegraph and moving to the northeast corner. The percentages of population and
the corresponding shares of these groups in total income are equal at any point
on this line. This straight line, therefore, represents the line of complete
equality or the egalitarian line. The graph representing the actual shares,
however, appears as a loop joining the two corners of the graph and lying
belowthis line of equality. The extent to which the loop deviates from the line
of equality represents the extent of inequality. The situation of extreme
inequality is given by the X-axis from the origin to the point representing 100
per cent on the X-axis and the perpendicular line joining the 100 per cent
point on the X-axis and the (last) point on the northeast corner of the line of
equality corresponding to this point. This is the situation where all the
incomes generated in the economy accrue to one individual. The Lorenz Ratioof Inequality or the Lorenz Concentration Ratio (LCR) is given by the ratio.
(area enclosed by the line of equality and the LC)
LCR =
(area of the right angled triangle formed by the X-axis, the line of equalityand the perpendicular line standing on the X-axis at the 100 per cent point)
This can be arrived at by computing the area enclosed by LC, the X-axis and
the perpendicular line referred to earlier and subtracting it from the area of the
right angled triangle. The required ratio is then easily calculated.
A comparison of the extent of inequalities (of income) between two
economies or the trends in the degree of inequality in an economy over time is
possible with the Lorenz Curve. Let us draw two such LCs, say for the rural
and urban areas of India. Let one Lorenz Curve, say the curve for the rural
areas lie completely within the other (the urban curve) all through the range of
values. (This is the case in the LCs drawn as an illustration see Graph). That
is, one LC dominates the other. This is called Lorenz domination.Clearly, the
inequality in the society corresponding to the curve nearer to the line of
equality is less severe than the inequality in the society corresponding to the
outer curve. Problems of comparison, however, arise when the two (or more)
Lorenz Curves intersect, when it is not possible to arrive at a conclusion
regarding which curve depicts a worse inequality situation than the other.
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Summary measures of inequality will be useful in such cases. To these we
turn now.
b) Summary Measures of Inequality
The measures given below are ratios and, therefore, dimensionless, that is,
free of scale. These measure relative inequality in distribution, that is, these
will not be affected by any proportional change inallincomes.
Let the incomes of P individuals in a society be Y1, Y2, . Yi, .., YP,
where Yi is the income of the i th individual in the population. The meanincome (M) of all the individuals will be M = ( Yi) P. The mean incomeM does not tell us anything about the extent of inequality in incomes in this
society. Let us then look at other measures that can help us in this regard. Let
the individuals be arranged in the increasing order of their incomes. The
Median Income Me is the income of the middlemost person in the ranking of
individuals in the increasing order of their incomes, that is,
Me = Y(P + 1)/2 , if Yk is the income of the individual whose rank is k.
Me shows that the incomes of one-half of the population are below it. This is
otherwise not a useful measure of inequality: it does not reduce to zero in the
case of equality of all incomes.
1) Range of the incomes R = the difference between the highest individualincome and the lowest individual income divided by the mean income
M, that is,
R = (Maximum of Yi Minimum of Yi)/M.
R is zero when all incomes are equal and is equal to P when all the
incomes accrue to a single person.
2) Relative Mean Deviation RMD = (1/PM) (Yi M),
wherexstands for the absolute value of x (see footnote)1 and M themean income.
3) Gini Ratio (GR) is defined as one half of the relative mean difference.2
Thus,
GR = (Yi - Yj) (2 P P M),
where the summation is done first with reference to j = 1, 2, ....P and then
with reference to i = 1, 2, ..P.3
GR can also be expressed as follows:
GR = 1 + (1/P) 2 [PY1 + (P 1) Y2 + + 2 YP-1 + YP]/(P P M)
where Y1 Y2 YP.4
(Individual incomes arranged
according to increasing order of income)
1For example( - ) 3= 3.
2 Mean difference is the arithmetic mean of the absolute differences between all pairs of
incomes (P P pairs) and is divided by M to get the relative mean difference. It is equal to(Yi Yj)/(P P M).3
For example, Yi Yj for i= 1, 2 and j = 1, 2 will be Y1 Y1 + Y1 Y2 + Y2 Y1 + Y2 Y2.4 less than or equal to.
