Unit-4 Poverty and Inequality Policy Implications

7/27/2019 Unit-4 Poverty and Inequality Policy Implications

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UNIT 4 POVERTY AND INEQUALITY:

POLICY IMPLICATIONS

Structure

4.0 Objectives

4.1 Introduction

4.2 The Concept of Poverty4.3 Measurement of Poverty

4.3.1 Income Indicators of Poverty

4.3.2 Indicators Covering Income and Non-income Dimensions of Poverty

4.4 Dimensions of Poverty in India

4.4.1 Income Poverty Indicators

4.4.2 Indicators Covering Income and Non-income Dimensions of Poverty

4.5 Concept of Inequality

4.6 Measurement of Inequality

4.6.1 Measures of Inequality of Income

4.6.2 Indicators Covering Inequality in Non-income Aspects of Life

4.7 Levels of Inequality

4.7.1 Levels of Inequality in Income and Consumption

4.7.2 Levels of Inequality in Non-income Aspects of Life

4.8 Policy Implications

4.9 Let Us Sum Up

4.10 Exercises

4.11 Key Words

4.12 Some Useful Books

4.13 Answers or Hints to Check Your Progress Exercises

4.0 OBJECTIVES

After reading this unit, you shall be able to:

define the concept of poverty; state different income and non-income indicators of poverty; assess the dimensions of poverty in India; define the concept of inequality; state the different methods of measurement of inequality of income; explain the levels of inequality; and state the policy implications of poverty and inequalities.

4.1 INTRODUCTIONAs seen in unit 2 earlier, the Indian economy has expanded and diversified

considerably since the advent of planning. The Gross Domestic Product

(GDP) grew at the average annual rate (compound rate) of 3.2 per cent in the

1960s and 1970s. The economy moved to a higher growth path thereafter to

5.8 per cent per annum in the 1980s and 5.7 per cent per annum in the 1990s.

This momentum of growth has more or less been maintained during the first

half of the current decade. The share of the agricultural sector in total GDP

has declined from about 55 per cent to about one-fourth and that of the


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services sector has increased from about 30 per cent to over 50 per cent over

the fifty-year period.

Has such economic expansion and diversification led to the socio-economic

well-being of the people of the country? This does not seem to be the case for

sizeable sections of the people. About one-fourth of the Indian population of

over a billion is poor. A significant proportion of labour force remains

unemployed, there are gross inequalities in distribution of income. In the

present unit and the following unit 5, we address ourselves to these issues of

economic development.

4. 2 THE CONCEPT OF POVERTY

Poverty is a multidimensional concept. Poverty may be defined as a state of

lack of access to the basic needs of income, food, shelter, education, health

services, safe drinking water and sanitation that help an individual lead a

decent, normal and effective existence. Indeed, the list of basic and other

needs may vary, depending upon the society in question and what, in its view,

constitutes normal andeffective existence. The next question that comes up is

about how lack of access is understood. Is a total lack of access to food

(hunger), etc., necessary to be considered as being in a state of poverty? Or is

there a minimum desirable level of access, only below which an individualwill be considered as being poor? These questions lead one to the realm of

estimating the incidence of poverty or the number who are poor and the

related quantitative indices of poverty or deprivation and measures of human

development. We shall deliberate upon these issues in the next section.

4.3 MEASUREMENT OF POVERTY

4.3.1 Income Indicators of Poverty

The first step in estimating the incidence of poverty is to define apoverty line.

The Task Force on Projections of Minimum Needs and Effective

Consumption Demand of the Planning Commission (1979), used an averageenergy (nutritional energy) requirement norm to define the poverty line. Since

calorie is the unit of energy, the norm used was in terms of calories. The Task

Force estimated the average daily per capita requirements for rural and urban

areas by using the specific calorie allowances recommended by the Nutritional

Expert Group (1968) for population groups of different age groups, sex and

activity. In this manner, the Task Force attempted to capture in the average

norms factors such as age, sex and occupational differences in the daily

calorie requirement of the population. The calorie norms, thus, derived were

rounded off to 2,400 calories per capita per day for rural areas and 2,100

calories per capita per day for urban areas. The monetary equivalents of

these norms were obtained by using: (i) data on the quantity and value of

items of household consumption and (ii) the calorie content of the items offood consumed by population groups belonging to different per capita

expenditure classes with appropriate conversion factors. The Task Force, thus,

estimated, on the basis of the observed consumer behaviour in 1973-74, that,

on an average, a consumer expenditure of Rs. 49.09 per capita per month was

associated with a calorie intake of 2,400 calories per capita per day in rural

areas and Rs. 56.04 per capita per month with a calorie intake of 2,100 per

capita per day in urban areas. In other words, the poverty line was defined as

the per capita expenditure level at which the average per capita per day

calorie intake is 2,400 calories for rural areas and 2,100 calories for urban

areas. This poverty line serves as a cut-off line for separating the poor from


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the non-poor if the distribution of population with per capita expenditure

below the level defined by the poverty line is counted as poor. The proportion

of the poor to the total population is the Poverty Ratio (PR) orthe Head

Count Ratio (HCR). PR or HCR measures the incidence of poverty. It is,

thus, defined as:

numberof peoplebelow poverty lineIncidenceof Poverty PR HCR 100

totalpopulation= = =

It is expressed as a percentage. This is useful for comparing the povertysituation in two areas like the rural and urban areas or different States or the

situation in an area in the year 2005 compared to, say, 1995.

The computation of the poverty line for the base year (1973-74) has been done

with prices of items in the base year. This is, therefore, updated for changes in

prices over time. This is, then, used with the distribution of population by

different per capita consumer expenditure classes available from time to time

from periodic surveys of the NSSO on household consumption to arrive at

estimates of the number of the poor and the poverty ratio for subsequent years.

The measurement of poverty described above, namely, the poverty ratio or the

head count ratio, is simply the proportion of the number of people below the

poverty line in the population. This ratio, however, does not make anydistinction within the broad category of the poor on the basis of their actual

levels of consumption and deprivation. Consequently, the poverty ratiofails to

capture the depth and severity of poverty in an adequate manner. A measure

developed for this purpose is the Poverty Gap (PG) Index. The PG Index

calculates the total shortfall of consumption below the poverty line, per capita

of the totalpopulation. This is, then, expressed as a percentage of the poverty

line. It can also be calculated as:

(Poverty line Per capita consumption of the poor)PG Index Poverty Ratio 100

Povertyline=

More comprehensive measures of the severity of poverty arethe Squared

Poverty Gap (SGP) andthe Sen Index(SI). We shall not go into the formulaefor these measures except to observe that: (i) SGP is not PG x PG, (ii) it

possesses the properties of both the Poverty Ratio and the Poverty Gap Index

and (iii) in addition, it also captures the extent of variation in the levels of

consumption of the poor. It is, however, sensitive to measurement errors at the

bottom of the per capita expenditure scale. The Sen Index takes note of the

shortfall in average consumption of the poor from the poverty line as well as

the inequality in consumption among the poor.

