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GS Paper: GS3-02.Inclusive growth and issues therein

  • Revisions in the Consumer Price Index (CPI)

    Why in the News?

    The Ministry of Statistics and Programme Implementation (MoSPI) has proposed major revisions in the Consumer Price Index (CPI) methodology, to be implemented in the new retail inflation series from February 2026.

    About the Consumer Price Index (CPI):

    • Overview: The CPI measures the average change over time in the prices paid by consumers for a fixed basket of goods and services typically consumed by households.
    • Purpose: It tracks retail inflation showing how the purchasing power of money changes due to price variations, and how living costs evolve across different population groups.
    • Components:
      • Food and Beverages: Cereals, pulses, vegetables, milk, meat, fish, sugar, and beverages.
      • Housing: Rent paid for rented houses and imputed rent for self-occupied dwellings.
      • Clothing and Footwear: Garments, textiles, footwear, and related goods.
      • Fuel and Light: LPG, kerosene, electricity, firewood, and other fuels.
      • Miscellaneous: Transport, communication, education, health, recreation, personal care, and other services.
    • Publishing Authority: The CPI is compiled and released by the Ministry of Statistics and Programme Implementation (MoSPI) through the National Statistical Office (NSO) every month.
    • Current Base Year: 2012, which is being revised to 2024 to reflect more recent household consumption patterns captured in the Household Consumption Expenditure Survey (HCES) 2023–24.
    • Coverage: Separate indices are compiled for Rural, Urban, and Combined (Rural + Urban) sectors to reflect diverse consumption and price patterns.
    • Types of CPI in India:
      1. CPI for Industrial Workers (CPI-IW): Base year 2016; tracks inflation for organized industrial workers; used for Dearness Allowance (DA) revisions.
      2. CPI for Agricultural Labourers (CPI-AL): Base year 1986–87; measures price changes faced by agricultural labourers.
      3. CPI for Rural Labourers (CPI-RL): Base year 1986–87; monitors inflation for rural households dependent on wage labour.
      4. CPI (Urban), CPI (Rural), and CPI (Combined): Base year 2012; represents national-level retail inflation and is the official measure of inflation in India.
    • Weightage: The relative importance (weight) of each component reflects its share in total household expenditure, for instance, food and beverages hold over 45%, while housing has 21.67% in urban CPI and 10.07% in all-India CPI.
    • Use and Importance:
      • Inflation Targeting: The Reserve Bank of India (RBI) uses CPI as the anchor for its Monetary Policy Framework, aiming for 4% ± 2% inflation.
      • Wage & Pension Adjustments: CPI is used to revise wages, pensions, and dearness allowances in both government and industrial sectors.
      • Policy Planning: It provides essential inputs for economic policy, poverty analysis, and fiscal decisions.
      • Economic Indicator: Serves as the primary indicator of cost of living, influencing interest rate decisions, tax indexation, and social welfare adjustments.

    Revisions in the Consumer Price Index (CPI)

    Revisions in the CPI:

    • Monthly Rent Data: Collection every month for both rural & urban areas, replacing earlier six-monthly urban series.
    • Inclusion of Rural Housing: Covers imputed rents for owner-occupied rural dwellings.
    • Exclusion of Employer Housing: Removes HRA-based distortions from government/PSU quarters.
    • Expanded Sampling & IMF Alignment: Broader coverage, discontinuation of panel imputation, adoption of IMF-recommended rent index computation.
    • Weight Revision: Recalibrates housing share (currently 21.67 % urban; 10.07 % all-India) using new expenditure data.
    • Transparency: MoSPI discussion papers (2024-25) invite feedback on PDS treatment, housing index, and base methodology.

    Rationale & Impact:

    • Captures Post-Pandemic Rent Surge overlooked by the 2012 base.
    • Addresses Rural Under-coverage for two-thirds of India’s population.
    • Enhances RBI’s Inflation Targeting through more accurate rent data.
    • Aligns with Global Standards, strengthening CPI’s credibility as a comprehensive welfare and policy indicator.
    [UPSC 2020] Consider the following statements:
    1. The weightage of food in Consumer Price Index (CPI) is higher than that Wholesale Price Index (WPI).
    2. The WPI does not capture changes in the prices of services, which CPI does.
    3. Reserve Bank of India has now adopted WPI as its key measure of inflation and to decide on changing the key policy rates.
    Which of the statements given above is/are correct?
    Options: (a) 1 and 2 only* (b) 2 only (c) 3 only (d) 1, 2 and 3

     

  • What is Rangarajan Poverty Line?