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The alternative formula shows that GR involves a weighted
sum of the incomes of individuals where the weights are the
ranks of individuals when they are arranged in the increasing
order of their incomes; but the poorest individual gets the
biggest weight P, the next individual who is better off than the
first gets the weight (P 1) and so on and finally, the richest
individual gets the weight one.
Other ratio measures can also be used. The distribution of income derived in
the manner described under the section on Lorenz Curve can be used tocompute simple ratio measures of inequality. For instance, we can compare
the shares in total income of the richest (top) 10 per cent of the population and
the poorest (bottom) 10 per cent of the population (Decile Ratio). Or we might
look at the ratio of the share in total income of the top half (50 per cent of the
population) of the income distribution to that of the bottom half.
Clearly, the measures mentioned above will give different values for a given
distribution of income. The important question to be considered is whether
these measures would rank different distributions of income in the same way
in terms of distributional inequality. These measures would give the same
ranking for, say, two distributions of income when there is Lorenz
domination, that is, where the two corresponding Lorenz curves are such that
one lies completely within the other. In cases, where the two curves intersect,
the choice of a suitable ratio has to be based on further considerations. For
example, a small transfer of income from a rich person to a person poorer than
him should be expected to result in a reduction in the inequality measure. This
property is known as thePigou-Dalton effect. How sensitive are the measures
mentioned above to this effect?
4.6.2 Indicators Covering Inequality in Non-income Aspects
of Life
Quality of life, as we noted earlier, has dimensions other than income, like
access to basic needs such as shelter, safe drinking water and services like
sanitation, electricity, education and health and employment opportunities. Anassessment of the varying degrees of access of different individuals or
households to one or more of these services and facilities is one way of
analysing such inequalities. Another is to attempt a similar assessment of how
the level of access to these services and facilities differ between and among
population groups like males and females, the rural folk and urban residents,
different areas like the various States, Union Territories and other
administrative divisions, the remote, the hilly and the backward areas, the
socially challenged groups like the Scheduled Castes/Tribes and the
physically challenged. The inclusion of the first population group and the last
two population groups in this list has to be specifically emphasised since the
most important social dimensions that need to be built into analysis of
inequality in levels of living are gender and social and physical disability.Discrimination based on these has to do with social and cultural attitudes and
biases and these have to be dealt with through empowerment of the groups
concerned and through efforts to change the social mindset. A third is to
attempt, if possible, the first and the second type of analysis by
income/consumption expenditure classes. This would, in a way, integrate the
analysis of income inequality attempted in an earlier section with the larger
area of levels of quality of life.
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The GDI and its component indices considered in an earlier section are all
indicators depicting gender inequality. The HDIs, GDIs and their component
indices are available for different States and Union Territories and in some
States at the district level also and can help analyse spatial inequality, that is,
inequality among areas. This will help building location-specific needs into
policy and policy implementation. The component indices of HDI and GDI
are more specific and their availability for different vulnerable groups like the
Scheduled Castes/Tribes, rural areas and women would help identifying
problems needing attention. One can also compute these indicators for
different income classes, areas and social classes to get an even better focus
for policy action. It is possible for example to compile the distribution of
school attendance, literacy, skills etc., by monthly per capita consumer
expenditure classes (MPCE classes) from NSSO consumer expenditure
surveys. Such a distribution by MPCE classes can also be extracted for the
Scheduled Castes/Tribes and for women from these surveys. Lorenz curve/GR
analysis can also be attempted for non-income aspects of quality of life. For
example, quality attributes like proportion of educated persons (matriculates
and above) to population in each income class can be analysed in the same
way as income by income classes as in the preceding section (See the example
worked out in the next section). Employment shares by income classes can be
examined in a similar fashion.
4.7 LEVELS OF INEQUALITY
4.7.1 Levels of Inequality in Income and Consumption
Let us look at levels of inequality in income or consumption. Consumer
expenditure of households is a good proxy for income, at least in the lower
classes. A study of inequalities in levels of consumption will by itself be
useful in an economy where agriculture, the unorganised sector, payment of
wages in kind and the non-monetised sector still play an important role. Such
an analysis will be able to pinpoint attention on specific areas of concern in
the consumption pyramid. Let us, therefore, turn to levels of inequality in
consumption.
Table 4.7: Inequality in Consumption: 1983 to 1999-00
1983 1993-94 1999-00Sl.