4.3.2 Indicators Covering Income and Non-income

Dimensions of Poverty

Poverty Ratios (PR) and measures related to PR provide a composite picture

of people whose per capita consumption expenditure is below the level of per

capita consumption expenditure corresponding to the basket of commodities

constituting the desired minimum. These do not, however, provide a complete

picture of the extent of deprivation or, alternatively, the state of well-being of

the population. These are rooted in calorie consumption and do not say

anything about several other factors that shape living standards, like: (a) the

health status of the population like longevity, overall mortality, infant

mortality, maternal mortality (mortality of women arising from child birth and

related causes) and morbidity (prevalence of diseases) and in general, access

to health services, (b) the nutritional status, (c) the educational status and


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(d) the living environment like housing, access to safe drinking water and

sanitation as also pollution-free air and water resources. Attempts have been

made to capture these aspects in alternative measures of poverty. Let us have a

brief look at them.

a) The Human Development Index (HDI) and the Human Poverty Index

(HPI)

As discussed in unit 3, the UNDP has been preparing Human Development

Reports (HDRs) and making estimates of the Human Development Index

(HDI) for different countries since 1990. The HDI incorporates three mostcritical and socially usefulchoices, viz.,

i) the choice to lead a long and healthy life;

ii) the choice to acquire knowledge; and

iii) to have access to the resources needed for a decent level of living.

The countries are ranked in order of the value of the HDI.

HDR also presents estimates ofHuman Poverty Index (HPI). This being a

measure of deprivation, HPI makes use of the following for the three areas of

choices referred to above:

i) Proportion of populationnotexpected to survive beyond 40 years;

ii) Adult illiteracy rate; and

iii) (a) Percentage of population without sustainable access to an improved

water source; and (b) Percentage of children aged 5 or below who are

underweight for their age.

The National Human Development Report, 2001 prepared by the Indian

Planning Commission follows the framework of human development adopted

in the UNDP HDR. It presents estimates of HDR for 1981 and 1991 for the

country and different States and Union Territories. It also gives estimates of

HDI for 2001 for the country and for 15 major States. Estimates of HDI for

the other States and Union Territories could not be prepared due to lack ofcomparable data for these States for 2001.

b) Gender-related Development Index (GDI) or Gender Equality Index

(GEI)

The Human Development Index (HDI) that we have discussed so far is based

on indicators reflecting economic, educational and health attainments of the

population. It does not, however, reflect gender-based disparities in such

attainments. Gender-based discrimination is prevalent in every society

developed or not to a lesser or greater degree. Such discrimination results in

a higher incidence of poverty in the female population than in the male

population, in whatever manner we measure poverty. Gender-related

Development Index (GDI) or Gender Equality Index (GEI) seeks to reflectgender disparity in human development. This will help to focus attention on

aspects of development planning that fail to reduce gender discrimination.

This index is estimated as a proportion of economic, educational and health

attainments of females to that of males. The common set of variables for

which the attainments of females and males are compared is the same set that

is used in estimating HDI.

c) Capability Poverty Measure (CPM)

UNDP HDR 1996 had also developed a Capability Poverty Measure (CPM)

for different countries. Three indicators, (i) the percentage of children under 5


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who are underweight (ii) the percentage of births unattended by trained health

personnel and (iii) the percentage of women aged 15 years and above who are

illiterate, were used for computing CPM.

Check Your Progress 1

Note: i) Space is given below each question for your answer.

ii) Check your answer(s) with those given at the end of the unit.

1) In what way is the PG Index more useful in assessing the poverty

situation?

2) What are the indicators which take note of income as well as non-income

aspects of poverty?

3) What are the indicators on which Human Development Index and the

Human Poverty Index estimated by the NHDR, 2001 of the Planning

Commission are based?

4) What are the indicators of Capability Poverty Measure (CPM) prepared by

NCAER?

4.4 DIMENSIONS OF POVERTY IN INDIA

4.4.1 Income Poverty Indicators

The incidence of poverty has declined from 56.4 per cent in 1973-74 to 27.1

per cent in 1999-00 in rural areas and from 49 per cent to 23.6 per cent during

the same period in urban areas (See Table 4.1). The decline is from about 55

per cent to 26 per cent for the country as a whole. While the number of the

rural poor declined, the rise in the number of the urban poor had been more

than compensating for it till 1994. Thereafter, the number of urban poor has

also declined. As of 2000, a little over one-fourth of the population of the

country is poor.These 260 million people do not have the purchasing power


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needed to meet the specific standard of calorie intake with some margin for

non-food consumption needs. About three-fourths of these are in the

countryside. About one-half of the population of Orissa and about two-fifths

of the population of Bihar and Madhya Pradesh do not have even this

minimum level of purchasing power (Table 4.2). Rural as well as urban

poverty is most severe in Orissa, with almost of its rural population and two-

fifths of its urban population being poor (Table 4.2).

Table 4.1: Poverty Ratio and the Number of Poor

Poverty Ratio (per cent) No. of Poor (million)Year

Rural Urban Combined Rural Urban Combined

(1) (2) (3) (4) (5) (6) (7)

1973-74 56.4 49.0 54.9 261.3 60.0 321.3

1977-78 53.1 45.2 51.3 264.3 64.6 328.9

1983 45.7 40.8 44.5 252.0 70.9 322.9

1987-88 39.1 38.2 38.9 231.9 75.2 307.1

1993-94 37.3 32.4 36.0 244.0 76.3 320.3

1999-00 27.1 23.6 26.1 193.2 67.0 260.2

Source:

1) Report of the Tenth Five Year Plan (2002-07) Steering Committee on Urban

Development, Urban Housing and Urban Poverty, 2001, Planning Commission.

2) National Human Development Report, 2001, Planning Commission.

Table 4.2: Poverty in India: 1999-00

Rural Urban Total

Sl.

No.

State No. Poor Poverty

Ratio

No. Poor Poverty

Ratio

No. Poor Poverty

Ratio

(Million) (Per cent) (Million) (Per cent) (Million) (Per cent)

(1) (2) (3) (4) (5) (6) (7) (8)

Major States

1. Andhra Pr. 5.81 11.05 6.09 26.63 11.90 15.77

2. Assam 9.22 40.04 0.24 7.47 9.46 36.09

3. Bihar 37.65 44.30 4.91 32.91 42.56 42.6

4. Gujarat 3.98 13.17 2.81 15.59 6.79 14.07

5. Haryana 1.19 8.27 0.54 9.99 1.73 8.74

6. Himachal Pr. 0.48 7.94 0.03 4.63 0.51 7.63

7. Karnataka 5.99 17.38 4.45 25.25 10.44 20.04

8. Kerala 2.1 9.38 2.01 20.27 4.14 12.72

9. Madhya Pr. 21.73 37.06 8.12 38.44 29.85 37.43

10. Maharashtra 12.51 23.72 10.29 26.81 22.80 25.02

11. Orissa 14.37 48.01 2.54 42.83 16.91 47.15

12. Punjab 1.02 6.35 0.43 5.75 1.45 6.16

13. Rajasthan 5.51 13.74 2.68 19.85 8.18 15.28

14. Tamil Nadu 8.05 20.55 5.00 22.11 13.05 21.12

15. Uttar Pradesh 41.2 31.22 11.79 30.89 52.99 31.15

16. West Bengal 18.01 31.85 3.34 14.86 21.35 27.02


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Other States

17. Arunachal Pr. 0.38 40.04 0.02 7.47 0.40 33.47

18. Goa 0.01 1.35 0.06 7.52 0.07 4.40

19. Jammu & Ka. 0.30 4.00 0.05 1.98 0.35 3.48

20. Manipur 0.65 40.04 0.07 7.47 0.72 28.54

21. Meghalaya 0.79 40.04 0.03 7.47 0.82 33.87

22. Mizoram 0.14 40.04 0.04 7.47 0.18 19.47

23. Nagaland 0.52 40.04 0.03 7.47 0.55 32.67

24. Sikkim 0.20 40.04 0.004 7.47 0.205 36.55

25. Tripura 1.25 40.04 0.05 7.47 1.30 34.44

26. A & N Islands 0.06 20.55 0.02 22.11 0.08 20.99

27. Chandigarh 0.01 5.75 0.04 5.75 0.05 5.75

28. D & N Ha. 0.030 17.57 0.003 13.52 0.033 17.14

29. Delhi 0.01 0.40 1.14 9.42 1.15 8.23

30. Pondicherry 0.06 20.55 0.18 22.11 0.24 21.67

31. Lakshadweep 0.003 9.38 0.008 20.27 0.011 15.6

India 193.24 27.09 67.01 23.62 260.25 26.10

Source: National Human Development Report, 2001, Planning Commission.

