8 Reasons Why India Is so Poor
India has 269 million people (21 percent of the total population) under the poverty line, as per the latest official headcount of the poor in India. It used to be 396 million (29 percent) prior to the announcement of new counting in June 1024.
However, the World Bank recently estimated Indian poverty to be 172 million (12.4 percent), based on its new poverty line of $1.90 per person per day using the new 2011 purchasing power parity (PPP) data. This is a measure of extreme poverty. (The World Bank revised its poverty line in October in 2015 to $1.90 a day from the earlier $1.25 a day.)
In 1947, when the colonial British left India, they left 70 percent of Indians in deep poverty with a tiny elite class that controlled everything. Over six decades later in 2011-2012, poverty is down to 21 percent despite the multifold increase in population. However, despite the significant progress, even 21 percent poverty means a huge headcount in a country of 1.3 billion people.
You may like to know that the World Bank has set the target of bringing down the global extreme poverty to less than 3 percent by 2030. The global community is now also duty-bound to pursue the Sustainable Development Goals (SDGs) which provides a holistic global development agenda, particularly for the poor countries.
World Poverty Clock
The progress towards the aim of global poverty elimination (SDG 1) is estimated through the World Poverty Clock in real time. A Brookings study published in June 2018 gives a highly optimistic status of Indian poverty. It says that now Nigeria is home to the largest number of global poor, not India! At the end of May 2018, 87 million people lived in extreme poverty compared with 73 million in India. Moreover, it also estimated that around 44 Indians come out of extreme poverty every minute, while Nigeria pushes 6 people into extreme poverty each minute. (The measure of extreme poverty is World Bank's $1.9 per day yardstick.)
A word of caution: Be cautious with various reports because they might use data from quite different sources and their poverty definitions may differ significantly.
Multidimensional Poverty Perspective
There is a more comprehensive way to measure poverty, through the Multidimensional Poverty Index (MPI). It is a joint venture of UK-based Oxford Poverty and Human Development Initiative (OPHI) and the United Nations Development Program (UNDP). Its 2017 report estimated India’s poverty at 41 percent (528 million).
Note that various dimensions of the MPI are connected with the SDGs. Thus, progress in SDGs can be suitably monitored through the MPI data.
While there can never be agreement on poverty numbers, compare these numbers with the European Union and US populations of 500 million and 320 million, respectively.
The mammoth Indian poverty is a delight for poverty experts for playing the game of poverty line and counting the poor!
Due to its very large population, India holds the distinction of having the highest number of poor in the world – a super poor nation! Consequently, South Asia has become the world’s biggest center of extreme poverty, followed by sub-Saharan Africa.
In both regions, the MPI estimates higher poverty than calculated by the one-dimensional income poverty line ($1.90 a day) of the World Bank. In South Asia, the MPI reveals 41.6% percent poverty compared with 19.2 percent from the WB’s income indicator. For sub-Saharan Africa, these figures are 60.1 percent and 46.4 percent, respectively.
Poverty Is Inherently Multidimensional
Wise people say: Poverty is easy to spot, but hard to define.
The income based one dimensional poverty line of the World Bank fails to reflect the hardships faced by the poor. It gives only headcount. A life in poverty means living deprived of sufficient food and nutrition, education, proper shelter, sanitation, clean water and so on. This points to the need of seeing poverty as a multidimensional phenomenon. The way MPI is constructed it offers a useful breakup of various deprivations faced by the poor as if poverty is being looked through a microscope.
The MPI is founded on the capability approach of Amartya Sen. According to Amartya Sen, rather than measuring poverty by income level, it is more appropriate to explore how much people can achieve with that income, considering the fact that such achievements will vary from one individual to another and from one place to another. What people can do or be is the most fundamental yardstick of people’s well-being because same level of income (resource) translate into different levels of doing or being, and also because there are non-material factors that also affect people’s capability to do or be.
Poverty is capability deprivation. It results from failure of basic capabilities that are critical to a person's well-being. The approach links 'poverty to the failure of the ability to achieve precisely those things that are ultimately important'. A response to poverty then, is about the expansion of choices and capabilities that people can have in order to lead lives they value.
Major Factors Behind India’s Poverty
Here, we will discuss major factors that led to deeply entrenched poverty in India. Given the multitude of languages, customs, cultures and castes in India, these factors are further intertwined. Here we highlight 8 important reasons for high poverty in India. However, one message is very clear: One has to look at poverty, beyond income.