No. Inequality MeasureRural Urban Rural Urban Rural Urban
1. Share (%) in total
consumption of the
(a) Bottom 10% of pop. 3.80 3.47 4.34 3.37 4.58 3.48
(b) Top 10% of pop. 24.64 27.43 23.59 27.70 22.60 27.88
(c) Ratio of (b) to (a) 6.48 7.90 5.44 8.22 4.93 8.01
(d) Bottom 20% of pop. 9.03 8.19 10.01 8.01 10.32 7.85
(e) Top 20% of pop. 39.23 42.28 37.49 42.80 36.57 43.08
(f) Ratio of (e) to (d) 4.34 5.16 3.74 5.34 3.54 5.49
(g) Bottom half of pop. 30.14 27.72 31.92 27.20 32.56 26.79
(h) Top half of population 69.86 72.28 68.08 72.80 67.44 73.21
(i) Ratio of (h) to (g) 3.32 2.61 2.13 2.68 2.07 2.73
2. Gini Ratio 0.298 0.330 0.282 0.340 0.258 0.341
Sources: National Human Development Report, 2001, Planning Commission.
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The household consumer expenditure surveys of the NSSO provide us with
trends in levels of consumption of expenditure in the population by monthly
per capita consumer expenditure (MPCE) classes. Estimates of the different
measures of inequality made from the data collected in these surveys are
shown in Table 4.7.
A comparison of the share of the bottom 10 per cent (or 20 per cent or 50 per
cent) of the population in total consumption with that of the top 10 per cent
(or 20 per cent or 50 per cent) of the population brings out dramatically the
extent of inequality in consumption. The inequality situation is worse in urbanareas than in rural areas. This is so in all States and Union Territories.
Inequality in consumption is declining, albeitslowly, in rural areas according
to all measures of inequality. On the other hand, urban inequality shows no
sign of any decline.
Regional Variations
Gini Ratios calculated for the rural and urban areas of different States and
Union Territories are shown grouped by ranges of values of their Gini Ratios
in 1999-00 in Table 4.8. Inequality in consumption levels is worse than in the
rest of the country (GR greater than 0.3) in urban areas of all the four
Southern States and adjoining Maharashtra and in urban areas of the region
extending from Chandigarh to West Bengal and urban Assam. These are alsoareas where incidence of (urban) unemployment is high. Arunachal Pradesh,
Dadra & Nagar Haveli, Pondicherry, the urban areas of the region extending
from Gujarat to Himachal Pradesh, Goa, Orissa and Sikkim and rural areas of
Tamil Nadu, Kerala and Maharashtra are only slightly better off in this regard,
with a GR of 0.25 to 0.30.
Table 4.8: Gini Ratios of States and Union Territories 1999-00
Range of Value
of Gini Ratio
Rural Urban
(1) (2) (3)
More than 0.3 Nil Assam,West Bengal, Bihar,
UttarPradesh, Madhya Pradesh,Delhi, Chandigarh, Maharashtra,
Andhra Pradesh, Tamil Nadu,Karnataka, Kerala
0.25 to 0.30 Arunachal Pradesh, Chandigarh,
Maharashtra, Dadra & NagarHaveli, Tamil Nadu, Pondicherry,
Kerala
Arunachal Pradesh, Tripura,
Sikkim, Orissa, HimachalPradesh, Punjab, Haryana,
Rajasthan, Dadra & Nagar Haveli,
Gujarat, Goa, Pondicherry
0.20 to 0.25 Assam, Sikkim, West Bengal,
Orissa, Bihar, Uttar Pradesh,
Madhya Pradesh, Punjab,Himachal Pradesh, Haryana,
Rajasthan, Daman & Diu, Gujarat,Goa, Karnataka, Andhra Pradesh,
A & N Islands
Meghalaya, Manipur, Nagaland,
Mizoram, Jammu & Kashmir,
Daman & Diu, A & N Islands,Lakshadweep
0.149 to 0.2 Tripura, Manipur, Meghalaya,
Nagaland, Mizoram, Delhi, Jammu
& Kashmir, Lakshadweep
Nil
Source: Gini Ratios are from the National Human Development Report, 2001 of thePlanning Commission.
Let us now turn to inequality in aspects of life other than income.