Incidence of Poverty among the Scheduled Castes and Tribes. Poverty ratios

for these two groups for 1993-94 and 1999-00 are shown in Table 4.3.

Roughly, two-fifths of the Scheduled Castes and Scheduled Tribes are poor,

although there has been some reduction in the incidence of poverty in these

groups of population over the six-year period (1993-94 to 1999-00). But

incidence of poverty among Scheduled Tribes residing in rural areas is still

very high. About one-half of these people are poor.

Table 4.3: Incidence of Poverty among Scheduled Castes and Tribes

(1993-94 & 1999-00)

Group 1993-94

R U

1999-00

R U

General Population 37 32 27 24

Scheduled Castes 48 49 36 38

Scheduled Tribes 52 41 46 35

Source: Tenth Five Year Plan 2002-2007 Vol. II, Planning Commission.

We referred earlier to the inadequacy of the poverty ratio in measuring the

depth and severity of poverty. The poverty ratio does not give any idea of the

distribution of the poor by levels of consumption. It does not say anything

about, for instance, the number of the poor whose consumption levels are justabout half of the poverty line consumption level. We have seen earlier how

the Poverty Gap (PG) Index is able to take note of these aspects and show the

magnitude of the effort required to raise the levels of consumption of all the

poor below to the consumption level signified by the poverty line. We also

noted that the Squared Poverty Gap (SPG) and the Sen Index (SI) are more

comprehensive measures that reflect the severity of poverty. The position in

India in the decade of 1990s, as reflected by the three measures, is shown in

Table 4.4. We note that while the Poverty Ratio, the PG Index and the Sen

Index have declined in 2000 to about 70 per cent of their levels in 1994, the


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SPG Index has come down more sharply to about two-thirds its level in 1994.

The depth and severity of poverty has declined as fast as incidence of poverty.

Table 4.4: Some Alternative Indices of Poverty 1993-94 & 1999-00

1993-94 1999-00Poverty

Index Rural Urban Combined Rural Urban Combined

(1) (2) (3) (4) (5) (6) (7)

PG Index 8.2 6.7 7.8 5.8 5.0 5.6SPG 2.7 2.3 2.6 1.7 1.6 1.7

Sen Index 11.4 9.3 10.9 8.1 7.0 7.8

Source: Sundaram, K., Keynote Address in the 38th Session of the Indian

Econometric Conference, January, 2002.

4.4.2 Indicators Covering Income and Non-income

Dimensions of Poverty

We have so far looked at levels of poverty as reflected in the poverty ratios.

We noted earlier that poverty ratios do not reflect certain aspects of the living

standards like health, education and nutrition and that the Human

Development Index (HDI), the Human Poverty Index (HPI) and the

Capability Poverty Ratio (CPM) are some of these attempts. Let us know what

do these say about levels of living?

a) Human Development Index (HDI) and the Human Poverty Index

(HPI)

Indias rank on the basis of HDI is 127 out of 177 countries, according to the

UNDP Human Development Report (UNDP HDR), 2004. HDI for India has

increased by about 40 per cent between 1975 and 2001. Norway is at the top

of the table of country-wise HDI values and Sierra Leone at the bottom. HDI

for the developing countries as a whole is well above that for India. Pakistans

rank is 165 and Sri Lankas is 34. HPI, 2001 for India is less than that for ourneighbours except Sri Lanka, Myanmar and Mauritius, according to UNDP

HDR, 2004. Indias rank on the basis of HPI according to the UNDP HDR

2004 is 53 out of about 100 countries. Mauritius, Sri Lanka and Myanmar are

relatively better off than India.

Inter-State Variations

Estimates of HDI for 2001 and those of HPI for 1991 for different States and

Union Territories are shown in Table 4.5. Let us first look at the extent of

deprivation across the country as revealed by HPI. Note that new areas get

added to the list of high poverty areas given earlier on the basis of poverty

ratio. The entire Northeastern Region except Mizoram, Rajasthan, Madhya

Pradesh, Uttar Pradesh, Bihar, Orissa and Dadra and Nagar Haveli have arelatively high level of poverty as denoted by HPI. States and Union

Territories with a relatively low level of human development are generally

seen to have a relatively high incidence of poverty (HPI). This inverse

relationship is seen to be very strong if we take into consideration only the 16

major States listed.


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Table 4.5: Human Poverty Indices (HPI) and Human Development Indices

(HDI) for States & Union Territories, 1991 & 2001

Sl.

No.

States & Union

Territories

HPI1991

%

Rural

HPI 1991

%

Urban

HPI 1991

%

Total

HDI

1991

HDI

2001

(1) (2) (3) (4) (5) (6) (7)

1. Chandigarh 25.07 15.07 15.96 0.674 Ne

2. Delhi 21.02 17.99 18.22 0.624 Ne

3. Kerala 24.57 17.23 22.73 0.591 0.638

4. Goa 15.58 13.78 36.10 0.575 Ne

5. A & N Islands 28.80 16.32 25.24 0.574 Ne

6. Pondicherry 25.86 19.57 22.52 0.571 Ne

7. Mizoram 37.19 14.07 26.47 0.548 Ne

8. Daman & Diu 23.88 15.82 19.90 0.544 Ne

9. Manipur 43.84 26.51 39.82 0.536 Ne

10. Lakshadweep 15.67 12.26 13.89 0.532 Ne

11. Nagaland 45.00 23.56 41.30 0.486 Ne

12. Punjab 28.04 18.47 25.25 0.475 0.537

13. Himachal Pr. 21.67 9.91 20.90 0.469 Ne

14. Tamil Nadu 30.31 18.61 26.45 0.466 0.531

15. Maharashtra 29.30 17.65 24.73 0.452 0.523

16. Haryana 31.64 18.57 28.41 0.443 0.509

17. Gujarat 31.83 20.87 28.05 0.431 0.479

18. Sikkim 38.14 17.80 38.59 0.425 Ne

19. Karnataka 35.28 21.59 30.99 0.412 0.478

20. West Bengal 42.43 23.22 37.35 0.404 0.472

21. Jammu & Kashmir 34.94 17.67 30.95 0.402 Ne

22. Tripura 46.32 21.97 42.71 0.389 Ne

INDIA 42.25 23.03 37.42 0.381 0.472

23. Andhra Pradesh 43.19 25.12 38.34 0.377 0.416

24. Meghalaya 55.81 20.15 49.41 0.365 Ne

25. Dadra & Nagar Hv. 45.66 21.95 43.64 0.361 Ne

26. Assam 49.32 22.52 46.29 0.348 0.386

27. Rajasthan 51.17 26.73 44.73 0.347 0.424

28. Orissa 47.97 28.29 45.22 0.345 0.404

29. Madhya Pradesh 45.43 25.69 40.79 0.328 0.394

30. Arunachal Pradesh 50.75 25.65 47.40 0.328 Ne

31. Uttar Pradesh 50.02 32.62 46.65 0.314 0.388

32. Bihar 53.65 29.70 50.48 0.308 0.367

Ne: not estimated.



