Understanding Poverty in India

• Publisher: Asian Development Bank
• Year: 2011
• ISBN:
  9789290923299
• Topic: Social Sciences
• Subtopic: Poverty in Sociology
• Index: Social Sciences

Inclusive growth needs to be achieved to reduce poverty and other disparities and raise economic growth. This book develops a poverty profile for India in view of the ongoing national and global efforts toward ensuring inclusive growth and bringing poverty levels down. This poverty profile will enable academics and policy makers to reassess and improve on the existing methodologies in estimating poverty rates, evaluate the effectiveness of existing poverty programs, and suggest alternative and complementary options for strategic intervention based on the lessons drawn from program implementation both at the state and national levels.

II

Strategies for Poverty Reduction: Focus on Infrastructure, Financial Inclusion and Social Sector Interventions

8 Social Sector Services and Poverty Reduction in India^*

Since Independence, India’s major concern has been the huge mass of poor across the country especially in the rural areas. Therefore, poverty reduction became one of the major goals in the planned development of the Indian economy. It was slowly realized that, at least in the Indian context, poverty is not only an economic phenomenon but also a social one. National Sample Survey Organization (NSSO) data shows that the head-count ratio of poverty based on minimum calorie requirement seems to have gone down substantially over the last decade or so. However, the absolute figures are still alarmingly high. Second, the non-income deprivations in terms of education, health, sanitation, drinking water, housing, etc., are far from satisfactory.

Undoubtedly, a harmonious society will have to be based on a high and sustainable economic growth rate as redistribution and poverty reduction need to draw from economic growth. Only through growth can productive employment and other income-earning opportunities be created. However, growth requires investing in basic social services and physical infrastructure and ensuring equal access to all members of society. Fortunately, policy choices for inclusive growth are being highlighted in the discussions for the Eleventh Plan.

In recent years, India has been growing at an unprecedented rate, unknown in its economic history. However, India will have to embrace inclusive growth to ensure that its thriving economy benefits the entire country. Carefully designed redistributive policies are part of an inclusive growth strategy. The purpose of the redistribution need not be to equalize incomes, but to promote equalization of opportunities and, in the process, reduce inequalities. Increasing inequalities, if left unchecked, could have significant negative social and economic impact and could undermine stability. They could also make reforms more difficult and lead to inefficient utilization of human capital, constrain economic growth and social development, and undermine the country’s long-term prosperity. Currently, the challenges facing India are arising mostly from increasing inequalities across individuals, regions and groups.

It may be noted that promoting equality of opportunities requires investment in education, health, sanitation, housing, physical connectivity, and other social services to expand human capacities, especially of wage earners, and strengthening social safety nets to prevent extreme deprivation and alleviate transitory livelihood shocks. Many observers, starting from Adam Smith to Amartya Sen note that the most important entitlements for an individual are health and education.

Currently, researchers and policy planners have started taking seriously the UNDP-defined concept of human poverty, which comprises deprivation of health, education, and income. Thus, the measure of poverty through calorie intake is not adequate, but should take into account education and health parameters. Therefore, the Government of India has aimed at providing livelihoods and better services through various schemes targeting the poor.

Understandably, health, education and effective employment are interactive processes. There is a three-way mutual dependence among them. For example, increasing inequalities in incomes lead to increasing inequalities in access to basic education and health care and vice-versa. Continued market and institutional reforms make factors of production more mobile across regions and sectors, and between urban and rural areas, and the economic structure more consistent with the country’s factor endowments, thereby creating more employment opportunities. To take advantage of these employment opportunities, the poor need to have access to health and nutrition, and education and skills. There are externalities at work as well: for example, education and functional literacy may increase awareness about schemes and rights that promote economic and social justice, level playing fields, and prevent corruption.

In the short run, it is necessary to ensure larger income for people below the poverty line through state interventions by enabling the creation of self-employment, through wage employment National Rural Employment Guarantee Scheme (NREGS), and through direct subsidies made available by instruments such as the Public Distribution System (PDS) that provides food grain at subsidized prices. However, long-run strategies on poverty alleviation are related to endowing people with skills through education and training, thus making them employable.