    Why in the News?

    After the C. Rangarajan Committee (2014) set India’s last official poverty line, economists from the Reserve Bank of India (RBI) have now revisited and updated the estimates using new household consumption data from Household Consumption Expenditure Survey (HCES) 2022–23.

    Evolution of Poverty Measurement in India:

    1. Planning Commission (1962): ₹20 (rural) and ₹25 (urban) per month; excluded health and education.
    2. Dandekar & Rath Committee (1971): Calorie-based standard (2250 kcal/day).
    3. Y. K. Alagh Committee (1979): Calorie-linked poverty line (2400 kcal rural; 2100 kcal urban).
    4. Lakdawala Committee (1993): Introduced state-specific and composite consumption baskets.
    5. Tendulkar Committee (2009): Uniform basket for rural/urban; ₹816 rural and ₹1000 urban (2011–12); shifted from calorie to expenditure-based poverty.

    About C. Rangarajan Committee on Poverty Estimation:

    • Objective: To evolve a broader and realistic poverty metric incorporating food, health, education, clothing, and shelter costs, beyond calorie-based norms.
    • Overview: Formed by the Planning Commission in 2012, chaired by Dr. C. Rangarajan, former RBI Governor, to review India’s poverty measurement methodology.
    • Report Submission: Submitted in June 2014; became a major benchmark in the debate on India’s official poverty line and methodological framework.
    • Definition of Poverty: Based on Monthly Per Capita Expenditure (MPCE) ₹972 (rural) and ₹1,407 (urban) at 2011–12 prices, equating to ₹32/day (rural) and ₹47/day (urban).
    • Data & Methodology: Used Modified Mixed Reference Period (MMRP) consumption data with separate rural–urban baskets, adjusting for state-wise price differentials.
    • Poverty Estimate (2011–12): Found 29.5% of India’s population below the poverty line.
    • Key Revision over Tendulkar: Expanded consumption basket to include education, healthcare, rent, transport, and other essentials; replaced calorie-based with expenditure-based cost-of-living approach.

    RBI 2025 Update (DEPR Study):

    • Source & Method: Conducted by RBI’s Department of Economic & Policy Research (DEPR) using HCES 2022–23 data for 20 states; retained Rangarajan framework.
    • New Price Index: Created a Poverty Line Basket (PLB) index instead of CPI reflecting actual consumption inflation more accurately.
    • PLB Composition: Rural PLB had 57% food share (vs 54% in CPI); Urban PLB had 47% (vs 36% in CPI).
    • Key Findings:
      • Rural Odisha poverty fell from 47.8% → 8.6%; Urban Bihar from 50.8% → 9.1%.
      • Lowest Poverty: Himachal Pradesh (0.4% rural), Tamil Nadu (1.9% urban).
      • Highest Poverty: Chhattisgarh (25.1% rural; 13.3% urban).
    • Significance: Confirms broad-based poverty decline yet highlights regional disparities; renews calls for a new official poverty line reflecting modern consumption trends.
    [UPSC 2019] In a given year in India, official poverty lines are higher in some States than in others because
    Options: (a) poverty rates vary from State to State
    (b) price levels vary from State to State *
    (c) Gross State Product varies from State to State
    (d) quality of public distribution varies from State to State

     

  • [27th August 2025] The gender angle to India’s economic vulnerabilities

    PYQ Relevance

    [UPSC 2021] Examine the role of ‘Gig Economy’ in the process of empowerment of women in India.

    Linkage: The article highlights that India’s economic vulnerabilities are aggravated by its failure to integrate women into the workforce. While traditional women-dominated export sectors face instability due to tariff shocks, the gig economy offers a new pathway for empowerment. Platforms like Urban Company demonstrate how women can earn sustainable incomes (₹18,000–25,000/month) with safety, insurance, and skill development. Thus, the gig economy is not just an employment option but a structural enabler of women’s empowerment, mobility, and autonomy. However, as the article stresses, formalisation of gig work, targeted policy support, and social protections are vital to make this empowerment sustainable.