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4.7.2 Levels of Inequality in Non-Income Aspects of Life
We look at levels of inequality in the matter of access to certain basic needs
like employment, education, health and shelter, adopting one or more of the
three approaches to assessing the inequality situation, listed in Sub-section
4.6.2.
a) Employment
As brought out by the 55th
Round of the NSSO, the quality of employment of
those in the bottom 25 per cent of the population group in terms of whateverparameter we may choose to specify leaves much to be desired. Their share in
regular wage/salaried employment is only 11 per cent and in casual labour, it
is about one-third in rural areas and, roughly, one-half in urban areas. Most of
the employment opportunities that come their way are low paid, insecure,
intermittent opportunities casual labour or self-employment. The levels of
their earnings are obviously too low as the combined earnings of one or more
such employed individuals in a household are hardly sufficient to raise the per
capita monthly consumption level of the household to Rs. 300/- in rural areas
and Rs. 425/- in urban areas at 1999-2000 price levels. The NSSO notes that
there is sharp increase in the proportion of regular wage/salaried workers and
the sharp decrease in the proportion of casual labour, especially in urban
areas, as we move from the bottom one-fourth of the population to the rest ofthe population.
b) Other Aspects
The rural-urban divide and the social divide in the matter of quality of
housing, education, health, shelter and other related aspects and facilities are
indeed striking. Regional variations abound but the picture of divide is
common everywhere.
4.8 POLICY IMPLICATIONS
What are the policy implications of the prevailing levels of inequality and
poverty? Let us examine.
a) Structure of GDP Growth
The overall growth of GDP of an economy can be expressed in terms of the
growth of GDP of the income classes. Let there be three income classes, the
bottom 30 per cent of the population, the middle 40 per cent of the population
and the top 30 per cent of the population. Let the rates of growth of overall
GDP and GDP of the three income classes be r, r1, r2, and r3 respectively and
the shares of the three classes in total GDP in the initial year be y1, y2 and y3
respectively. It can be shown that:
r = y1 r1 + y2 r2 + y3 r3
This is true of consumption also. If the income of each of the classes grows atthe same rate during a period of time, overall GDP will also grow at the same
rate. Further, the income shares of the income classes in total GDP at the end
of that period will also remain the same as in the initial period. The income
share of any income class will be higherthan in the initial period only if the
rate of growth of income in that class is higherthan the overall rate of growth.
However, the shares of all classes cannot increase simultaneously; some will
increase while others will decrease. Thus, the share of the bottom 30 per cent
class may increase while those of the other two classes may decrease. In such
a case, income inequality will also come down. A development strategy that
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aims at reduction in income inequality would include steps to ensure that the
rate of growth of income in the bottom 30 per cent of the population is
significantly higher than the rate of growth of overall GDP so that its share of
GDP goes up.
Alternative exercises with the Plan model carried out while formulating the
Fifth Five Year Plan, for instance, postulated that by way of reduction in the
inequality in expenditure distribution the rate of growth of consumption in the
bottom few deciles of the population would be much higher than the growth
rate of aggregate consumption during the Plan period. The subsequent FiveYear Plans included specific targets of reduction in the poverty ratio in the
relevant target years generally on the basis of a similar analysis. The Plans
naturally, therefore, included policies and programmes designed to achieve
these targets as also for realising objectives in non-income aspects of poverty
and inequality like, for example, improvement of urban slums shelter and
basic services for the urban poor.
Notwithstanding these and the overall rates of growth of GDP as also the
considerable sectoral diversification of GDP achieved over the last five
decades, there have been shortfalls in the realisation of such targets. Indicators
of non-income dimensions of poverty and levels of inequality in nonincome
aspects of life show that quality of life is far from satisfactory not only for the
poor but also for sizable sections of society above the poverty line. We may
not be in a position to give a complete policy prescription in this Unit.
However, we shall highlight some problems and policy issues in areas relevant
to this Unit.
