Economy (by Reddy Sir)

Poverty | Inequality | Unemployment

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MILLENNIUM DEVELOPMENT GOALS (MDG)

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• There are several definitions of poverty, and scholars
disagree as to which definition is appropriate for India.
• Poverty refers to a situation when people are
deprived of basic necessities of life.

• It is often characterized by inadequacy of food,

shelter and clothes.
• poverty refers to a state of deprivation
where there is a lack of essential needs
for subsistence.
• According to the world bank

• Poverty is pronounced deprivation in well-

being and comprises many dimensions. It
includes low incomes and the inability to
acquire the basic goods and services
necessary for survival with dignity.
• The MPI looks beyond income to
understand how people experience
poverty in multiple and simultaneous
ways.
HEALTH

EDUCATION

STANDARD OF LIVING
MULTI- DIMENSIONAL POVERTY INDEX
MULTI- DIMENSIONAL POVERTY INDEX

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 Deprived if living in
Dimensions of
Indicator the household Weight
Poverty
where…

An adult under 70
years of age or a
Nutrition 1/6
child is
undernourished.
Health Any child has died
in the family in the
Child mortality five-year period 1/6
preceding the
survey.
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 No household
member aged 10
Years of schooling years or older has 1/6
completed six years
of schooling.

Education
Any school-aged
child is not attending
school up to the age
School attendance 1/6
at which he/she
would complete class
8.

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 The household cooks with dung,
Cooking Fuel 1/18
wood, charcoal or coal.
The household’s sanitation facility is
not improved (according to SDG
Sanitation 1/18
guidelines) or it is improved but
shared with other households.

The household does not have access

to improved drinking water (according
Drinking Water to SDG guidelines) or safe drinking 1/18
water is at least a 30-minute walk
from home, round trip.

Standard of living Electricity The household has no electricity. 1/18

Housing materials for at least one of

roof, walls and floor are inadequate:
Housing the floor is of natural materials and/or 1/18
the roof and/or walls are of natural or
rudimentary materials.

The household does not own more

than one of these assets: radio, TV,
Assets telephone, computer, animal cart, 1/18
bicycle, motorbike or refrigerator, and
does not own a car or truck.
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Types of Poverty:
• Absolute poverty: A person is said to be absolutely poor if he is unable
to meet his basic needs.

• Relative poverty: A person is said to be relatively poor if his daily

expenditure is lower than average expenditure in the country
Poverty Trap?

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Causes of Poverty in India
 Colonial Exploitation:

Population Explosion:

Low Agricultural Productivity:

Low Rate of Economic Development:

 Price Rise:

Unemployment:

Social Factors:

Climatic Factors:
 Corruption:
Lack of proper implementation of schemes etc
Impact of poverty ?
1) Obstruction in the economic growth and development of
the country
2) High infant mortality rate due to inadequate medical
facilities
3) Fewer children are enrolled in schools as parents cannot
afford their education
4) Infants with low birth weight suffer from mental and
physical disabilities
5) Unemployment and extreme poverty leads to domestic
violence
 Stress among the family members
Malnutrition
Increase in hygiene and diet-related diseases
Increased rate of homeless people
• Inequality: After 1991 reforms it is argued that there is
increasing inequality in India. According to an Oxfam report,
India’s top 1% of the population now holds 73% of the wealth.
• Poverty and Nasalism etc
Poverty Estimation in India

•Poverty estimation in India is carried

out by (Planning commission ) now
NITI Aayog
• poverty line based on the data captured by the National Sample
Survey Office(now NSO)

• the Ministry of Statistics and Programme Implementation

(MOSPI).
• Poverty line refers to minimum
expenditures to be incurred by a person
to meet his basic needs in India.

• The poverty line is fixed at Rs 27 in rural

area & Rs 32 in urban areas.
• Different countries have different methods of defining the
threshold income, depending on local socio-economic needs.
Poverty Line Basket:

•The basket of goods and services necessary

to satisfy basic human needs is the Poverty
Line Basket (PLB).
Head Count Ratio (HCR)
• is defined as the proportion of individuals
living below the Poverty Line when the
number of poor is estimated.
• According to NITI Aayog’s National
Multidimensional Poverty Index (2021)

• India’s HCR is 25.01%.