    Mentor’s Comment

    India’s economic rise is undeniable, valued at $4.19 trillion, it is poised to be the world’s third-largest economy. Yet, the proposed 50% U.S. tariffs on Indian exports highlight an uncomfortable truth: India’s growth story is fragile because it has failed to empower half its population. This article unpacks how gender imbalance in labour markets is no longer a social concern but an economic vulnerability.

    Introduction

    India’s ascent as a global economic power is being tested by external shocks such as U.S. tariff hikes targeting $40 billion worth of Indian exports. Unlike China, which diversified and scaled its manufacturing, India’s labour-intensive sectors, textiles, gems, leather, footwear, remain exposed. These are precisely the industries that disproportionately employ women. The looming disruption reveals a deeper structural weakness: India’s persistently low female labour force participation rate (FLFPR). What was once viewed as a social development challenge is now a core economic liability threatening the sustainability of India’s demographic dividend.

    The U.S. tariff shock and its economic implications

    1. Targeted exports: U.S. tariffs at 50% could shave off nearly 1% from India’s GDP, directly hitting sectors employing 50 million workers, many of them women.
    2. Comparative disadvantage: India could face a 30–35% cost disadvantage against competitors like Vietnam.
    3. Dependency: The U.S. absorbs 18% of India’s exports, exposing India’s lack of diversification.
    4. Employment vulnerability: An export decline of up to 50% could destabilise women-dominated industries.

    Women’s participation as India’s strategic liability

    1. Persistently low FLFPR: Stuck at 37–41.7%, far below China’s 60% and the global average.
    2. Lost GDP potential: IMF estimates closing the gender gap could boost India’s GDP by 27%.
    3. Cultural and systemic barriers: Patriarchal norms, unpaid care work, safety issues, poor public transport, and sanitation gaps keep women away from education and jobs.
    4. Urban stagnation: Urban female labour participation shows little improvement despite rising education levels.

    The ticking clock of India’s demographic dividend

    1. Demographic window: India’s working-age population outnumbers dependents, but this will close by 2045.
    2. Historical lessons: China, Japan, and the U.S. capitalised on their demographic peak to fuel growth; Southern Europe failed due to low female participation, resulting in stagnation.
    3. Risk of lost opportunity: Without women’s integration, India risks a slowdown before fully realising its demographic advantage.

    Lessons from global experiences in women’s empowerment

    1. U.S. during WWII: Women’s labour mobilised with equal pay and childcare.
    2. China’s post-1978 reforms: FLFPR at 60%, backed by state-supported childcare and education.
    3. Japan’s reforms: FLFPR rose from 63% to 70%, boosting GDP per capita by 4%.
    4. Netherlands model: Flexible part-time work with full benefits, relevant for India’s context.
    5. Common thread: Institutional investments in legal protections, skills, and care infrastructure.

    Emerging solutions and policy innovations within India

    1. Karnataka’s Shakti Scheme: Free bus travel boosted female ridership by 40%, improving access to jobs, education, and autonomy.
    2. Targeted fiscal policies: Tax incentives for female entrepreneurs, digital inclusion drives, and gender-skilling programmes.
    3. Gig economy empowerment: Urban Company employs 15,000+ women, offering ₹18,000–25,000/month along with maternity benefits and insurance.
    4. Public schemes: Rajasthan’s Indira Gandhi Urban Employment Guarantee Scheme generated 4 crore person-days of work, with 65% jobs for women, enabling many to work for the first time.

    Conclusion

    The U.S. tariff threat is a wake-up call, India’s economic fragility lies not just in external shocks but in internal neglect of women’s potential. Empowering women is no longer a matter of social justice but a strategic necessity for sustaining growth, harnessing the demographic dividend, and achieving global competitiveness. The choice is stark: invest in women and rise as a resilient power, or ignore them and remain vulnerable to shocks and stagnation.

  • 23% of PM Jan Dhan accounts inoperative

    Why in the news?

    The Government informed Parliament that 23% of the 56.04 crore PM Jan Dhan Yojana accounts are inoperative.

