India’s stubborn income poverty problem

Context: Declining multidimensional poverty is good news but income poverty, which has remained defiantly high for the last five years, must be fixed.

Progressing Indian economy:

• NSO estimates GDP growth at 7.3%, Sensex crosses 72,000, and foreign exchange reserves exceed $620 billion.
• Inflation contained within RBI's desired band of 4 plus/minus 2 percent.
• India has achieved a remarkable reduction in its MPI value and Headcount Ratio between 2015-16 and 2019-21, indicating success of the country’s commitment and action to address the multidimensional nature of poverty through its multisectoral approach.
• Optimistic macro-economic outlook for India, outperforming G20 countries.

Challenges:

The Indian economy has faced several challenges in recent times, including:

Weak Demand: The economy has grappled with weak demand, which has impacted various sectors

Unemployment: Rapid growth in unemployment has been a significant challenge, affecting the country's workforce

Poor Infrastructure: India's infrastructure gap, estimated to be around $1.5 trillion, has hindered economic development and the quality of life, particularly in rural areas Balance of Payments Deterioration: The country has been running a persistent current account deficit, reflecting its dependence on foreign goods and services

High Levels of Private Debt: The economy has been burdened by high levels of private debt, impacting financial stability

Inequality: There is a significant disparity between the rich and the poor, posing a challenge to inclusive economic growth

Population Growth: The heavy population pressure has strained the economy, affecting Resource allocation and social welfare

Agrarian Crisis: The agriculture sector, which employs a large portion of the population, has faced challenges, contributing to the overall economic issues

Inflation: High inflation has affected the cost of living and household financial savings, impacting purchasing power

Trade Imbalance and Global Developments: The economy has been influenced by trade imbalances, global demand, and macroeconomic policies, posing risks to growth and development

Income poverty

• It  refers to a situation where an individual or a family's income is insufficient to meet basic needs such as food, shelter, and clothing.
• In the context of India, the poverty line is calculated based on the income required to afford a minimum standard of living.
• According to the World Bank, extreme poverty in India has reduced by 12.3% between 2011 and 2019, with the poverty headcount rate declining from 22.5% to 10.2% during this period.
•  The poverty rate in the country has nearly halved, falling from 55% to 28% over the ten-year period.
• Despite these improvements, poverty remains widespread in India, with millions of people still living below the poverty line. While there has been progress in reducing income poverty, it remains a significant challenge in the country.

Causes:

1. Lack of good jobs/job growth: When there is a lack of good job opportunities or job growth, individuals may struggle to generate sufficient income.
2. Inequality and marginalization: Social and economic inequality can contribute to poverty, as marginalized groups may face barriers to accessing Resources and opportunities.
3. Lack of access to basic healthcare and education: Without access to essential healthcare and education, individuals may find it difficult to improve their economic prospects.
4. Conflict and instability: Regions affected by conflict and instability often experience higher levels of poverty due to the disruption of livelihoods and basic services.
5. Inadequate infrastructure and Resources: Limited access to clean water, nutritious food, and basic services can perpetuate poverty by hindering individuals' ability to meet their basic needs.
6. Unemployment and underemployment: High levels of unemployment and underutilized Resources can lead to a lack of income-generating opportunities, particularly in sectors such as agriculture.
7. Ineffective governance: Poor governance can impede economic development and the provision of essential services, contributing to persistent poverty.

Solutions:

To address income poverty in India, several measures have been proposed and implemented. Some of the common solutions include:

• More Employment Opportunities: Creating and promoting more job opportunities, especially in rural areas, can help alleviate poverty
• Minimum Needs Programme: Implementing programs that ensure the supply of minimum needs to the poor sections of society, such as food, shelter, and clothing
• Social Security Programmes: Introducing social security programs to provide a safety net for the vulnerable population
• Education Facilities: Providing universal access to education, including special facilities such as stipends, free books, and contingency allowances for the poor
• Agricultural Growth and Poverty Alleviation: Focusing on agricultural growth and related initiatives to uplift rural communities
• Infrastructure Development: Accelerating the development of infrastructure, including transportation, energy, and communication networks, to create employment and economic opportunities
• Human Resource Development: Investing in the development of human capital through education, healthcare, and skill training
• Access to Assets and Credit: Facilitating access to assets and credit for the poor to support entrepreneurship and economic activities
• Public Distribution System: Strengthening the public distribution system to ensure the efficient and equitable distribution of essential goods and services
• Direct Attack on Poverty: Implementing targeted anti-poverty programs and schemes to directly address the needs of the impoverished population
• These measures aim to tackle income poverty through a combination of economic, social, and policy interventions, with a focus on creating sustainable livelihoods and improving the well-being of the population.