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b) Gender-related Development Index (GDI) or Gender Equality Index

(GEI)

UNDP HDR 2003 estimates GDI 2001 for India as 57.4 per cent and Indias

rank with reference to this index as 103 out of 175 countries. In other words,

the attainment of women in the three dimensions covered by HDI is only

about three-fifths of those of men. The attainment of women in human

development dimensions covered by NHDR HDI (income, health and

education) is only about two-thirds of that of men. Gender equality was the

highest in Kerala (87.2 per cent) followed by Manipur (80.2 per cent),Meghalaya (79.9 per cent), Himachal Pradesh (78.3 per cent) and Nagaland

(78.3 per cent) in the 1980s. It was the highest in Himachal Pradesh (85.8 per

cent) in the 1990s and the least in Bihar (46.9 per cent). Estimates of GEI

showed that women were generally better off in Southern India than in the

Indo-Gangetic Plain, especially in Bihar and UP.

c) Capability Poverty Measure (CPM)

NHDR 2001 provides the basic data required for making estimates somewhat

similar to the estimates of CPM. These estimates are given in Table 4.6. The

extent of inadequate physical growth among women and children is alarming.

Table 4.6: Some Measures Relevant to Capability Poverty: 1998-99(Percentage)

Measure INDIA

Highest Value

among States &

Union Territories

Lowest Value

among States &

Union Territories

Children who are

underweight for age

47.0 55.1

(Madhya Pradesh)

20.6

(Sikkim)

Children who areunderweight for height

15.5 24.3

(Orissa)

5.3

(Haryana)

Children who are not

tall enough for their age

45.5 55.5

(Uttar Pradesh)

18.1

(Goa)Women with BMI less

than 18.5 kg./m2

35.8 48.0

(Orissa)

10.7

(Arunachal Pradesh)


We have considered several measures of poverty and estimates of the levels of

poverty based on these. One set of measures is income based. The most

important among these is the poverty ratio, which gives the incidence of

poverty with reference to the (lack of the) purchasing power required to afford

the minimum desirable standard of calorie consumption. Another set attempts

to capture the extent of deprivation that the poor suffer in the matter of access

to food, safe drinking water, sanitation, medical attention, shelter, education

and health and nutrition to ensure longevity. The third consists of those thatmeasure levels of human development in the population, as this is one of the

important instruments for tackling poverty. A part of this set is also the one

that looks at gender disparity in human development. The fourth is based on

the lack of the capability to attain a specified minimum desirable standard of

living. And we find that the inability to access the basic needs of living and

the low levels of human development and capability usually form part of a

vicious circle. Only a development policy that is capable of cutting this

vicious circle can effectively solve the problem of poverty.

Let us now turn our attention to the problem of inequality.


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1) What is hunger ratio?

2) Describe the trends with reference to incidence of poverty.

3) What is the incidence of poverty among scheduled castes and tribes?

4.5 CONCEPT OF INEQUALITY

While the concept of poverty is rooted in the lack of access or a low level

of access to food, nutrition, shelter, education and other services, inequality

is related to unequal access or different degrees of access of different

individuals or groups of individuals to these opportunities, services and

benefits. Inequality is, thus, a more general concept than poverty. It looks attherelative levels of access of different groups to development opportunities

and benefits. The different levels of access in the concept of inequality also

include the low level of access below which people are considered poor. In

fact, the low level of access or the limit (like for example, the calorie limit for

consumption) that may be set for defining poverty will itself include a number

of lower levels of access.

4. 6 MEASUREMENT OF INEQUALITY

4.6.1 Measures of Inequality of Income

a) Lorenz Curve

The most simple way to represent inequalities is called the Lorenz Curve. To

draw a Lorenz Curve, we take the cumulative percentages of the population

and their corresponding shares in the total income of all individuals. On x-

axis, we represent shares in population and on y-axis the corresponding shares

in total income. The resultant graph called the Lorenz Curve (LC).


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Lorenz Curves on Consumer Expenditure - Rural and Urban India: 1999-00

Lorenz Curve: 1999-00

0

20

40

60

80

100

120

0 10 20 30 40 50 60 70 80 90 100

Population Shares

Shareof

Consumption

eg.

LineU

R

We notice that the points of the curve corresponding to eg. Line in the

figure lie on a straight line from the origin in the southwest corner of thegraph and moving to the northeast corner. The percentages of population and

the corresponding shares of these groups in total income are equal at any point

on this line. This straight line, therefore, represents the line of complete

equality or the egalitarian line. The graph representing the actual shares,

however, appears as a loop joining the two corners of the graph and lying

belowthis line of equality. The extent to which the loop deviates from the line

of equality represents the extent of inequality. The situation of extreme

inequality is given by the X-axis from the origin to the point representing 100

per cent on the X-axis and the perpendicular line joining the 100 per cent

point on the X-axis and the (last) point on the northeast corner of the line of

equality corresponding to this point. This is the situation where all the

incomes generated in the economy accrue to one individual. The Lorenz Ratioof Inequality or the Lorenz Concentration Ratio (LCR) is given by the ratio.

(area enclosed by the line of equality and the LC)

LCR =

(area of the right angled triangle formed by the X-axis, the line of equalityand the perpendicular line standing on the X-axis at the 100 per cent point)

This can be arrived at by computing the area enclosed by LC, the X-axis and

the perpendicular line referred to earlier and subtracting it from the area of the

right angled triangle. The required ratio is then easily calculated.

A comparison of the extent of inequalities (of income) between two

economies or the trends in the degree of inequality in an economy over time is

possible with the Lorenz Curve. Let us draw two such LCs, say for the rural

and urban areas of India. Let one Lorenz Curve, say the curve for the rural

areas lie completely within the other (the urban curve) all through the range of

values. (This is the case in the LCs drawn as an illustration see Graph). That

is, one LC dominates the other. This is called Lorenz domination.Clearly, the

inequality in the society corresponding to the curve nearer to the line of

equality is less severe than the inequality in the society corresponding to the

outer curve. Problems of comparison, however, arise when the two (or more)

Lorenz Curves intersect, when it is not possible to arrive at a conclusion

regarding which curve depicts a worse inequality situation than the other.


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Summary measures of inequality will be useful in such cases. To these we

turn now.

b) Summary Measures of Inequality

The measures given below are ratios and, therefore, dimensionless, that is,

free of scale. These measure relative inequality in distribution, that is, these

will not be affected by any proportional change inallincomes.

Let the incomes of P individuals in a society be Y1, Y2, . Yi, .., YP,

where Yi is the income of the i th individual in the population. The meanincome (M) of all the individuals will be M = ( Yi) P. The mean incomeM does not tell us anything about the extent of inequality in incomes in this

society. Let us then look at other measures that can help us in this regard. Let

the individuals be arranged in the increasing order of their incomes. The

Median Income Me is the income of the middlemost person in the ranking of

individuals in the increasing order of their incomes, that is,

Me = Y(P + 1)/2 , if Yk is the income of the individual whose rank is k.

Me shows that the incomes of one-half of the population are below it. This is

otherwise not a useful measure of inequality: it does not reduce to zero in the

case of equality of all incomes.

1) Range of the incomes R = the difference between the highest individualincome and the lowest individual income divided by the mean income

M, that is,

R = (Maximum of Yi Minimum of Yi)/M.

R is zero when all incomes are equal and is equal to P when all the

incomes accrue to a single person.

2) Relative Mean Deviation RMD = (1/PM) (Yi M),

wherexstands for the absolute value of x (see footnote)1 and M themean income.

3) Gini Ratio (GR) is defined as one half of the relative mean difference.2

Thus,

GR = (Yi - Yj) (2 P P M),

where the summation is done first with reference to j = 1, 2, ....P and then

with reference to i = 1, 2, ..P.3

GR can also be expressed as follows:

GR = 1 + (1/P) 2 [PY1 + (P 1) Y2 + + 2 YP-1 + YP]/(P P M)

where Y1 Y2 YP.4

(Individual incomes arranged

according to increasing order of income)

1For example( - ) 3= 3.

