TRENDS IN POVERTY IN INDIA AND THE POLICY  RESPONSE

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South Asia is home to the largest number of poor in the world, and India

accounts for the largest percentage of the region’s share. The long-term

performance of the Indian economy with respect to poverty reduction has

been mixed, with poverty actually increasing in the fi rst two decades after

India became independent in 1947. However, there has been a sustained

reduction in poverty since the 1970s. Figure 2.1 shows trends in poverty

incidence over four decades, measured by the headcount ratio (that is the

proportion of the population below the national poverty line). Rural poverty

declined from 55.7 per cent in 1974 to 37.4 per cent in 1991, while urban

poverty fell from almost 48 per cent to 33.2 per cent during the same period,

with the major proportion of this decline occurring between 1978 and 1987.

Estimated poverty rates increased after the macroeconomic crisis in 1991,

though these estimates were based on a relatively smaller sample.1

The latest estimates for poverty in India, for 1999–2000, are deliberately

not included in Figure 2.1 since they are at the center of considerable

controversy. According to these estimates, poverty in India had declined

to 27 per cent in rural areas with a national fi gure of 26 per cent. However,

the most recent household expenditure survey used a different methodology,

resulting in a lack of comparability between the latest estimates and all

earlier ones. The debate surrounding the latest poverty estimates in India

is quite intense and wide-ranging, though largely arid at this stage given

the fundamental lack of comparability between the latest estimates and

those before. In a widely cited analysis, using offi cial poverty lines of the

Planning Commission, Deaton (2001) fi nds that poverty in India declined

from 36.2 per cent in 1993–94 to 28.8 per cent in 1999–2000. Unfortunately,

though, the actual status on poverty in India to date is ambiguous, with

considerable skepticism attached to offi cial fi gures.

Even with the latest questionable estimates, India remains the epicenter

of poverty, both within South Asia and in the world, with as many as 259

million people below the national poverty line. In terms of the international

poverty line of US $1 per day (measured at 1993 purchasing power parity

exchange rates), there are 358 million poor in India. If instead we use the

norm of US $2 per day, almost 80 per cent of India’s vast population is

below the poverty line (World Bank, 2003).

In terms of the non-income dimensions of poverty too, India continues to

display intense poverty with relatively poor indicators of social and human

development relevant to the millennium development goals (MDGs), such

as infant and maternal mortality, literacy levels and gender inequalities (see

Table 2.1). To the extent that poverty-targeted programs can ameliorate

Figure 2.1 Rural and urban poverty in India, 1952–93

Table 2.1 MDG related human development indicators in India

MDG 1. Goal 1: Eradicate extreme poverty and hunger;

Goal 2: Achieve universal primary education

1 Population living below $1 a day (%), 1990–2001 34.7

2 Share of poorest 20% in national income or consumption (%), 1990–2001 8.1

3 Children underweight for age (% under age 5), 1995–2001 47

4 Undernourished people (as % of total population)

1990–92 25

1998–2000 24

5 Net primary enrollment ratio (%)

1990–91 –

2000–01 –

MDG 2. Goal 3: Promote gender equality and empower women

1 Ratio of girls to boys in primary education

1990–91 0.71

2000–01 0.77

2 Ratio of literate females to males (age 15–24)

1990 0.74

2001 0.82

MDG 3. Goal 4: Reduce child mortality; goal 5: Improve maternal health

1 Under-5 mortality rate (per 1000 live births)

1990 123

2001 93

2 Infant mortality rate (per 1000 live births)

1990 80

2001 67

3 Maternal mortality ratio (per 100 000 live births), 1995 440

MDG 4. Goal 6: Combat HIV/AIDS, malaria and other diseases

1 Malaria cases (per 100 000 people), 2000 7

2 Tuberculosis cases (per 100 000 people), 2001 199

MDG 6. Goal 7: Ensure environmental sustainability; water and sanitation

1 Population with sustainable access to an improved water source, rural (%)

1990 61

2000 79

2 Population with sustainable access to an improved water source, urban (%)

1990 88

2000 95

3 Urban population with access to improved sanitation (%)

1990 44

2000 61

Source: UNDP (2003).

these non-income dimensions of poverty, as is often their stated objective,

these data only serve to highlight the importance and necessity of well

functioning targeting in the country.

Poverty in India is overwhelmingly rural, with more than 70 per cent of

the poor in rural areas. As might be expected, small and marginal farmers

and landless rural labor are important contributors in aggregate poverty (see

Table 2.2). Poverty is also disproportionately higher in population groups

belonging to Scheduled Tribes and Scheduled Castes.

Table 2.2 Characteristics of the poor: Percentage of rural households

below the poverty line, 1983, 1987–88, 1993–94

Livelihood Category 1983 1987–88 1993–94

1 Self-employed: agriculture 38.99 35.88 27.11

2 Self-employed: non-agriculture 42.89 36.11 29.13

3 Rural labor: agriculture 63.2 59.63 50.56

4 Rural labor: non-agriculture 44.13 43.66 34.62

5 Others 29.8 25.4 23.27

6 All households 46.8 42.25 34.7

7 Female-headed households – 41.1 32.7

Source: Long and Srivastava (2002).