The first is, of course, the restructuring of GDP growth in favour of the
bottom three or four deciles so that the shares of these deciles in total GDP
rises substantially as early as possible. Besides reorienting the structure of the
production in line with this objective, action is called for in a number of other
fronts. Some are dealt with below.
b) Employment
i) Employment Orientation of GDP Growth
The rate of growth of employment has lagged behind the rate of growth of the
labour force during the 1980s and the 1990s and as a result, unemployment
has increased, from 20 million in 1994 to 27 million in 2000. The rising rate
of growth of the economy during the period 1994-2000 (6.7 per cent per
annum on the average) has hardly helped in generating employment, as the
employment intensity of GDP growth has declined substantially during the
1990s. Growth of GDP by one per cent during the period 1983-94 resulted in
employment growth of one half of one per cent. During the period 1994-2000,
however, the growth of GDP by one per cent led to employment growth of
only about one-sixth of one per cent. It is, therefore, necessary to ensure that
the structure of GDP growth should become more employment oriented thanbefore. Globalisation facilitates easier access than before to the latest
technology and international capital. These should be accessed only if the
implications of such a step for employment in the short run as well as in the
long run are clearly seen to be favourable. Quality of employment [see the
sub-section 4.7.2 (a)] should be raised through: (a) stricter enforcement of
labour laws relating to minimum wages and social protection to workers and
(b) provision of loans and technical and marketing support to the self-
employed.
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ii) Poverty Alleviation Programmes and Employment Schemes
Poverty alleviation programmes and a variety of employment and self-
employment promotion programmes for the non-poor have been implemented
for about 25 years now. The impact of these programmes on poverty and
unemployment and, therefore, on inequalities has not been as much as
expected. The factors responsible for such a state of affairs have to be tackled.
Personnel implementing the programmes, especially at the grass-roots level,
have to be trained properly. The routine approach being adopted by the
official machinery to the implementation of the programmes, much to thedetriment of their objectives, has to be changed, attitudinal changes in it have
to brought about and it should be suitably reoriented to serve the goal of
poverty reduction. Other impediments to the programmes which need to be
dealt with firmly are: (a) the nexus between the official machinery and the
rich and the powerful that runs counter to the interests of the poor, (b)
corruption, and (c) the lack of a proactive cooperation from agencies whose
inputs are crucial to the success of the programmes. The involvement of
Panchayati Raj Institutions (PRIs) and Urban Local Bodies (ULBs) is
important for better implementation of the programmes but these bodies are
currently not endowed with the necessary powers and administrative support.
PRIs and ULBs should, therefore, be strengthened in this regard and involved
in the implementation of these programmes. The credit system is somewhatreluctant to provide credit to the poor and the unemployed or the self
employed in view of their past experience with such lending programmes and
a trustworthy linkage has to be built up between that system and the
beneficiaries of the new set of programmes.
The processes of identification of the poor that are liable to be adversely
affected by factors like: (a) the way the society is organised, (b) the lack of
voice for the poor and (c) corruption, (d) lax implementation of programmes
on the ground, (e) use of contractors despite instructions to the contrary, and
(f) failure to utilise funds and other resources allocated for the programmes,
lead to leakages in the programmes. These can be prevented only through:
(i) a tightening up of the monitoring of programme implementation,(ii) organisation of the poor through social mobilisation and awareness
creation in collaboration with NGOs who have successfully done such work,
(iii) rooting out corruption and (iv) bringing about transparency in programme
implementation. Finally, it is necessary to take a total view of poverty and
reorient the planning process suitably to strike at the root causes of poverty.
Most of these steps apply equally well to the problem of generation of
productive employment opportunities on a scale sufficient to liquidate
unemployment and underemployment.
iii) The National Rural Employment Guarantee Act, 2005
A debate on the question of making the Right to Work a Fundamental Right
enshrined in the Constitution and the need for a national employmentguarantee scheme had been going on in the country for a long time. At last,
things have moved towards this goal. The National Advisory Council (NAC)
prepared a draft Employment Guarantee Act (EGA) and based on the draft,
Government came out with the National Rural Employment Guarantee Bill.
The same has been passed by the Parliament and has become the Act i.e., The
National Rural Employment Guarantee Act, 2005. This Act provides the
enhancement of livelihood security of the households in rural areas of the
country by providing at least one hundred days of guaranteed wage
employment in every financial year to every household whose adult members
volunteer to do unskilled manual work.