2 Mean difference is the arithmetic mean of the absolute differences between all pairs of

incomes (P P pairs) and is divided by M to get the relative mean difference. It is equal to(Yi Yj)/(P P M).3

For example, Yi Yj for i= 1, 2 and j = 1, 2 will be Y1 Y1 + Y1 Y2 + Y2 Y1 + Y2 Y2.4 less than or equal to.


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The alternative formula shows that GR involves a weighted

sum of the incomes of individuals where the weights are the

ranks of individuals when they are arranged in the increasing

order of their incomes; but the poorest individual gets the

biggest weight P, the next individual who is better off than the

first gets the weight (P 1) and so on and finally, the richest

individual gets the weight one.

Other ratio measures can also be used. The distribution of income derived in

the manner described under the section on Lorenz Curve can be used tocompute simple ratio measures of inequality. For instance, we can compare

the shares in total income of the richest (top) 10 per cent of the population and

the poorest (bottom) 10 per cent of the population (Decile Ratio). Or we might

look at the ratio of the share in total income of the top half (50 per cent of the

population) of the income distribution to that of the bottom half.

Clearly, the measures mentioned above will give different values for a given

distribution of income. The important question to be considered is whether

these measures would rank different distributions of income in the same way

in terms of distributional inequality. These measures would give the same

ranking for, say, two distributions of income when there is Lorenz

domination, that is, where the two corresponding Lorenz curves are such that

one lies completely within the other. In cases, where the two curves intersect,

the choice of a suitable ratio has to be based on further considerations. For

example, a small transfer of income from a rich person to a person poorer than

him should be expected to result in a reduction in the inequality measure. This

property is known as thePigou-Dalton effect. How sensitive are the measures

mentioned above to this effect?

4.6.2 Indicators Covering Inequality in Non-income Aspects

of Life

Quality of life, as we noted earlier, has dimensions other than income, like

access to basic needs such as shelter, safe drinking water and services like

sanitation, electricity, education and health and employment opportunities. Anassessment of the varying degrees of access of different individuals or

households to one or more of these services and facilities is one way of

analysing such inequalities. Another is to attempt a similar assessment of how

the level of access to these services and facilities differ between and among

population groups like males and females, the rural folk and urban residents,

different areas like the various States, Union Territories and other

administrative divisions, the remote, the hilly and the backward areas, the

socially challenged groups like the Scheduled Castes/Tribes and the

physically challenged. The inclusion of the first population group and the last

two population groups in this list has to be specifically emphasised since the

most important social dimensions that need to be built into analysis of

inequality in levels of living are gender and social and physical disability.Discrimination based on these has to do with social and cultural attitudes and

biases and these have to be dealt with through empowerment of the groups

concerned and through efforts to change the social mindset. A third is to

attempt, if possible, the first and the second type of analysis by

income/consumption expenditure classes. This would, in a way, integrate the

analysis of income inequality attempted in an earlier section with the larger

area of levels of quality of life.


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The GDI and its component indices considered in an earlier section are all

indicators depicting gender inequality. The HDIs, GDIs and their component

indices are available for different States and Union Territories and in some

States at the district level also and can help analyse spatial inequality, that is,

inequality among areas. This will help building location-specific needs into

policy and policy implementation. The component indices of HDI and GDI

are more specific and their availability for different vulnerable groups like the

Scheduled Castes/Tribes, rural areas and women would help identifying

problems needing attention. One can also compute these indicators for

different income classes, areas and social classes to get an even better focus

for policy action. It is possible for example to compile the distribution of

school attendance, literacy, skills etc., by monthly per capita consumer

expenditure classes (MPCE classes) from NSSO consumer expenditure

surveys. Such a distribution by MPCE classes can also be extracted for the

Scheduled Castes/Tribes and for women from these surveys. Lorenz curve/GR

analysis can also be attempted for non-income aspects of quality of life. For

example, quality attributes like proportion of educated persons (matriculates

and above) to population in each income class can be analysed in the same

way as income by income classes as in the preceding section (See the example

worked out in the next section). Employment shares by income classes can be

examined in a similar fashion.

4.7 LEVELS OF INEQUALITY

4.7.1 Levels of Inequality in Income and Consumption

Let us look at levels of inequality in income or consumption. Consumer

expenditure of households is a good proxy for income, at least in the lower

classes. A study of inequalities in levels of consumption will by itself be

useful in an economy where agriculture, the unorganised sector, payment of

wages in kind and the non-monetised sector still play an important role. Such

an analysis will be able to pinpoint attention on specific areas of concern in

the consumption pyramid. Let us, therefore, turn to levels of inequality in

consumption.

Table 4.7: Inequality in Consumption: 1983 to 1999-00

1983 1993-94 1999-00Sl.

No. Inequality MeasureRural Urban Rural Urban Rural Urban

1. Share (%) in total

consumption of the

(a) Bottom 10% of pop. 3.80 3.47 4.34 3.37 4.58 3.48

(b) Top 10% of pop. 24.64 27.43 23.59 27.70 22.60 27.88

(c) Ratio of (b) to (a) 6.48 7.90 5.44 8.22 4.93 8.01

(d) Bottom 20% of pop. 9.03 8.19 10.01 8.01 10.32 7.85

(e) Top 20% of pop. 39.23 42.28 37.49 42.80 36.57 43.08

(f) Ratio of (e) to (d) 4.34 5.16 3.74 5.34 3.54 5.49

(g) Bottom half of pop. 30.14 27.72 31.92 27.20 32.56 26.79

(h) Top half of population 69.86 72.28 68.08 72.80 67.44 73.21

(i) Ratio of (h) to (g) 3.32 2.61 2.13 2.68 2.07 2.73

2. Gini Ratio 0.298 0.330 0.282 0.340 0.258 0.341

Sources: National Human Development Report, 2001, Planning Commission.


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The household consumer expenditure surveys of the NSSO provide us with

trends in levels of consumption of expenditure in the population by monthly

per capita consumer expenditure (MPCE) classes. Estimates of the different

measures of inequality made from the data collected in these surveys are

shown in Table 4.7.

A comparison of the share of the bottom 10 per cent (or 20 per cent or 50 per

cent) of the population in total consumption with that of the top 10 per cent

(or 20 per cent or 50 per cent) of the population brings out dramatically the

extent of inequality in consumption. The inequality situation is worse in urbanareas than in rural areas. This is so in all States and Union Territories.

Inequality in consumption is declining, albeitslowly, in rural areas according

to all measures of inequality. On the other hand, urban inequality shows no

sign of any decline.

Regional Variations

Gini Ratios calculated for the rural and urban areas of different States and

Union Territories are shown grouped by ranges of values of their Gini Ratios

in 1999-00 in Table 4.8. Inequality in consumption levels is worse than in the

rest of the country (GR greater than 0.3) in urban areas of all the four

Southern States and adjoining Maharashtra and in urban areas of the region

extending from Chandigarh to West Bengal and urban Assam. These are alsoareas where incidence of (urban) unemployment is high. Arunachal Pradesh,

Dadra & Nagar Haveli, Pondicherry, the urban areas of the region extending

from Gujarat to Himachal Pradesh, Goa, Orissa and Sikkim and rural areas of

Tamil Nadu, Kerala and Maharashtra are only slightly better off in this regard,

with a GR of 0.25 to 0.30.