India has made commitments to a wider spread of education both at the international level (through the Millennium Development Goals and Education for All) and at the national level (increasing public expenditure in education to 6 percent of GDP, universalizing elementary education, making available free and compulsory education to children in the 6–14 age group). Two of the most important Central Government Schemes aimed at achieving these objectives are Sarva Siksha Abhiyan (SSA) and the Mid-day Meal Scheme. The Sarva Siksha Abhiyan was launched in 2001–2002 in an effort to universalize elementary education (UEE) through community ownership of the school system. The stress is on the quality of education and supervision with accountability to the elementary school system in the country. Performance has been generally impressive as a step forward. However, there are pockets where the benefits of SSA have not had the desired impact.¹

Employment-generation programs, intended to reduce poverty, provide ‘wage employment’ and ‘self-employment’ and hence, their efficiency in reducing poverty depends on their efficacy in generating sufficient employment opportunities. Education enables a person to participate in the country’s development process and improves their income-earning capacity. Elementary education is the foundation stone for the development process. In the post-liberalization era, the demand for skilled labor has been increasing both in the domestic and foreign markets. In a competitive environment, the upgradation of skills becomes a critical factor and the appropriate supply response would be forthcoming if the labor force is exposed to ‘skill development’ beforehand itself. In this context, vocational education plays a key role.

Vocational training is broadly defined as training which prepares an individual for a specific vocation or occupation. The aim is to impart training through ‘hands-on’ experience in necessary skills required for a specific vocation or trade, which makes a person employable or creates employment opportunities for her/him. The share of the labor force that has had formal vocational training is around 5 percent, far lower than that in many of the developed and developing countries. Even among those trained, the types of skills imparted have not kept pace with the changing business environment of the post-liberalization era.²

Until 2001, there was no significant development in the Mid-day Meal (MDM) scheme and it was limited to providing dry rations (uncooked food) in most states.³ With Supreme Court orders and the political will of various states, hurdles were gradually removed. Today, MDM has become a daily school routine across the country. It has been fairly successful, but there are areas of concern relating to infrastructure, the continuation of caste discrimination, lack of sensitivity towards women’s problems, etc.⁴

Health and poverty are related. If the health care system is adequate, people will be healthy and the incidence of disease and sickness especially for women and children would be lower. As a consequence, the qualitative (energy to work) and quantitative (reduction in man-days lost due to ill health) effects are expected to be positive. Also, if health expenditure is reduced, income available for other ‘necessaries’ (food, clothing and shelter) is expected to be higher.

Human development is a process of enlarging people’s choices. The most critical choices that lead to a long and healthy life are to be educated and to enjoy a decent standard of living.⁵ It is also possible that poor health results in people’s income being reduced.⁶

One can quote Jeffrey Sachs at this point, ‘…the National Health Mission is a transformative idea, and I would want that the public spending on healthcare is raised to even 5 percent of the GNP ($40 per person)’.

Macro Analysis

The Planning Commission estimates that the cost to the country of the Employment Guarantee Scheme is around Rs 25,000 crore, around 1 percent of the GDP. Hence, the cost is not as exorbitant as claimed by critics of this scheme.⁷ Social sector expenditure (center and state government combined) as a percentage of total expenditure for the periods 2001–2002, 2002–2003, 2003–2004, 2004–2005, 2005–2006 and 2006–2007 is 21.4, 20.6, 19.7, 20.4, 22.0, 22.2 and 21.6 respectively.⁸ Expenditure on education, health and other areas of the social sector (center and state government combined) to GDP is 3 percent, 1 percent and 2 percent, respectively,⁹ which has been the trend since 2001–2002. In 2007–2008, public expenditure (center and state combined) on health, education and other areas of social expenditure as a percentage of total expenditure was 10.3 percent, 4.7 percent and...