1. Social Inequality Leading to Exclusion and Marginalization
Societies cannot progress if certain sections of people are left-out simply because they happen to be from the “wrong” class, caste, ethnic group, race or sex. If the virus of color and race based discrimination has damaged the social set up of many countries in the West, the bacteria of “caste” division has undermined the cohesive social fabric of India. Lower caste people have traditionally been excluded from the mainstream society governed by the so-called upper caste communities. They have historically lived isolated in the periphery of the villages and townships and subsisted doing only those tasks considered “unfit” for the other castes. Their un-touchability can be considered the worst form of rejection by the mainstream society.
While considerable change has taken place in people’s attitude since 1947, but the “lower caste” communities are still not satisfactorily absorbed in the mainstream society. Rural India (where 70% of the population lives) is still quite “caste conscious” compared with the urban society where education and financial well-being has largely erased the caste divisions. Mahatma Gandhi tried to remove the social stigma of un-touchability by coining the label "Harijan" (god's people) for them but with only partial success. The official label for about 170 million (around 14 percent of current total population) unfortunate lower caste people is Scheduled Caste (SC).
Another segment of society that is still very much detached from the mainstream is the tribal community forming 8% of the population. These tribal people (called Scheduled Tribe (ST)) have historically lived in secluded areas such as forests. The Colonial British designated their habitations as "excluded areas", not due to any special privilege but for convenience of the colonial policies. Unfortunately, the “free” governments after 1947 never bothered to assimilate them into rest of the mainstream society and the tribal communities continued to remain isolated and “barely governed.” As a result, besides the poverty of the tribal communities, their backward due to lack of governance of their areas also gave rise to armed Maoist movement. It, ideologically, wants to establish communist state based on Mao’s principles through gun battle. Popularly called Naxals, these Maoists now pose the biggest internal security threat for the country. Fortunately, even now they have not formed any nexus with Islamic terrorist groups of next door neighbor Pakistan.
Beside the SCs and STs, there are several other communities designated “Other Backward Classes” or simply OBC – they may or may not be Hindus. Their socioeconomic plight is also similar to SCs and STs. The list of OBCs is dynamic and every now and then the government edits it (mostly for political reasons); there is significant confusion about their exact proportion. However, most experts agree OBCs to be in the range 25 – 35% of the population. Combined together they form 50 – 60 percent India's population! Thus, the population of the so-called forward or upper class is less than one-third, but who by and large control everything.
Now tell me how any country can possibly progress if over half of its people get excluded from the mainstream societal processes.
While marginalization and exclusion happen in all societies, but in India it is in grotesque proportions due to sheer numbers.
The policy of reservation in government jobs for the backward communities has certainly helped them to rise up to some extent. But it is insufficient because government jobs are limited. A far better way is to train and turn them into entrepreneurs. Here the idea of ‘social business’ offers a great opportunity for NGO and social organizations to make a difference.
The remedy lies in policies leading to inclusion and empowerment of the poor.
What say you?
What is the most basic cause of poverty in the US?
High level of illiteracy, particularly in the rural areas and among women, has been a crucial factor not only in perpetuating economic backwardness but also for high population growth. The persistence of high illiteracy has created a situation where poverty and population have been feeding each other. It is well established that female literacy plays an important role in the well-being of the family in many ways. When women are educated, they not only contribute economically but also raise healthier kids and keep the family size small. Early marriage of girls and early child bearing is closely related with their low literacy; it feeds poverty.
In 2010 only 26.6% women above 25 years found to have received secondary education, as opposed to 50.4% men. In comparison, in China 54.8% women and 70.4% men had secondary education; in the US, this figure was 94.7% for women and 94.3% for men.
While the growth rate of population has decreased significantly over the decades and the rate fertility decline has accelerated since 2011, India's population is currently growing annually at the rate of about 1.4 percent. The total fertility rate has sharply fallen to 2.3 and should approach the replacement rate of 2.1 by 2020 and country's population should stabilize by 2050 at around 1.5 billion and then begin to fall. The current population increase is largely driven by population momentum (large base of people in the fertile age); not because people want large families. Around 18 million people are added to population each year. However, not that many people are lifted out of poverty every year.
Early marriage of girls and lack of awareness about reproductive healthcare, particularly in the rural areas, are major factors behind current population growth. Population is clearly a factor contributing to, and sustaining, high levels of poverty. But the Chinese population control through one-child policy would be a bad example to follow for the democratic India where people enjoy various Constitutional freedoms and rights.