Table 4.8: Gini Ratios of States and Union Territories 1999-00

Range of Value

of Gini Ratio

Rural Urban

(1) (2) (3)

More than 0.3 Nil Assam,West Bengal, Bihar,

UttarPradesh, Madhya Pradesh,Delhi, Chandigarh, Maharashtra,

Andhra Pradesh, Tamil Nadu,Karnataka, Kerala

0.25 to 0.30 Arunachal Pradesh, Chandigarh,

Maharashtra, Dadra & NagarHaveli, Tamil Nadu, Pondicherry,

Kerala

Arunachal Pradesh, Tripura,

Sikkim, Orissa, HimachalPradesh, Punjab, Haryana,

Rajasthan, Dadra & Nagar Haveli,

Gujarat, Goa, Pondicherry

0.20 to 0.25 Assam, Sikkim, West Bengal,

Orissa, Bihar, Uttar Pradesh,

Madhya Pradesh, Punjab,Himachal Pradesh, Haryana,

Rajasthan, Daman & Diu, Gujarat,Goa, Karnataka, Andhra Pradesh,

A & N Islands

Meghalaya, Manipur, Nagaland,

Mizoram, Jammu & Kashmir,

Daman & Diu, A & N Islands,Lakshadweep

0.149 to 0.2 Tripura, Manipur, Meghalaya,

Nagaland, Mizoram, Delhi, Jammu

& Kashmir, Lakshadweep

Nil

Source: Gini Ratios are from the National Human Development Report, 2001 of thePlanning Commission.

Let us now turn to inequality in aspects of life other than income.


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4.7.2 Levels of Inequality in Non-Income Aspects of Life

We look at levels of inequality in the matter of access to certain basic needs

like employment, education, health and shelter, adopting one or more of the

three approaches to assessing the inequality situation, listed in Sub-section

4.6.2.

a) Employment

As brought out by the 55th

Round of the NSSO, the quality of employment of

those in the bottom 25 per cent of the population group in terms of whateverparameter we may choose to specify leaves much to be desired. Their share in

regular wage/salaried employment is only 11 per cent and in casual labour, it

is about one-third in rural areas and, roughly, one-half in urban areas. Most of

the employment opportunities that come their way are low paid, insecure,

intermittent opportunities casual labour or self-employment. The levels of

their earnings are obviously too low as the combined earnings of one or more

such employed individuals in a household are hardly sufficient to raise the per

capita monthly consumption level of the household to Rs. 300/- in rural areas

and Rs. 425/- in urban areas at 1999-2000 price levels. The NSSO notes that

there is sharp increase in the proportion of regular wage/salaried workers and

the sharp decrease in the proportion of casual labour, especially in urban

areas, as we move from the bottom one-fourth of the population to the rest ofthe population.

b) Other Aspects

The rural-urban divide and the social divide in the matter of quality of

housing, education, health, shelter and other related aspects and facilities are

indeed striking. Regional variations abound but the picture of divide is

common everywhere.

4.8 POLICY IMPLICATIONS

What are the policy implications of the prevailing levels of inequality and

poverty? Let us examine.

a) Structure of GDP Growth

The overall growth of GDP of an economy can be expressed in terms of the

growth of GDP of the income classes. Let there be three income classes, the

bottom 30 per cent of the population, the middle 40 per cent of the population

and the top 30 per cent of the population. Let the rates of growth of overall

GDP and GDP of the three income classes be r, r1, r2, and r3 respectively and

the shares of the three classes in total GDP in the initial year be y1, y2 and y3

respectively. It can be shown that:

r = y1 r1 + y2 r2 + y3 r3

This is true of consumption also. If the income of each of the classes grows atthe same rate during a period of time, overall GDP will also grow at the same

rate. Further, the income shares of the income classes in total GDP at the end

of that period will also remain the same as in the initial period. The income

share of any income class will be higherthan in the initial period only if the

rate of growth of income in that class is higherthan the overall rate of growth.

However, the shares of all classes cannot increase simultaneously; some will

increase while others will decrease. Thus, the share of the bottom 30 per cent

class may increase while those of the other two classes may decrease. In such

a case, income inequality will also come down. A development strategy that


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aims at reduction in income inequality would include steps to ensure that the

rate of growth of income in the bottom 30 per cent of the population is

significantly higher than the rate of growth of overall GDP so that its share of

GDP goes up.

Alternative exercises with the Plan model carried out while formulating the

Fifth Five Year Plan, for instance, postulated that by way of reduction in the

inequality in expenditure distribution the rate of growth of consumption in the

bottom few deciles of the population would be much higher than the growth

rate of aggregate consumption during the Plan period. The subsequent FiveYear Plans included specific targets of reduction in the poverty ratio in the

relevant target years generally on the basis of a similar analysis. The Plans

naturally, therefore, included policies and programmes designed to achieve

these targets as also for realising objectives in non-income aspects of poverty

and inequality like, for example, improvement of urban slums shelter and

basic services for the urban poor.

Notwithstanding these and the overall rates of growth of GDP as also the

considerable sectoral diversification of GDP achieved over the last five

decades, there have been shortfalls in the realisation of such targets. Indicators

of non-income dimensions of poverty and levels of inequality in nonincome

aspects of life show that quality of life is far from satisfactory not only for the

poor but also for sizable sections of society above the poverty line. We may

not be in a position to give a complete policy prescription in this Unit.

However, we shall highlight some problems and policy issues in areas relevant

to this Unit.

The first is, of course, the restructuring of GDP growth in favour of the

bottom three or four deciles so that the shares of these deciles in total GDP

rises substantially as early as possible. Besides reorienting the structure of the

production in line with this objective, action is called for in a number of other

fronts. Some are dealt with below.

b) Employment

i) Employment Orientation of GDP Growth

The rate of growth of employment has lagged behind the rate of growth of the

labour force during the 1980s and the 1990s and as a result, unemployment

has increased, from 20 million in 1994 to 27 million in 2000. The rising rate

of growth of the economy during the period 1994-2000 (6.7 per cent per

annum on the average) has hardly helped in generating employment, as the

employment intensity of GDP growth has declined substantially during the

1990s. Growth of GDP by one per cent during the period 1983-94 resulted in

employment growth of one half of one per cent. During the period 1994-2000,

however, the growth of GDP by one per cent led to employment growth of

only about one-sixth of one per cent. It is, therefore, necessary to ensure that

the structure of GDP growth should become more employment oriented thanbefore. Globalisation facilitates easier access than before to the latest

technology and international capital. These should be accessed only if the

implications of such a step for employment in the short run as well as in the

long run are clearly seen to be favourable. Quality of employment [see the

sub-section 4.7.2 (a)] should be raised through: (a) stricter enforcement of

labour laws relating to minimum wages and social protection to workers and

(b) provision of loans and technical and marketing support to the self-

employed.


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ii) Poverty Alleviation Programmes and Employment Schemes

Poverty alleviation programmes and a variety of employment and self-

employment promotion programmes for the non-poor have been implemented

for about 25 years now. The impact of these programmes on poverty and

unemployment and, therefore, on inequalities has not been as much as

expected. The factors responsible for such a state of affairs have to be tackled.

Personnel implementing the programmes, especially at the grass-roots level,

have to be trained properly. The routine approach being adopted by the

official machinery to the implementation of the programmes, much to thedetriment of their objectives, has to be changed, attitudinal changes in it have

to brought about and it should be suitably reoriented to serve the goal of

poverty reduction. Other impediments to the programmes which need to be

dealt with firmly are: (a) the nexus between the official machinery and the

rich and the powerful that runs counter to the interests of the poor, (b)

corruption, and (c) the lack of a proactive cooperation from agencies whose

inputs are crucial to the success of the programmes. The involvement of

Panchayati Raj Institutions (PRIs) and Urban Local Bodies (ULBs) is

important for better implementation of the programmes but these bodies are

currently not endowed with the necessary powers and administrative support.