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All households are eligible to seek to perform casual manual work at the wage
rate prescribed under section 6 of the Act. The Act would be extended to the
entire country in five years. Transparency in the implementation of the Act is
to be ensured through making available the muster rolls and other records for
public scrutiny free of cost or at cost price. The Act would help in protecting
the rural households from poverty and hunger; it will effectively check rural-
urban migration; it will be a major source of employment for women giving
them some economic independence; it will create useful assets in rural areas;
it will change the power equations in rural society; it will foster a more
equitable social order; and it is an opportunity to activate and empower the
PRIs, including gram panchayats and gram sabhas.
c) Education
Education has expanded but school dropout rate at every stage of education is
high. Schools without teachers, without proper infrastructure and absolutely
basic teaching aids like maps and dust-free chalk in rural areas and the
opportunity cost of going to school are some of the reasons that are
responsible for such levels of dropouts. The provision of mid-day meals to
school-children has improved the situation in States like Tamil Nadu where
this was introduced long back. The situation is bound to improve in other
States where this has been introduced recently. However, the implementation
of this programme also needs to be monitored well and the points relating to
leakages and other aspects mentioned in respect of poverty alleviation
programmes apply to this programme too. The mid-day meals programme
ensures that children do not drop out of the education system, their nutrition
status improves and facilitates social cohesion of children. Their capacity to
learn will also be enhanced since none can absorb any knowledge on an empty
stomach.
The quality of education needs to be improved considerably if education has
to facilitate access to productive employment. Further, regional, area and
group-wise differences in quality will only convert education into an
instrument fordeepening inequalities from being an instrument forreducing
inequality. An NGO has estimated that out of every 100 village girls enrollingin class I, just one survives in the system to reach class XII. Besides the
question: (a) affordability and (b) the struggle against social attitudes, it is also
an indicator of the difficulties of getting through the public examinations at
the tenth and twelth classes with the kind of education imparted by rural
schools insufficiently equipped to meet the standards required for these
examinations. This leads to a quality divide between rural schools and
insufficiently equipped urban schools on the one hand and the other
well-equipped schools on the other. Equipping Government schools in rural
and urban areas will call for massive investments. But if India can meet global
standards in civil aviation, software and defence, it can certainly do so in
providing for educating its children. In other words, it is a question of the right
social priorities and also for sowing the seeds for sustained future growth at
the right time.
d) Health
The percentage of GDP spent on public health in India (0.9 per cent) is lower
than almost any other country and this includes those of similar income levels.
Even the public health delivery system that this level of investment supports is
neglected. Monitoring of performance is either non-existent or defective.
Absenteeism among doctors is high. The proportion of doctors who try to
recommend that patients should go and see them at their private clinics is very
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high. The public sector medical system does not offer diagnostic tests even for
basic illnesses. Government does not in any way help patients in identifying
who is a doctor and who is a quack. The result is that people are driven to
private doctors for diagnostics and treatment and often get medical treatment
from quacks, unable to rid themselves of their illnesses but get economically
ruined in the process of finding a cure for their illnesses, despite the existence
of a public health care system. For the urban poor and the not so poor, it is a
story of waiting in long queues, indifferent medical attention and payment of
bribes to doctors, nurses and other employees of the clinics and hospitals to
get attended to.
What are the policy initiatives needed? First, the provision of basic health
care to all should be the primary responsibility of the public sector and the
specialised services that the rich need should be provided by the private
sector. Basic health care and medical attention is notan area of privatisation.
The present high share of the private sector in rural health care a major
deficiency of the Indian health system has to come down drastically.
Second, an effective monitoring system for the delivery of public health care
should be put in place. Third, a system of weeding out quackery should be
evolved and established. Lastly, investment in public health care should be
raised substantially so that all the above reforms are implementedtogether as
a package.
e) Shelter
As for shelter, a workable housing policy for the urban poor is conspicuous by
its absence. Instead demolitions of slums or the so-called unauthorised
shelters or encroachments in vacant land have become a substitute for a
housing policy. Cities attract migrants from rural areas and, in the absence of
a policy for housing the working class or the poor, these migrants occupy
vacant land, pavements, water pipes and empty strips of railway land over
time. Wherever possible, they build their shelters investing their time and
labour and also whatever meagre resources they may have. Resort to
demolitions without any alternative plan to resettle such people is hardly a
policy. And such an option destroys, in one fell stroke, the entire investmentmade by the poor on their shelters. Efforts or plans to improve cities to bring
them to international standards without any plan to think about housing the
poor, who make up a substantial proportion of the citys population and who
provide a variety of services to the better off residents in the metropolis, will
hardly measure up to the minimum standards of a social policy anchored on
the common man. This is another area where Government should get its social
priorities right.
f) General
As would be seen from the foregoing paragraphs, the key point is that the
right social priorities the interests of the common man and the social
situation should be the guide in matters like growth strategy, allocation ofresources among sectors and within sectors and programmes, legislation,
choice of sectors for privatisation, choice of projects like EGA, strengthening
of rural school, components of development projects like development of
cities and so on. A well organised monitoring system of projects and
programmes and transparency in their implementation should be built into the
programmes. All the points made in respect of the poverty alleviation
programmes need to be stressed in respect of all the programmes providing
social sector services. It is in the tenacity with which development policy
holds on to the social priorities dictated by the social situation that the hope of
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a better future for the poor and the dispossessed lies, especially in a
socioeconomic and political and cultural environment that generates pressures
against the adoption of such policies.