4. Gender Inequality
Gender equality is both a core concern and an essential part of human development. Indian social fabric is highly patriarchal which has left women significantly exploited and discriminated. If caste based biases work only outside home in the open society, the discrimination against women operates both in and out of homes. Not only men always get preference in every walk of life, their attitude towards women is largely patronizing and imposing.
Their weak status, particularly in the rural areas, is at the root of most chronic problems. It is their lack of awareness or access to family planning tools and early marriage of girls and their early child bearing, which ultimately have led to high population; lack of awareness of health issues related to pregnancy and child upbringing has resulted in high mortality rate, under-nutrition and malnutrition among children; lower education and lack of freedom has resulted in low participation in societal processes. All these factors are enough to feed and sustain poverty.
On the World Economic Forum’s 2016 gender gap index (GGI) India ranked 87 out of 144 nations.in 2017, it slipped down to 108th position. The index benchmarks national gender gaps on economic, political, education and health criteria.
Indian Muslim community (forming 15% of country's population) is easily the most backward group in terms of gender inequality. Its clergy habitually wants Muslims to live like the Arab tribes of the 7th century uncivilized Middle East, in the name of Sharia'h Law - confining women inside the veils and oppressed by exploitative medieval practices of instant triple talaq, Halala marriages and polygamy.
Fortunately, Indian government is now firmly pushing an end to these stone-age practices by taking a pro-women stand in the Supreme Court of India. There are chances that Indian Muslim women would now move a bit closer towards gender equality. Incidentally, backward-looking Indian mullahs are also stumbling block on the way to a Uniform Civil Code for all Indians. This one step would provide freedoms enjoyed by rest of the Indian women.
5. Unequal Distribution of Wealth
India happens to be a rich country inhabited by very poor people. – Dr Manmohan Singh, Ex-Prime Minister of India
Unfortunately, since departure of the colonial British in 1947 all economic development has taken place in the cities, while the majority of the population lives in the countryside. Thus, the rural India has always remained neglected. Another peculiarity is the land holding pattern in India: most land has traditionally been under the control of a few landlords, leaving the vast majority landless. The "Zamindari system” of lopsided land ownership has ancient origin but given a boost during the British rule. Handful zamindars became legal owners of vast tracts of land and all others had to work for them to survive. This rent seeking exploitative system has since kept a vast majority of people in the rural India poor. Land reforms were debated noisily after independence but implementation lacked honest political will, despite the famous "Bhoodan Andolan" of Vinoba Bhave. Unfortunately, land reforms are no more an issue of public debates at present. All talks of poverty removal appear to center only around economic reforms, imitating the unsuitable Western capitalism.
Rising wealth inequality
According to the latest edition of Oxfam International’s global inequality report titled Reward Work, Not Wealth published in Jan 2018, the richest 1 percent in India bagged 73% of the wealth created last year; the poorest half got just 1 %. In the last 12 months the wealth of this elite group increased by Rupees 20,913 billion. This amount is equivalent to total budget of Central Government in 2017-18. As the myopic ‘economic experts’ gloat over rising number of billionaires in India, the inequality is growing bigger with each passing year. Rising inequality is working against the efforts of poverty eradication; it is also fracturing the society and undermining Indian democracy.
It is in fact a global phenomenon. Globally, 82 percent of the wealth generated last year went to the richest one percent of the global population, while 3.7 billion people that account for the poorest half of the world saw no increase in their wealth, says the report.
6. Faulty Economic Reforms
The so called economic liberalization and market reforms that started in the 1990s are nothing but an attempt to replicate the Western capitalism that promotes "trickle down" economy. It serves to make the rich richer and expand the economy. India has become more unequal in recent years. In early 1990s, there were just 2 billionaires; now there are 131 billionaires, in a country of 1.33 billion people. The rich elites are also controlling more wealth, their share increased from 1.8 percent in 2003 to 26 percent in 2008. Today, they are still richer and much more powerful.
Experts suggest that if India could only freeze its rising inequality, by 2019 around 90 million more people could come out of extreme poverty. Reducing inequality by 10 points in Gini coefficient (equivalent of a 36 percent reduction) could further lift up another 83 million poor people.
The push to urbanization means uprooting the poor from their rural roots and turning them into “cheap labor resource” for businesses in the town. In the cities they would live in large slums, exploited both by the mafia and employers, devoid of human dignity and livelihood security.