PRIs and ULBs should, therefore, be strengthened in this regard and involved

in the implementation of these programmes. The credit system is somewhatreluctant to provide credit to the poor and the unemployed or the self

employed in view of their past experience with such lending programmes and

a trustworthy linkage has to be built up between that system and the

beneficiaries of the new set of programmes.

The processes of identification of the poor that are liable to be adversely

affected by factors like: (a) the way the society is organised, (b) the lack of

voice for the poor and (c) corruption, (d) lax implementation of programmes

on the ground, (e) use of contractors despite instructions to the contrary, and

(f) failure to utilise funds and other resources allocated for the programmes,

lead to leakages in the programmes. These can be prevented only through:

(i) a tightening up of the monitoring of programme implementation,(ii) organisation of the poor through social mobilisation and awareness

creation in collaboration with NGOs who have successfully done such work,

(iii) rooting out corruption and (iv) bringing about transparency in programme

implementation. Finally, it is necessary to take a total view of poverty and

reorient the planning process suitably to strike at the root causes of poverty.

Most of these steps apply equally well to the problem of generation of

productive employment opportunities on a scale sufficient to liquidate

unemployment and underemployment.

iii) The National Rural Employment Guarantee Act, 2005

A debate on the question of making the Right to Work a Fundamental Right

enshrined in the Constitution and the need for a national employmentguarantee scheme had been going on in the country for a long time. At last,

things have moved towards this goal. The National Advisory Council (NAC)

prepared a draft Employment Guarantee Act (EGA) and based on the draft,

Government came out with the National Rural Employment Guarantee Bill.

The same has been passed by the Parliament and has become the Act i.e., The

National Rural Employment Guarantee Act, 2005. This Act provides the

enhancement of livelihood security of the households in rural areas of the

country by providing at least one hundred days of guaranteed wage

employment in every financial year to every household whose adult members

volunteer to do unskilled manual work.


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All households are eligible to seek to perform casual manual work at the wage

rate prescribed under section 6 of the Act. The Act would be extended to the

entire country in five years. Transparency in the implementation of the Act is

to be ensured through making available the muster rolls and other records for

public scrutiny free of cost or at cost price. The Act would help in protecting

the rural households from poverty and hunger; it will effectively check rural-

urban migration; it will be a major source of employment for women giving

them some economic independence; it will create useful assets in rural areas;

it will change the power equations in rural society; it will foster a more

equitable social order; and it is an opportunity to activate and empower the

PRIs, including gram panchayats and gram sabhas.

c) Education

Education has expanded but school dropout rate at every stage of education is

high. Schools without teachers, without proper infrastructure and absolutely

basic teaching aids like maps and dust-free chalk in rural areas and the

opportunity cost of going to school are some of the reasons that are

responsible for such levels of dropouts. The provision of mid-day meals to

school-children has improved the situation in States like Tamil Nadu where

this was introduced long back. The situation is bound to improve in other

States where this has been introduced recently. However, the implementation

of this programme also needs to be monitored well and the points relating to

leakages and other aspects mentioned in respect of poverty alleviation

programmes apply to this programme too. The mid-day meals programme

ensures that children do not drop out of the education system, their nutrition

status improves and facilitates social cohesion of children. Their capacity to

learn will also be enhanced since none can absorb any knowledge on an empty

stomach.

The quality of education needs to be improved considerably if education has

to facilitate access to productive employment. Further, regional, area and

group-wise differences in quality will only convert education into an

instrument fordeepening inequalities from being an instrument forreducing

inequality. An NGO has estimated that out of every 100 village girls enrollingin class I, just one survives in the system to reach class XII. Besides the

question: (a) affordability and (b) the struggle against social attitudes, it is also

an indicator of the difficulties of getting through the public examinations at

the tenth and twelth classes with the kind of education imparted by rural

schools insufficiently equipped to meet the standards required for these

examinations. This leads to a quality divide between rural schools and

insufficiently equipped urban schools on the one hand and the other

well-equipped schools on the other. Equipping Government schools in rural

and urban areas will call for massive investments. But if India can meet global

standards in civil aviation, software and defence, it can certainly do so in

providing for educating its children. In other words, it is a question of the right

social priorities and also for sowing the seeds for sustained future growth at

the right time.

d) Health

The percentage of GDP spent on public health in India (0.9 per cent) is lower

than almost any other country and this includes those of similar income levels.

Even the public health delivery system that this level of investment supports is

neglected. Monitoring of performance is either non-existent or defective.

Absenteeism among doctors is high. The proportion of doctors who try to

recommend that patients should go and see them at their private clinics is very


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high. The public sector medical system does not offer diagnostic tests even for

basic illnesses. Government does not in any way help patients in identifying

who is a doctor and who is a quack. The result is that people are driven to

private doctors for diagnostics and treatment and often get medical treatment

from quacks, unable to rid themselves of their illnesses but get economically

ruined in the process of finding a cure for their illnesses, despite the existence

of a public health care system. For the urban poor and the not so poor, it is a

story of waiting in long queues, indifferent medical attention and payment of

bribes to doctors, nurses and other employees of the clinics and hospitals to

get attended to.

What are the policy initiatives needed? First, the provision of basic health

care to all should be the primary responsibility of the public sector and the

specialised services that the rich need should be provided by the private

sector. Basic health care and medical attention is notan area of privatisation.

The present high share of the private sector in rural health care a major

deficiency of the Indian health system has to come down drastically.

Second, an effective monitoring system for the delivery of public health care

should be put in place. Third, a system of weeding out quackery should be

evolved and established. Lastly, investment in public health care should be

raised substantially so that all the above reforms are implementedtogether as

a package.

e) Shelter

As for shelter, a workable housing policy for the urban poor is conspicuous by

its absence. Instead demolitions of slums or the so-called unauthorised

shelters or encroachments in vacant land have become a substitute for a

housing policy. Cities attract migrants from rural areas and, in the absence of

a policy for housing the working class or the poor, these migrants occupy

vacant land, pavements, water pipes and empty strips of railway land over

time. Wherever possible, they build their shelters investing their time and

labour and also whatever meagre resources they may have. Resort to

demolitions without any alternative plan to resettle such people is hardly a

policy. And such an option destroys, in one fell stroke, the entire investmentmade by the poor on their shelters. Efforts or plans to improve cities to bring

them to international standards without any plan to think about housing the

poor, who make up a substantial proportion of the citys population and who

provide a variety of services to the better off residents in the metropolis, will

hardly measure up to the minimum standards of a social policy anchored on

the common man. This is another area where Government should get its social

priorities right.

f) General

As would be seen from the foregoing paragraphs, the key point is that the

right social priorities the interests of the common man and the social

situation should be the guide in matters like growth strategy, allocation ofresources among sectors and within sectors and programmes, legislation,

choice of sectors for privatisation, choice of projects like EGA, strengthening

of rural school, components of development projects like development of

cities and so on. A well organised monitoring system of projects and

programmes and transparency in their implementation should be built into the

programmes. All the points made in respect of the poverty alleviation

programmes need to be stressed in respect of all the programmes providing

social sector services. It is in the tenacity with which development policy

holds on to the social priorities dictated by the social situation that the hope of


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a better future for the poor and the dispossessed lies, especially in a

socioeconomic and political and cultural environment that generates pressures

against the adoption of such policies.




1) Under which situation summary measures of inequality are useful over

Lorenz Curve in the measurement of inequality?

