8 Reasons Why India Is So Poor
The Super Poor India !
India has 363 million (or 29.5 percent) people under the poverty line based on a survey of 2011-12, as against 407 million (37 percent) in 2004-05. This is latest claim that comes from the Rangarajan Committee in June 2014, until then it was pegged at 269 million (22 percent) using another formula. That’s enough for the comedy of poverty line in India! The more comprehensive Multidimensional Poverty Index 2013 report of UK based Oxford Poverty and Human Development Initiative (OPHI) and the United Nations Development Program (UNDP) says that 53.7 percent (or 650 million) people are poor. 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.
India holds the distinction of having the most number of poor of the world – a super poor nation! Consequently, South Asia has become the world’s biggest center of extreme poverty. On the World Bank’s extreme poverty line of 1.25 dollars a day, there are roughly 500 million extreme poor in South Asia, followed by 400 million in sub Saharan Africa. The chart below clearly shows the global poverty trends since 1981.
Given the multitude of languages, customs, cultures and “castes” in India, the reasons for poverty are also numerous and intertwined. Here an attempt is made to highlight 8 important reasons for high poverty in India. However, one message is very clear: One has to look at poverty, beyond income.
Global Poverty Trend since 1981
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 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 as 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.
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.
Why this issue of marginalization is important can be guessed from the statistics: Indian population consists of roughly 16% SC, 8% ST, and 35% OBC. Hence, combined together they form 60 – 65 percent India's population! So, the population of the so-called forward or upper class is less than one-third, but who by and large control everything.
The policy of reservation in government jobs for the backward communities has certainly helped them to rise up to some extent. But it is limited to the small fraction of the backward communities that somehow managed to do well and gain education.
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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 are 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 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 model would be a bad example to follow for the democratic India. ()
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 2014 gender gap index (GGI) India ranked 114 out of 142 nations. India scored below average on parameters like economic participation, educational attainment and health and survival. It slipped 13 spots from its last year's ranking of 101. It is part of the 20 worst-performing countries on the labour force participation, estimated earned income, literacy rate and sex ratio at birth indicators. The index benchmarks national gender gaps on economic, political, education and health criteria.
Indian Muslim community is perhaps most backward in terms of gender inequality. Its clergy habitually wants 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 polygamy and 'triple' Talaq.. But for their resistance, India would have by now a Uniform Civil Code for all Indians. Rise of radical Wahhabi Islam across the world in the past 2 decades will make the task of providing equal treatment to Muslim women much harder.
5. Unequal Distribution of Wealth
India happens to be a rich country inhabited by very poor people. – Dr Manmohan Singh
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.
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6. Faulty Economic Reforms
The so called economic liberalization and market reforms 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 97 billionaires, in a country of 1.25 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 freeze its rising inequality, by 2019 around 90 million 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 is meant to uproot the poor from their rural roots and turn 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.]
Jobless Economic Growth
The Indian economy created fewer than 3 million job between 2005 and 2010 !! Considering population growth of 18 million every year, around 10 million new jobs are needed per year!!! The current "follow West" economists of India haven't the slightest idea about 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 and wealthy.
India Needs “Social Capitalism”
India must reject the Western capitalism model; it needs a “Social Capitalism” that solves 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.
In fact, India needs development beyond GDP growth. Here is a 5 Point Real Development Plan for India.
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 people connected to the implementing government machinery. This is a common way for the people with “high connections” to acquire wealth – of course at the cost of 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. Now even the CAG estimate of 1,86,000 crore coal scam proves to be an understatement! Shall we see it as a sign of progress!
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 "loot." The colonial rule was all about robbing India to enrich Britain; other unfortunate colonized States were also bled to make Britain prosperous.
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 regions) 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 to 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 evidence to suggest 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 labelled 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 oppose to the Western capitalism India needs a comprehensive “development” plan in order to really crush widespread poverty. 1. It needs an economy that supports millions of small and medium enterprises; it will be suitable to employ low skilled poor people. 2. Focus on good governance to root out deep rooted corruption that eats away 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.
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Kerala, a tiny state in south India, achieved demographic transition solely based on human development. It has left Western scholars confused who want to correlate everything with economic growth.