• The Rural HCR is 32.75%

• the Urban HCR is 8.81%

poverty gap ratio
• According to the World Bank,

• poverty gap is the mean shortfall from the poverty line

,expressed as a percentage of the poverty line.

• Poverty gap measures the intensity of poverty.

• It shows the extent to which individuals on average fall

below the poverty line
• In India, there were two main methods of collecting
data:

• Uniform Reference Period (URP) (1993-94)

• Mixed Reference Period (MRP) (from 1999-2000)

• Modified Mixed reference period(2009-10,2010-11)

•Uniform Recall Period (URP): During the
survey, people are asked as to how much
money has been spent on certain goods and
services in the previous 30 days

•i.e., recall period (30 days) is uniform for all

goods and services.
• Mixed Recall Period (MRP): How much money has been
spent on certain goods and services in the previous 30
days + How much money has been spent in the last 365
days on certain goods and services which are bought at
low frequency (clothing, footwear, durables, education
and institutional health expenditure)
 Modified Mixed reference period
• 365-days for clothing, footwear, education, institutional
medical care, and durable goods

• 7-days for edible oil, egg, fish and meat, vegetables, fruits,
spices, beverages, refreshments, processed food, pan,
tobacco and intoxicants

• 30-days for the remaining food items, fuel and light,

miscellaneous goods and services including non-
institutional medical; rents and taxes.
Post-independence poverty estimates:
•B. S Minhas’s study 1956-57(65%)
•M. S Ahluwalia’s 1960-61(39%)
•P.D Ojha’s estimates 1960-61(44%)
•Pranab Bardhan 1968-69(54%)
V.M. Dandekar and Neel Kantha Rath

• the first systematic assessment of poverty in India

in 1971

• based on National Sample Survey (NSS) data from

1960-61
• They argued that the poverty line must be
derived from the expenditure that was
adequate to provide 2250 calories per day in
both rural and urban areas.
• This generated debate on minimum calorie
consumption norms while estimating poverty
and variations in these norms based on age and
sex.
Y .K .Alagh task Force (1979):

• constructed a poverty line for rural and urban areas

on the basis of nutritional requirements.
Area Calories Minimum consumption expenditure (Rs per capita
per month)

Rural 2400 49.1

Urban 2100 56.7

D .T.Lakdawala Committee (1993):URP
•(i) consumption expenditure should be
calculated based on calorie consumption
2400(R),2100(U)
state specific poverty lines should be
constructed
• these should be updated

• the Consumer Price Index of Industrial Workers (CPI-IW) in urban areas

• Consumer Price Index of Agricultural Labour (CPI-AL) in rural areas

• This assumes that the basket of goods and
services used to calculate CPI-IW and CPI-AL
reflect the consumption patterns of the poor.
Suresh Tendulkar Committee (2009):

• 2004-05 data

• MRP
•recommended four major changes
(i) a shift away from calorie consumption based poverty
estimation; change the consumption basket

(ii) a uniform poverty line basket (PLB) across rural and urban
India
(iii)Make price adjustment more scientific

(iv) incorporation of private expenditure on health and education

while estimating poverty.
2004-05
urban poverty ratio of 25.7%

rural poverty head count ratio for 2004-05 was

placed at 41.8 percent

37.2 percent at all-India

 Suresh Tendulkar Rangarajan Committee
Criteria
Committee (2009) (2012)

Monthly per capita Monthly per capita

Basis of Poverty line
consumption expenditure consumption expenditure

Rs 816 (Rural); Rs 1000 Rs 972 (Rural); Rs 1407

Poverty line (2011-12)
(Urban) (Urban)

Per capita per day Rs 27 ( Rural); Rs 33

Rs 32 (Rural); Rs 47 (Urban)
(Unofficial) in 2011-12 (Urban)
 Calorific norms: 2155 Kcal
(Rural); 2090 Kcal (Urban)
Food
+
+
Poverty line basket Protein, Fat requirements
Non-food (Education,
+
Health)
Non-Food (Education,
Health)