    About Pradhan Mantri Jan Dhan Yojana (PMJDY):

    • Launch: Introduced in 2014 as the world’s largest financial inclusion mission.
    • Objective: To provide banking to the unbanked, insurance to the unsecured, and credit to the unfunded.
    • Accounts: Basic Savings Bank Deposit (BSBD) accounts with zero balance, minimal paperwork, and e-KYC facility.
    • Benefits: RuPay debit card with accident insurance, overdraft, micro-insurance, and pension coverage.

    Key Features:

    • Access: Universal banking through branches and Business Correspondents.
    • Overdraft: Up to ₹10,000 for eligible account holders.
    • Insurance: Accident cover of ₹1 lakh (₹2 lakh for new accounts post-2018); life cover of ₹30,000 for accounts opened between August 2014–January 2015.
    • Interoperability: Enabled via RuPay cards and Aadhaar-linked platforms.
    • Post-2018 Expansion: Coverage extended to all unbanked adults, overdraft limit enhanced, and eligibility age increased from 60 to 65 years.
    • Direct Benefit Transfers: Strengthened subsidy delivery through the JAM Trinity (Jan Dhan–Aadhaar–Mobile).

    Do you know?

    As per the Reserve Bank of India (RBI) guidelines (2009), an account is considered dormant if no transaction occurs for over two years.

     

    [UPSC 2015] Pradhan Mantri Jan-Dhan Yojana’ has been launched for

    Options:

    (a) providing housing loan to poor people at cheaper interest rates

    (b) promoting women’s Self-Help Groups in backward areas

    (c) promoting financial inclusion in the country*

    (d) providing financial help to the marginalized communities

     

  • Financial Inclusion Index, 2025

    Why in the News?

    The Reserve Bank of India (RBI) has announced that the Financial Inclusion Index (FI-Index) for Financial Year (FY) 2025 has risen to 67.0, up from 64.2 in FY 2024.

    About Financial Inclusion Index (FI-Index):

    • Developer: Created by the Reserve Bank of India to assess the extent of financial inclusion in India.
    • First Release: Published in August 2021 for the financial year ending March 2021.
    • Coverage: Encompasses five key sectors—banking, investments, insurance, postal services, and pensions.
    • Scoring Scale: Ranges from 0 (total exclusion) to 100 (full inclusion).
    • Update Cycle: Updated annually in July; cumulative index with NO base year.
    • Indicators: Based on 97 indicators across all five sectors to ensure comprehensive assessment.
    • Key Parameters:
      1. Access (35%): Measures availability of financial infrastructure like bank branches, automated teller machines, and postal outlets.
      2. Usage (45%): Tracks frequency of use of services like savings, loans, insurance, and pension schemes.
      3. Quality (20%): Assesses financial literacy, consumer protection, equity, and service reliability.

    India’s Performance Over the Years:

    • March 2017: Index at 43.4, reflecting the initial phase of inclusion efforts.
    • March 2021: Rose to 53.9, due to the expansion of banking and digital infrastructure.
    • March 2024: Improved to 64.2, with broader access and increased adoption of financial services.
    • March 2025: Reached 67.0, driven by digital transactions, better service quality, and financial literacy campaigns.
    [UPSC 2016] The establishment of ‘Payment Banks’ is being allowed in India to promote financial inclusion. Which of the following statements is/are correct in this context?

    1. Mobile telephone companies and supermarket chains that are owned and controlled by residents are eligible to be promoters of Payment Banks

    2. Payment Banks can issue both credit cards and debit cards

    3. Payment Banks cannot undertake lending activities

    Options: (a) 1 and 2 only (b) 1 and 3 only* (c) 2 only (d) 1, 2 and 3

     

  • Concern over falling household savings in India – what can be done

    Why in the News?

    India’s household savings rate fell to 29.7% of GDP in 2022–23, the lowest level in 40 years, down from 34.6% in 2011–12.

    What led to the decline in household financial savings in India?

    • Rise in Consumption Expenditure: After the COVID-19 pandemic, households increased spending on consumer durables, travel, and lifestyle, reducing the capacity to save.
    • High Inflation: Persistent rise in prices of essentials like food, fuel, and healthcare eroded disposable income and limited savings.
    • Shift Towards Riskier Financial Assets: Investments in mutual funds and equities increased, with SIP contributions rising significantly, while traditional savings like fixed deposits declined.
    • Slow Income Growth and High Interest Rates (Fisher Effect): Stagnant wages and low nominal income growth, coupled with high interest rates and loan EMIs, reduced household savings potential.
    • Rising Household Debt: Household liabilities reached 6.4% of GDP in FY24, due to more borrowing for housing, education, and personal loans.
    • Reversal of COVID-Era Forced Savings: Savings spiked during lockdowns but dropped sharply as economic activity resumed and pent-up demand surged.