2) State the indicators of inequality in non-income aspects of life.

3) Do you think that right kind of social priorities should be the guiding force

in the poverty alleviation strategy? Give reasons in support of your

answer.

4.9 LET US SUM UP

We have seen that poverty is the state of lack of access or low access to basic

needs of food, fuel, shelter, health etc. Inequality is a larger concept it

concerns itself with the relative levels of access of individuals to basic needs

and opportunities and benefits from development.

Poverty is generally measured by the poverty ratio. This is based on a

minimum desirable consumption standard. This standard is based on income

or its proxy, the household consumption expenditure. Poverty, however, has

several dimensions and, therefore, composite income and non-income

indicators of poverty assume importance in assessing the nature and levels of

poverty.

We found that the incidence of poverty has come down over the 1970s and the

1980s, though the number of the poor remained at about 320 million. Both the

incidence of poverty and the number of people below the poverty line have

come down during the period 1994 to 2000. Some indicators show that the

depth and severity of poverty have also come down in the 1990s.

Inequality is analysed with the help of the Lorenz Curve which gives a visual

presentation of the extent of inequality the extent to which the actual levels

of income or consumption deviate from the egalitarian line or the line of


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complete equality. The Gini Ratio is the most commonly used summary

measure of inequality and can be used to compare inequality situations over

time, areas and population groups.

The inequality in levels of consumption situation is worse in urban areas than

in rural areas. This is so across States and Union Territories. Inequality in

consumption is declining slowly in rural areas according to all measures of

inequality but urban inequality shows no sign of any decline.

Restructuring GDP growth in favour of the bottom three or four deciles is

important so that their share of total GDP rises substantially as early aspossible. This calls for action on a number of fronts. Employment orientation

of growth, streamlining of poverty alleviation programmes and employment

promotion programmes (which have been affected adversely by many factors

ranging from lax implementation to intervention from the rural power elite),

implementation of an Employment Guarantee Act in all areas covering all

adults seeking casual manual work, efficient implementation of the mid-day

meals programme across the country, strengthening and raising the quality of

rural schools and urban schools similarly placed, streamlining the public

health care delivery system to provide basic health care including diagnostic

services to all and the monitoring of the system, rooting out quackery, and

evolving a workable housing policy for the urban poor are some essential

elements of a development policy for tackling poverty and inequality.

4.10 EXERCISES

1) What do you mean by poverty? Explain the indicators that cover income

and non-income dimensions of poverty.

2) What do you mean by inequality? How are the inequalities of income

measured in an economy? Also state the different indicators that cover

inequality in non-income aspects of life.

3) Examine the policy implications of widespread poverty and inequality in

the Indian economy.

4) The quality of life in India is far from satisfactory. Comment.

5) Do you think that delivery of poverty alleviation programmes has not been

effective? How can it be made more effective?

4.11 KEY WORDS

Human Development: It is a process of enlarging peoples choices as well as

raising the level of their well-being. For example, the three most critical and

socially valuable choices are: (i) the choice to lead a long and healthy life; (ii)

the choice to acquire knowledge and be educated; and (iii) to have access to

the resources needed for a decent level of living.

Poverty Gap Index: It is calculated as the total shortfall of consumption

below the poverty line, divided by the total population. This per capita

shortfall in consumption below the poverty line is then expressed as a

percentage of the poverty line. It can also be calculated as follows:

(Poverty line Percapita consumptionof thepoor)PG Index Poverty Ratio 100

Povertyline=

Poverty Line: Putting a price on the minimum required consumption levels of

food, fuel, clothing shelter and health care etc., that is, the purchasing power


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73

required to acquire the minimum required consumption levels of food etc.

This is expressed as so many rupees per capita per month.

Poverty Line Earnings: These are the earnings per day which will enable the

worker and his dependents to reach the consumption level equal to the poverty

line consumption level. It is assumed that on an average a worker has to

support 2 dependents. It is also assumed that wages for 26 days in a month

include wages for the four rest days in a month also.

Poverty Ratio: Poverty ratio is a measure of poverty. It is also called Head

Count Ratio (HCR). It measures incidence of poverty and is used forcomparing the poverty situation in two areas or two regions or two periods of

time etc. It is expressed as a percentage and is defined as:

numberof peoplebelow poverty lineIncidenceof Poverty PR HCR 100

totalpopulation= = =

Working Poor: Persons who are employed but who receive wages that are

too low to enable him/her and his dependents to raise their level of

consumption to the minimum desired standard level specified by the poverty

line.

4.12 SOME USEFUL BOOKSBhaduri, Amit (2004); Guaranteeing Employment, The Hindu, Chennai

Edition, 27th

December, 2004.

Dev, Mahendra (1996); Paper: Social Security for Indian Workers

Performance and Issues, Published in the Indian Journal of Labour

Economics, Vol. 39, No. 4, October December, 1996.

Dreze, Jean (2004); Employment As a Social Responsibility, The Hindu,

Chennai Edition, 22nd

November, 2004.

, (2004); Unemployment Guarantee, The Hindu, Chennai Edition,

31st

December, 2004.

Goverment of India (1993); Report of the Expert Group on Estimation of

Proportion and Number of Poor, Perspective Planning Division, Planning

Commission, New Delhi.

Kumar, Krishna (2005); Schooling in Rural India, The Hindu, Chennai

Edition, 11th

January, 2005.

, (2002); Tenth Five Year Plan (2002-07), Volumes I & II, Planning


, (2002); National Human Development Report 2001, Planning


Meier, Gerald M. (1990); Leading issues in Economic Development, OxfordUniversity Press, Delhi.

Sainath, P. Everybody Loves a Good Drought: Stories from Indias Poorest

Districts, Penguin Books India (P) Ltd., New Delhi 17.

Sita Prabhu, K. (2001); Economic Reform and Social Sector Development: A

Study of Two Indian States, Strategies for Human Development in India

Vol. 3, Sage Publications, New Delhi.


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United Nations Development Programme (UNDP), Human Development

Report 2003, Millenium Development Goals: A Compact among Nations to

End Poverty. UNDP, New York, USA.

The reports/documents of the Planning Commission referred to above can be

accessed in the Planning Commission website http://www.

planningcommission.nic.in. Human Development Reports of the UNDP for

different years can be accessed in the Human Development Report Office

website http://hdr.undp.org

4.13 ANSWERS OR HINTS TO CHECK YOUR

PROGRESS EXERCISES


1) The PG index is helpful in working out the shortful of consumption below

the poverty line. It will indicate the magnitude of the effort that would be

required to raise the consumption level of all the persons below the

poverty line to the consumption level of the poverty line.

2) Human Poverty Index and Human Development Index

3) i) Human Development Index:

Longevity, Knowledge and Decent Living.

ii) Human Poverty Index:

a) Proportion of population not expected to survive beyond 40 years

b) Adult literacy rate

c) Access to improve water source

d) Percentage of underweight children.

4) i) Percentage of children under 5 years of age below are underweight

ii) Percentage of unattended births

iii) Percentage of illiterate women aged 15 years.


1) The hunger ratio refers to proportion of the persons to the total population

who do not have access to food.

2) The incidence of poverty has declined persistently since 1973-74. In 1999-

2000, a little over one-fourth of the population of this country are poor.

3) The incidence of poverty among scheduled castes and scheduled tribes has

declined although it is still very high.


1) In a situation when two Lorenz Curve intersect each other and it isdifficult to state which curve depicts a worse inequality situation,

summary measures of inequality are useful.

2) Gender Development Index (GDI) and Human Development Index (HDI).

3) Yes, for details see section 4.8.

Unit-4 Poverty and Inequality Policy Implications

Documents