Given the huge population and poverty, India needs an "employment centric" economy – millions of micro, small and medium business units. Only they can employ the unskilled or low skilled people from the vast pool of the poor.
Large high-tech industrial units don't generate too many jobs and whatever jobs they create is suitable for those who are already well off. According to the NSSO survey, the size of India's workforce is around 450 million. Of which only about 30 million work in the formal or organized sector. The government recognizes only about 70 million as unemployed or underemployed. Thus, there are 350 million unrecognized by the government as unemployed. Government surveys list them as "self employed" but they barely survive and live chronically in poverty. Who are these "self employed" people, more in numbers than the population of United States, and how do they survive?
They milk the cows, become seasonal farm workers, run small shops or sell on the roadsides, make incense sticks, match sticks and bidis, drive manual or auto rickshaws, work as domestic help, work as unaccounted contract workers on daily wages, work as gardeners and watchmen, or work as plumbers, carpenters or shoe repairers and so on. They have no safety net such as pension or healthcare benefits enjoyed by the regular employees and hence, are the most vulnerable. They are also the first victim of natural calamities, now becoming more frequent due to climatic disorder. [The poor are always the first victims of climatic disasters. Of course, nothing changes for better after their death-toll makes headline news.]
What do you think?
Other than income, what is the most effective anti-poverty measure?
Jobless Economic Growth
Considering the population growth of around 18 million every year, around 10 million new jobs need to be created per year. In 7 years, between 2005 and 2012, India's GDP growth was 5.4% and only about 15 million new jobs were created. Official data say that 1.55 lakh jobs were created in 2015 and 2.31 lakh in 2016. All these numbers talk about the so-called formal economy of the rich people and their firms. This formal sector is all about the prosperity of the rich; not at all about the well-being of the poor.
Arrival of the dynamic Modi government in 2014 did not make things any better for young job seekers. The GDP may be growing at 7% per year. But job growth remains pathetic and that too for those well educated. India’s textbook ‘economic experts’ are ‘worried’ about stagnating 5% unemployment rate because their book knowledge ends at GDP growth. They have never lived in poverty or read books that talk about how the poor masses survive and what type of economy they actually need. Why? Because the ‘poor men economy’ is labeled ‘informal economy’ and it is all about people’s well being; not GDP.
The Economic Survey 2015-16 estimated that this informal sector provided 90% of jobs through the period 2004-05 to 2011-12. Further, the Survey also pointed to a shift in the pattern of employment from permanent jobs to casual and contract employment. The increasingly “temporary” nature of work has an “adverse effect” on the level of wages, stability of employment, and employees’ social security. It also indicates preference by employers away from regular/formal employment to circumvent labour laws.
Here is another twist. Such employment surveys do not consider the huge workforce – people working in units employing less than 10 people – and those employed in the informal sector.
A commonsense question: Why Indian government doesn’t make policies around this informal sector, if it is serious about eradicating poverty?
And the answer is: because India is run by the "follow West" economists who haven't the slightest idea what type of economic reforms India and its poor people really need. Their thinking stops at inviting "foreign direct investments" and vision fails to go beyond air conditioned corporate houses of the rich few. They are capital market fundamentalists who worship their only God called GDP!
I wonder why Indian finance minister doesn’t read about the capability theory of Nobel winner economist Amartya Sen to come out of his morbid obsession to GDP growth.
India Needs “Social Capitalism”
India must reject the Western capitalism model; it needs a “Social Capitalism” that is ideal for solving India’s problems. It should follow twin goals: ‘maximizing employment’ – given its huge population and poverty – and ‘maximizing social good’. This involves shifting away from the ‘shareholder’ to ‘stakeholder’ capitalism by incorporating interests of other stakeholders: employees, society, customers, and environment. Then finally encouraging what nobel winner Bangladeshi economist calls “social businesses” which operate to maximize chosen social goals while keeping the business profitable.
Corruption and leakages in government schemes are widespread in India. Late Prime Minister Rajeev Gandhi had famously admitted that only about 15% money actually reaches the ultimate beneficiaries. Even if we discard this figure as highly pessimistic and assume that say 30-35% of the welfare funds actually reach the designated beneficiaries, the rest is siphoned off by the middlemen and people connected to the implementing government machinery. This is a common way for the people with “high connections” to acquire dirty wealth – by depriving the poor who generally have no voice or ability to assert. Another common form of corruption in schemes designed for the poor is inclusion of non-poor people with political connections in the list of beneficiaries. The end result is that the eligible poor are denied the benefits.