    Why is the shift to financial assets important for capital formation?

    • Improves Resource Mobilisation: Financial assets like deposits, mutual funds, and pension funds channel household savings into productive sectors, supporting investment and infrastructure growth.
    • Enhances Financial Intermediation and Efficiency: Financial institutions act as intermediaries, allocating savings to sectors with higher returns and productivity, ensuring efficient capital use. Eg: Banks mobilise savings into loans for MSMEs, which contribute significantly to employment and GDP.
    • Reduces Idle Capital and Boosts Formal Economy: Unlike physical assets (like gold and real estate), financial assets contribute to the formal economy, increasing credit availability and financial inclusion. Eg: Shift from gold to digital savings accounts increases liquidity and boosts credit growth in the economy.

    How has rising household debt impacted financial stability?

    • Increased Vulnerability to Economic Shocks: High debt levels reduce households’ ability to absorb income shocks (like job loss or medical emergencies), leading to loan defaults and stress on financial institutions. Eg: During the COVID-19 pandemic, many households defaulted on EMIs due to income loss, affecting NBFCs and banks.
    • Reduced Net Financial Savings: Growing liabilities shrink the net financial savings rate, limiting the funds available for productive investments and weakening domestic capital formation. Eg: In FY24, household liabilities rose to 6.4% of GDP while financial savings fell to 5.1%, a four-decade low.
    • Pressure on Banking and Credit Systems: High levels of unsecured loans (like personal and gold loans) increase credit risk, prompting regulatory tightening and affecting credit flow to the economy. Eg: RBI imposed stricter norms on personal loans in FY25 to prevent systemic risk from unsecured lending growth.

    What steps can improve savings among rural and low-income groups?

    • Promote Micro-Savings Products: Introduce low-ticket savings schemes tailored for daily or weekly contributions. Eg: The PM Jan Dhan Yojana encourages basic savings with zero-balance accounts.
    • Provide Government-Backed Guarantees and Incentives: Offer interest subsidies, insurance cover, or guaranteed returns to build trust among low-income savers. Eg: The Kisan Vikas Patra and Public Provident Fund (PPF) offer guaranteed returns with sovereign backing.
    • Expand Financial Literacy Campaigns: Run focused awareness drives on budgeting, saving, and investment options in local languages. Eg: RBI’s Financial Literacy Week and SEBI’s village workshops educate people on safe saving practices.
    • Leverage Digital and Fintech Solutions: Use mobile wallets, micro-investing apps, and digital payment systems to make saving more accessible. Eg: Platforms like Paytm Payments Bank and Airtel Payments Bank offer micro-savings and insurance.
    • Revamp and Strengthen Post Office Schemes: Modernise postal savings with better accessibility, digital interface, and doorstep banking. Eg: Rural Post Offices now offer core banking services, enabling safer and formal saving options.
    • Introduce Default Saving Options (Behavioral Nudges): Implement opt-out pension schemes or auto-enrollment in saving plans for informal workers. Eg: The Atal Pension Yojana encourages informal sector workers to save for retirement through auto-debits.

    Way forward: 

    • Develop a National Household Savings Strategy: Create a coordinated policy framework across ministries with clear targets, integrating financial literacy, product innovation, and social security measures for underserved populations.
    • Encourage Inclusive Fintech Innovations: Promote user-friendly micro-investing platforms, AI-driven financial guidance, and blockchain-based savings tools to enable secure, transparent, and accessible savings for rural and low-income households.

    Mains PYQ:

    [UPSC 2017] Among several factors for India’s potential growth, savings rate is the most effective one. Do you agree? What are the other factors available for growth potential?

    Linkage: The artilce explicitly state that India’s gross domestic savings rate fell to its lowest in four decades (29.7% of GDP in 2022-23). This question directly related to the importance of the savings rate for India’s growth, which aligns with the concern over falling household savings. 