Check Your Progress 3
Note: i) Space is given below each question for your answer.
ii) Check your answer(s) with those given at the end of the unit.
1) Under which situation summary measures of inequality are useful over
Lorenz Curve in the measurement of inequality?
2) State the indicators of inequality in non-income aspects of life.
3) Do you think that right kind of social priorities should be the guiding force
in the poverty alleviation strategy? Give reasons in support of your
answer.
4.9 LET US SUM UP
We have seen that poverty is the state of lack of access or low access to basic
needs of food, fuel, shelter, health etc. Inequality is a larger concept it
concerns itself with the relative levels of access of individuals to basic needs
and opportunities and benefits from development.
Poverty is generally measured by the poverty ratio. This is based on a
minimum desirable consumption standard. This standard is based on income
or its proxy, the household consumption expenditure. Poverty, however, has
several dimensions and, therefore, composite income and non-income
indicators of poverty assume importance in assessing the nature and levels of
poverty.
We found that the incidence of poverty has come down over the 1970s and the
1980s, though the number of the poor remained at about 320 million. Both the
incidence of poverty and the number of people below the poverty line have
come down during the period 1994 to 2000. Some indicators show that the
depth and severity of poverty have also come down in the 1990s.
Inequality is analysed with the help of the Lorenz Curve which gives a visual
presentation of the extent of inequality the extent to which the actual levels
of income or consumption deviate from the egalitarian line or the line of
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complete equality. The Gini Ratio is the most commonly used summary
measure of inequality and can be used to compare inequality situations over
time, areas and population groups.
The inequality in levels of consumption situation is worse in urban areas than
in rural areas. This is so across States and Union Territories. Inequality in
consumption is declining slowly in rural areas according to all measures of
inequality but urban inequality shows no sign of any decline.
Restructuring GDP growth in favour of the bottom three or four deciles is
important so that their share of total GDP rises substantially as early aspossible. This calls for action on a number of fronts. Employment orientation
of growth, streamlining of poverty alleviation programmes and employment
promotion programmes (which have been affected adversely by many factors
ranging from lax implementation to intervention from the rural power elite),
implementation of an Employment Guarantee Act in all areas covering all
adults seeking casual manual work, efficient implementation of the mid-day
meals programme across the country, strengthening and raising the quality of
rural schools and urban schools similarly placed, streamlining the public
health care delivery system to provide basic health care including diagnostic
services to all and the monitoring of the system, rooting out quackery, and
evolving a workable housing policy for the urban poor are some essential
elements of a development policy for tackling poverty and inequality.
4.10 EXERCISES
1) What do you mean by poverty? Explain the indicators that cover income
and non-income dimensions of poverty.
2) What do you mean by inequality? How are the inequalities of income
measured in an economy? Also state the different indicators that cover
inequality in non-income aspects of life.
3) Examine the policy implications of widespread poverty and inequality in
the Indian economy.
4) The quality of life in India is far from satisfactory. Comment.
5) Do you think that delivery of poverty alleviation programmes has not been
effective? How can it be made more effective?
4.11 KEY WORDS
Human Development: It is a process of enlarging peoples choices as well as
raising the level of their well-being. For example, the three most critical and
socially valuable choices are: (i) the choice to lead a long and healthy life; (ii)
the choice to acquire knowledge and be educated; and (iii) to have access to
the resources needed for a decent level of living.
Poverty Gap Index: It is calculated as the total shortfall of consumption
below the poverty line, divided by the total population. This per capita
shortfall in consumption below the poverty line is then expressed as a
percentage of the poverty line. It can also be calculated as follows:
(Poverty line Percapita consumptionof thepoor)PG Index Poverty Ratio 100
Povertyline=
Poverty Line: Putting a price on the minimum required consumption levels of
food, fuel, clothing shelter and health care etc., that is, the purchasing power
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required to acquire the minimum required consumption levels of food etc.