Rural: 25.7% Rural: 30.9%

% of BPL population in
Urban: 13.7% Urban: 26.4%
2011-12
All-India: 22% All India: 29.5%
Committee Rural Urban Total

Lakdawala 28.3 25.7 27.5

Committee

Tendulkar 41.8 27.5 37.2

Committee
Main Focus Areas Only counts 1. Food
expenditure on food, 2. Non-food items, such
health, education as education,
and clothing. 3. Healthcare,
4. Clothing,
5. Transport,
6. Rent,
7. Non-food items that
meet nutritional
requirements.
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• Socio Economic Caste Census (SECC)

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automatic exclusion on the basis of 14 parameters,

automatic inclusion on the basis of 5 parameters

the extent of deprivation on the basis of 7 parameters.

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Parameters of Automatic Exclusion:

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1. Motorized 2/3/4 wheeler/fishing boat.
2. Mechanized 3-4 wheeler agricultural equipment.
3. Kisan credit card with credit limit of over Rs. 50,000/-.
4. Household member government employee.
5. Households with non-agricultural enterprises registered with
government.
6. Any member of household earning more than Rs. 10,000 per
month.
7. Paying income tax.

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8 Paying professional tax.
9. Having 3 or more rooms with pucca walls and roof.
10. Owns a refrigerator.
11. Owns landline phone.
12. Owns more than 2.5 acres of irrigated land with 1irrigation
equipment.
13. 5 acres or more of irrigated land for two or more crop season.
14. Owning at least 7.5 acres of land or more with at least one
irrigation equipment.

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Parameters of Automatic inclusion
1. Households without shelter.
2. Destitute, living on alms(charity).
3. Manual scavenger families.
4. Primitive tribal groups.
5. Legally released bonded labour.

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Parameters for assessing the extent of
Deprivation
1. Households with Kutchha house
2. No adult member in working age
3. Household headed by female and no working age male member
4. Household with handicapped members and no able bodied adult
5. Household with no literate over 25 years
6. Landless households engaged in manual labour
7. SC/ST households.
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• The Ministry of Rural Development has taken a decision to use the SECC
data in all its programmes.

• SECC data would have meaningful use in Housing for all, Education and
Skills thrust, MGNREGA, National Food Security Act, interventions for
differently able, interventions for women led households, and targeting of
households/individual entitlements on evidence of deprivation, etc.

• The household data is also available for planners of programmes at State,

district, Block, Gram Panchayat and village level.

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• The Ministry of Rural Development has taken a decision to use the
SECC data in all its programmes.

• SECC data would have meaningful use in Housing for all, Education
and Skills thrust, MGNREGA, National Food Security Act,
interventions for differently able, interventions for women led
households, and targeting of households/individual entitlements on
evidence of deprivation, etc.

• The household data is also available for planners of programmes at

State, district, Block, Gram Panchayat and village level.
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• Inequality refers to the phenomenon of unequal and/or unjust
distribution of resources and opportunities among members of a given
society.

• The term inequality may mean different things to different people and
in different contexts
• Literally, inequality means the lack of evenness or
social disparity or disparity of distribution or
opportunity, services, benefits or being unequal.

• In other words inequality is related to unequal

access or different degrees of access of different
individuals or groups of individuals to these
opportunities, services and benefits.
• Income inequality in India refers to the unequal
distribution of wealth and income among its citizens.
Reasons for inequality
Historical reasons

Unequal land distribution in rural areas

Females were always treated to be subordinate

and weaker to males.

Large-scale informal employment: 80% of the

Indian labour force is employed in the informal
sector.
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A huge proportion of the population is still dependent on agriculture

Inter-state inequalities: Growth has been different across sectors and

regions.

 For examples, Green Revolution has disproportionately benefitted

Western and Southern India when compared to Eastern India.

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• According to the paper by famous Economist Thomas Piketty,

• tax progressivity which is a tool to contain the rise in inequality was

progressively reduced.

• Wage inequality dispersion also increased in many sectors, as

privatizations removed government-set pay scales, which were less
unequal.

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Studies show that globalization and opening up the economy has
benefited the rich more than the poor, thus raising the inequality.

Lack of skill development and jobless growth.