The scale of corruption has steadily increased since the economic reforms were started. In 1992, when market reforms just started Harshad Mehta led stock market scam was estimated at 750 crores; it was mind boggling figure then. Corruption peaked during 2004-14 when Manmohan Singh ruled the country. India was rocked by scam after scam, as if the country was literally thrown to dogs.
Fortunately, 2014 brought a nationalist government of Modi which is honest, efficient and far sighted. Indians are now full of hope about the future.
8. The Colonial Rule
"A significant fact which stands out is that those parts of India which have been longest under British rule are the poorest today." – Jawaharlal Nehru, First Prime Minister of India
The colonial British rule laid the foundation for a long term and chronic poverty in India after they departed. This is what Nehru is saying above using different set of words. The tiny state of Kerala in the southern India fortunately saw the least damaging influence of the British exploiters (there are many reasons for that) and is at present a unique model (in the world) of improvement in the quality of life through social and human development alone. It is something unthinkable for a Western brain which has been taught to see economic growth alone as "development."
It was the traditional historic prosperity of India that attracted invaders from various parts of the world in the last 2000 years. Prior to the British, India had been ruled by the foreigners like the Kushanas, Turko-Afghans and Mughals. All of them gradually got assimilated into the Indian society and culture. They not only became absorbed in India but also protected and promoted Indian society, culture and economy. None of them systematically drained India’s wealth or resources to make another country prosperous. Revenue collected or wealth acquired by them was spent within India. Whether spent on the public or for personal luxury of the ruling elite, the wealth remained within the country. Thus, India remained prosperous even in the Mughal era until the East India Company started acquiring "diwani" (right to collect revenue) around 1760. It was the beginning of the legal "plunder." The colonial rule was all about robbing India to enrich Britain.
The Battle of Plasssey in June 1757 marked the beginning of British dominance (and also the beginning of end of the Mughal Empire): when a small force of the East India Company's professional troops, defeated and killed the ruling Nawab of Bengal, Siraju-ud-daula. The outcome of the battle marked a significant turning point in the history of Indian subcontinent. It allowed the English East India Company foothold on the Indian soil, from which to undertake its future expansionist ventures within and around India. Soon, after the Battle of Buxar it acquired the "diwani" in Bengal and in 1765 its rights expanded to Bihar and Orissa.
Unlike their predecessors the British, however, consciously remained in India as foreign occupiers until their departure in 1947. They remained isolated from the Indian society and culture and formed a separate class of their own within India. The only reason for their presence in India (and in other occupied colonies) was to secure raw materials for British industries and other goods for the comforts of their citizens. The vast population in India also provided market for goods manufactured back home. They subordinated Indian economy to the British trade and industry. Their economic policies actively favored non-Indians or made things difficult for Indian businessmen. As occupiers, they used Indian wealth to pay for all their expansionist ventures and territory building both inside and outside India.
Moreover, the British policies forcibly disbanded community grain banks and promoted replacement of food crops for local consumption with cash crops like cotton, opium, tea and grains for export to feed the animals in England. This change in the cropping pattern left Indian farmers vulnerable to famines.
There are documentary evidences to suggest that the colonial rulers chose to ignore the famine affected people. It is estimated that during the two centuries of colonial rule, famines and the resulting epidemics caused over 30 million deaths. The most recent Bengal Famine of 1943-44 led to about 1.5 million deaths from starvation; 3.5 million if deaths from epidemics are also included.
In his masterpiece "Poverty and un-British Rule in India" Dadabhai Naoroji (popularly labeled as "The Grand Old Man of India" and "The Father of Indian Nationalism") also categorically blamed "the drain of wealth" for the poverty in India.
As opposed to the Western ‘trickle down’ capitalism India needs a comprehensive “human development” plan in order to really crush the widespread poverty. 1. It needs an economy that supports millions of small and medium enterprises that are suitable to employ low skilled poor people. 2. Focus on good governance to root out deep-rooted corruption that eats away a major chunk of the welfare budget. 3. Finally, promote women empowerment through education and healthcare; it will greatly help deal with poverty fed by the population growth.
These 8 major causes of poverty, by themselves, point to the right development model. India must realize that by blindly following GDP growth, it is only promoting inequality that sustains by keeping the poor in poverty.
Finally, there is a silver lining in the dark. In recent years, particularly since 2014, the Indian government has initiated targeted anti-poverty programs that are all inclusive. Quite likely, future poverty estimates would show a much reduced poverty level in India.