This is expressed as so many rupees per capita per month.
Poverty Line Earnings: These are the earnings per day which will enable the
worker and his dependents to reach the consumption level equal to the poverty
line consumption level. It is assumed that on an average a worker has to
support 2 dependents. It is also assumed that wages for 26 days in a month
include wages for the four rest days in a month also.
Poverty Ratio: Poverty ratio is a measure of poverty. It is also called Head
Count Ratio (HCR). It measures incidence of poverty and is used forcomparing the poverty situation in two areas or two regions or two periods of
time etc. It is expressed as a percentage and is defined as:
numberof peoplebelow poverty lineIncidenceof Poverty PR HCR 100
totalpopulation= = =
Working Poor: Persons who are employed but who receive wages that are
too low to enable him/her and his dependents to raise their level of
consumption to the minimum desired standard level specified by the poverty
line.
4.12 SOME USEFUL BOOKSBhaduri, Amit (2004); Guaranteeing Employment, The Hindu, Chennai
Edition, 27th
December, 2004.
Dev, Mahendra (1996); Paper: Social Security for Indian Workers
Performance and Issues, Published in the Indian Journal of Labour
Economics, Vol. 39, No. 4, October December, 1996.
Dreze, Jean (2004); Employment As a Social Responsibility, The Hindu,
Chennai Edition, 22nd
November, 2004.
, (2004); Unemployment Guarantee, The Hindu, Chennai Edition,
31st
December, 2004.
Goverment of India (1993); Report of the Expert Group on Estimation of
Proportion and Number of Poor, Perspective Planning Division, Planning
Commission, New Delhi.
Kumar, Krishna (2005); Schooling in Rural India, The Hindu, Chennai
Edition, 11th
January, 2005.
, (2002); Tenth Five Year Plan (2002-07), Volumes I & II, Planning
Commission, New Delhi.
, (2002); National Human Development Report 2001, Planning
Commission, New Delhi.
Meier, Gerald M. (1990); Leading issues in Economic Development, OxfordUniversity Press, Delhi.
Sainath, P. Everybody Loves a Good Drought: Stories from Indias Poorest
Districts, Penguin Books India (P) Ltd., New Delhi 17.
Sita Prabhu, K. (2001); Economic Reform and Social Sector Development: A
Study of Two Indian States, Strategies for Human Development in India
Vol. 3, Sage Publications, New Delhi.
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United Nations Development Programme (UNDP), Human Development
Report 2003, Millenium Development Goals: A Compact among Nations to
End Poverty. UNDP, New York, USA.
The reports/documents of the Planning Commission referred to above can be
accessed in the Planning Commission website http://www.
planningcommission.nic.in. Human Development Reports of the UNDP for
different years can be accessed in the Human Development Report Office
website http://hdr.undp.org
4.13 ANSWERS OR HINTS TO CHECK YOUR
PROGRESS EXERCISES
Check Your Progress 1
1) The PG index is helpful in working out the shortful of consumption below
the poverty line. It will indicate the magnitude of the effort that would be
required to raise the consumption level of all the persons below the
poverty line to the consumption level of the poverty line.
2) Human Poverty Index and Human Development Index
3) i) Human Development Index:
Longevity, Knowledge and Decent Living.
ii) Human Poverty Index:
a) Proportion of population not expected to survive beyond 40 years
b) Adult literacy rate
c) Access to improve water source
d) Percentage of underweight children.
4) i) Percentage of children under 5 years of age below are underweight
ii) Percentage of unattended births
iii) Percentage of illiterate women aged 15 years.
Check Your Progress 2
1) The hunger ratio refers to proportion of the persons to the total population
who do not have access to food.
2) The incidence of poverty has declined persistently since 1973-74. In 1999-
2000, a little over one-fourth of the population of this country are poor.
3) The incidence of poverty among scheduled castes and scheduled tribes has
declined although it is still very high.
Check Your Progress 3
1) In a situation when two Lorenz Curve intersect each other and it isdifficult to state which curve depicts a worse inequality situation,
summary measures of inequality are useful.
2) Gender Development Index (GDI) and Human Development Index (HDI).
3) Yes, for details see section 4.8.