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Urban bias in pvt sector investment

Urban bias of educational facilities

High inflation

More focus on capital intensive ways of production etc

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Lorenz Curve vs Gini Coefficient
• The distribution of Income in an economy is
represented by the Lorenz Curve
•The degree of income inequality is measured
through the Gini Coefficient.

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Gini Coefficient:
• The Gini coefficient was developed by the statistician and
sociologist

•Corrado Gini

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Palma ratio
• The Palma ratio is defined as the ratio of the
richest 10% of the population's share of gross
national income divided by the poorest 40%'s
share

• middle class incomes almost always

represent about half of gross national
income while the other half is split between
the richest 10% and poorest 40%,
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Kuznets curve

• Relationship between economic growth and

inequality.

• It is inverted U shaped meaning that as

initially economic growth leads to greater
inequality, followed later by the reduction of
inequality.
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Inequality Index
• This Index is prepared by Oxfam International and Development
Finance International (FDI).
• According to FDI, all these 3 factors play a major role in
reducing inequality.
• These 3 factors include health, education, and social protection.

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 Economic inequality

 unemployment

 poverty

created by the Covid-19 pandemic

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Universal Basic Income
• Suggested by Rangarajan committee, 2014

• The Economic Survey of India 2016-17

• It is a regular fixed cash transfer payment provided by the
government to every citizen or resident regardless of their socio-
economic status to ensure that they are at least able to meet
their basic needs.
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India is regarded as a country With "Demographic
Dividend" This is due to (2011)

(a) Its high population in the age group below 15

years
(b) Its high population in the age group of 15-64
years
(c) Its high population in the age group above 65
years
(d) Its high total population
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Disguised unemployment generally means (2013)

(a) large number of people remain unemployed

(b) alternative employment is not available

(c) marginal productivity of labour is zero

(d) productivity of workers is low

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• According to CMIE data--December 2021,

• the male LFPR was 67.4%, the female LFPR was as low as 9.4%.

• World Bank---India’s female labor force participation rate is around

25% when the global average is 47%.
• Despite rapid economic growth, declining fertility,
and an increase in education of women in India
over the past three decades, the female workforce
participation rate – proportion of women who are
working – in the country continues to remain low.
•
Higher Enrolment of Females in higher Educational
Institutions.
•
More number of Women opting for Household duties due to
increase in household incomes.
•
Cultural factors- Social Constraints and Patriarchal norms.
•
Structural Transformation: Decline in agriculture not
accompanied by creation of jobs for women in other
sectors.
•
Decline in Labour Intensive Industries in Urban areas.
•
Significant wage gap between males and females
 GDP Growth vis-à-vis Employment Growth

Growth Rates in Year of Surveys Employment

Years of NSSO Surveys Elasticity with
Employment GDP respect to GDP#

1972‐73 to 1977‐78 2.61 4.60 0.57

1977-78 to 1983-84 2.19 3.92 0.56
1983-84 to 1987-88 1.53 3.99 0.38
1987-88 to 1993-94 1.39 5.65 0.24
1993-94 to 1999-00 1.04 6.51 0.16
2004-05 – 2011-12 0.22 9.08 0.02
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Sectors covered

Projects on environment protection

 water conservation
 heritage conservation
 maintenance of gardens
 removal of encroachment
 illegal sign boards
 hoardings and banners
Sanitation etc
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Eligibility

People in the 18 to 60 age group are eligible for the scheme under
which at least 50 people in each ward of urban local bodies will be
given employment

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• Employment: Rajasthan Government said that
nearly 40,000 people got the work on the first
day.

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Objectives

(i) To facilitate working capital loan up to Rs 10,000;

(ii) To incentivize regular repayment;

(iii) To reward digital transactions

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• The vendors, availing loan under the scheme, are eligible to
get an interest subsidy @@ 7%.

• The interest subsidy amount will be credited into the

borrower’s account quarterly.

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Examine the role of the ‘Gig Economy’
in the process of empowerment of
women in India.
(Answer in 150 words) 10
India ????????
with its demographic dividend of half-a-billion
labour force
 the world’s youngest population
rapid urbanisation
widespread adoption of smartphones and
associated technology
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Vineet Nayar, the former CEO of HCL
Technologies
• The former CEO questioned top management of companies and
wrote, “Is senior management being part of other company boards
moonlighting? When they invest their own money in startups and
make profits, is that moonlighting? Is their trading in stock markets
moonlighting?”

