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Causes of Poverty | Descending into Poverty | Detailed Information

 CAUSES OF POVERTY

In India, poverty is explained with reference to two sets of causes: one relating to underdevelopment of the economy and the other relating to unequal distribution of income. Let us discuss the causes of poverty in India in detail are as follows:

Poverty with Reference to Underdevelopment of the Indian Economy

Qu. What is the single most important reason of poverty in India?

Ans. It is rapidly rising population that offsets/neutralises the gain of GDP growth.

Underdevelopment of the Indian economy is the principal cause of poverty in India. Following factors support this observation:

(1). Low Level of National Product: Net National Product (NNP) of India is miserably low compared to its size of population. Low per capita income is the obvious consequence. The per capita income of the country falls in the category of poorest countries, according to UNO norms.

(2). Low Rate of Growth: Rate of growth of economy has been quite low during Five Year Plans in India.

During the period of planning, growth rate of GDP has been nearly 5 per cent.

But owing to nearly 2 per cent growth rate of population, per capita income grew by 3 per cent only.

Low growth rate of per capita income has tended to sustain poverty.

(3). Heavy Pressure of Population: Population has been rising at a rapid pace. This rise is mainly due to a rapid fall in the death rate. Growth rate of population was 1.0 per cent in 1941-51, and 2.1 per cent in 1991-2001. In terms of its size, India's population was 84.63 crore in 1991 and 121 crore in 2011. Heavy pressure of population adds to dependency burden, implying greater poverty.

(4). Inflationary Spiral: Owing to low GDP growth and high growth rate of population, less developed economies like India are vulnerable to inflationary spiral. It signifies a situation of persistent rise in prices. Inflation compounds poverty. It erodes real income of the households. Those who are marginally above the poverty line are driven down to the poverty line. Those already below the poverty are compelled to suffer deprivation over a longer period of time.

(5). Chronic Unemployment and Underemployment: India is a country sustaining chronic employment and underemployment. Poverty is just a reflection of unemployment. In 2011-12, the number of unemployed persons in India was around 2.45 crore. It further increased to 4.35 crore till March 2016.

(6). Capital Deficiency: Capital is one of the principal factors of economic growth. Accumulation of capital points to a rise in production capacity of a nation. Unfortunately, capital stock and capital formation continue to be highly deficient. Lack of capital points to low production capacity. In turn, low production capacity leads to low level of employment. And, low level of employment implies high level of poverty.

Lack of capital ⇾ Low level of production capacity ⇾ Low level of employment ⇾ High level of poverty

(7). Lack of Able and Efficient Entrepreneurs: GDP growth needs efficient and skilled entrepreneurs. Unfortunately, India lacks entrepreneurial skill. Consequently, production activity has failed to gather a momentum. Implying that we have failed to tackle poverty.

 (8) Outdated Social Institution: The social structure of our country is full of outdated traditions and institutions like caste system and joint family system. Such traditions and institutions obstruct dynamic changes in the economy. Growth rate is hampered and poverty is sustained.

(9). Lack of Infrastructure: Energy, transport and communication- the vital components of economic infrastructure as well as education, health and housing services- the principal components of social infrastructure, are grossly deficient. Economic and social infrastructure serves as the foundation of growth and development. But unfortunately, this foundation continues to be weak and unstable despite more than 68 years of planning. Slow pace of growth and persistence of poverty are the obvious consequences.

Poverty with Reference to Unequal Distribution of Income

  1. Poverty in India can also be explained with reference to unequal distribution of income.
  2. Efforts have been made by the government to moderate inequality (in the distribution of income) through a system of progressive taxation and other measures.
  3. But despite all such measures, poverty in India has only tended to compound over time.
  4. According to NCAER (in 2009-10), top 20 per cent of population appropriates 53.2 per cent of total income, while the bottom 40 per cent population appropriates only 15.3 per cent.
  5. According to Monopoly Enquiry Commission, 1536 companies in the country are controlled by 75 families.
  6. Unequal distribution of income not only reflects the size of existing poverty but also points to the possibilities of widening gulf between the rich and the poor in the near future. Because those with higher income (and wealth) certainly have greater capacity to generate still higher income in the near future (than those with lower income).
  7. With huge stocks of wealth, the rich are able to build their fortune while the poor continue to struggle for survival.

Avoid Jobless Growth

  • Poverty will reduce with acceleration of the growth only if jobless growth is avoided.
  • Jobless growh occurs when GDP growth is 'technology driven' rather than 'employment driven'.
  • The government must ensure that the population process is labour-intensive rather than capital/technology-intensive.  

Descending into Poverty

NEP (in terms of liberalisation, privatisation and globalisation) along with PAPs may have accelerated the pace of growth and reduced the percentage of population below poverty line. But, thare are millions, living under a constant threat of slipping below BPL. These are small and marginal farmers, particularly in the states of Andhra Pradesh and Maharashtra. NEP has exposed them to the uncertainties of the market. Market forces have driven them to commercial farming. Often they find themselves helpless in coping with high cost of commercial cultivation as well as in managing the uncertainties of the market. Consequently, they are being driven deep into the vicious circle of poverty. Thousands of them (in the states of Andhra Pradesh and Maharashtra) have committed suicide, due to the unbearable burden of poverty and indebtedness.

To learn the meanings of Poverty, Poverty Line in details then click on the given link: Poverty

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