• “Why call everything an employee does outside work as

moonlighting,”

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Facts????????
As per the scheme of the Indian Constitution,

 both Parliament and State Legislatures are vested with the power to
make labour laws.

 That is how over the years, more than 150 labour legislations have
been enacted by the Centre and States

covering aspects like wages, social security, industrial relations and

occupational safety, health and working conditions, etc
• Article 14: It provides for equality before the law or equal
protection of the laws within the territory of India.

• Article 16: It talks about the right of equal opportunity in the

matters of public employment.

• Article 39(c): It specifies that the economic system should not

result in the concentration of wealth and means of production to
the detriment of the entire society.
• The first National Commission on Labour was set up
on 24 December 1966 - Justice P.B. Gajendragadkar

• The second National Commission on Labour (NCL)

was set up on 15 October 1999 under the
chairmanship of Ravindra Varma
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Poverty Alleviation Programs in India
• 3 rd FYP Trickle down approach
• 4 th FYP direct attack
Among the following, who are eligible to benefit from the "Mahatma Gandhi
National Rural Employment Guarantee Act”? (2011)

a) Adult members of only the scheduled caste and scheduled tribe

households
b) Adult members of below poverty line (BPL) households
c) Adult members of households of all backward communities
d) Adult members of any household
Increase in absolute and per capita real GNP do not connote a higher
level of economic development, if (2018)

(a) industrial output fails to keep pace with agricultural output.

(b) agricultural output fails to keep pace with industrial output.

(c) poverty and unemployment increase.

(d) imports grow faster than exports.

With reference to Pradhan Mantri Kaushal Vikas
Yojana, consider the following statements (2018)
1. It is the flagship scheme of the Ministry of Labour and Employment.
2. It, among other things, will also impart training in soft skills,
entrepreneurship, financial and digital literacy.
3. It aims to align the competencies of the unregulated workforce of the
country to the National Skill Qualification Framework.
Which of the statements given above is/are correct?
a) 1 and 3 only
b) 2 only
c) 2 and 3 only
d) 1, 2 and 3
The programs can be mainly grouped into
A. Wage employment programs
B. Self-employment programs
C. Food security programs
D. Social security programs
E. Urban poverty alleviation programs
F. Skill India programs for employment
• The MGNREGS guarantees 100-day wage employment in a financial
year to every rural household.
• The scheme became a safety net for migrants who returned to their
village during the Covid-19 lockdown in 2020.
• The MGNREGS was launched by the then United Progressive
Alliance (UPA) government led by the Congress in 200 most-
backward districts of the country in 2006.

• It was extended to 130 more districts during 2007-08 and to the

entire country in 2008-09.
• The Centrally Sponsored Centrally Managed (CSCM) has three
components as presented below:
• Short Term Training: The Short-Term Training component imparted at
PMKVY Training Centres (TCs) is expected to benefit candidates of
Indian nationality who are either school/college dropouts or
unemployed.
• Apart from providing training according to the National Skills
Qualification Framework (NSQF), TCs also impart training in soft skills,
entrepreneurship, financial and digital Literacy.

• The duration of the training varies per job role.

• Upon successful completion of their assessment, candidates are
being provided placement assistance by Training Providers (TPs).

• Under PMKVY, training and assessment fees are paid by the

Government. Pay-outs are provided to the TPs.
• Recognition of Prior Learning: Individuals with prior learning
experience or skills are assessed and certified under the Recognition
of Prior Learning (RPL) component of the scheme.

• RPL aims to align the competencies of the unregulated workforce of

the country to the NSQF.
• Special Projects: The Special Projects component of PMKVY envisages
creation of a platform that will facilitate trainings in special areas
and/or premises of government bodies, corporate or industry bodies,
and trainings in special job roles.
• Special Projects require some deviation from the Short Term
Training guidelines under PMKVY for any stakeholder.
• A proposing stakeholder can be institutions of central or state
government(s)/autonomous body/statutory body or any other
equivalent body or corporate who desire to provide training to
candidates.