  • India breaks into top 100 of SDG Index for the first time

    Why in the News?

    In a major milestone, India has ranked 99th out of 167 countries in the 2025 edition of the Sustainable Development Report (SDR), released by the UN Sustainable Development Solutions Network.

    What are Sustainable Development Goals (SDGs)?

    • Definition: SDGs are 17 global goals adopted by all UN member states in 2015 to end poverty, protect the planet, and promote peace and prosperity by 2030.
    • Core Focus: They balance economic growth, social inclusion and environmental sustainability for a better future.
    • Scope: The goals cover health, education, gender equality, clean water, economic growth, climate action, and governance.
    • Global Framework: They are part of the 2030 Agenda for Sustainable Development adopted by the UN.

    About Global SDG Rankings:

    • Report Publisher: The Sustainable Development Report is released annually by the UN Sustainable Development Solutions Network, led by Jeffrey Sachs.
    • Methodology: It ranks 167 countries using an SDG Index score out of 100 based on performance across all 17 goals.
    • Score Interpretation: A score of 100 means full achievement of all SDGs; lower scores show partial or poor implementation.
    • Data Sources: Rankings are based on a mix of social, economic, environmental, and governance indicators.
    • Global Patterns: European countries dominate top ranks; countries with conflict or debt rank lower.
    Note: In India, we also have our own SDG India Index released by NITI Aayog.

    Key Highlights of the Rankings:

    • India’s Rank 2025: India ranks 99th with a score of 67—its first time in the top 100.
    • Major Countries’ Ranking: China ranks 49th (74.4); the US ranks 44th (75.2) but is 193rd in SDG policy support.
    • Neighbourhood Comparison: Bhutan ranks 74th (70.5), Nepal 85th (68.6), Bangladesh 114th (63.9), Pakistan 140th (57), Sri Lanka 93rd, and Maldives 53rd.
    • Top Performers: Finland, Sweden, and Denmark lead the world in SDG achievement.
    • Areas of Progress: Global gains include access to electricity, mobile broadband, internet, and lower child mortality.
    • Major Setbacks: Challenges include rising obesity, declining press freedom, biodiversity loss, and growing corruption.
    • Target Gaps: Only 17% of SDG targets are on track to be achieved by 2030.
    [UPSC 2016] Consider the following statements:

    1. The Sustainable Development Goals were first proposed in 1972 by a global think tank called the ‘Club of Rome’.

    2. The Sustainable Development Goals have to be achieved by 2030.

    Which of the statements given above is/are correct?

    Options: (a) 1 only (b) 2 only * (c) Both 1 and 2 (d) Neither 1 nor 2

     

  • Analyzing Poverty Levels in India by Comparing various Surveys

    Why in the News?

    A recent study titled ‘Poverty Decline in India after 2011–12: Bigger Picture Evidence’ shows that poverty in India fell from 37% in 2004-05 to 22% in 2011-12. However, poverty declined by only an additional 18% until 2022-23, and officials have not released any poverty estimates after 2011-12.

    What are the three methods used to estimate post-2011 poverty in India?

    • Alternative NSSO Surveys: Using different socio-economic surveys like the Usual Monthly Per Capita Consumption Expenditure (UMPCE) from NSSO rounds after 2011-12, despite comparability issues with earlier surveys. Eg: Estimates based on UMPCE suggest poverty between 26-30% in 2019-20.
    • Private Final Consumption Expenditure (PFCE) Scaling: Scaling consumption data from the 2011-12 Household Consumption Expenditure Survey using the growth rate of PFCE from National Accounts Statistics (NAS) to estimate consumption trends. Eg: Used by economist Surjit Bhalla and colleagues in 2022.
    • Survey-to-Survey Imputation: Filling data gaps by linking related surveys (e.g., consumption surveys with employment surveys) through imputation models, often at the State level for better accuracy. Eg:  The recent study titled ‘Poverty Decline in India after 2011–12: Bigger Picture Evidence’ study using NSSO Employment-Unemployment Surveys with Consumer Expenditure Surveys to estimate poverty decline to about 18% in 2022-23.

    Note: Surjit Bhalla is an Indian economist, author, and columnist who served as Executive Director for India at the International Monetary Fund.

    How much has poverty declined post-2011–12, and how does it compare with the earlier period?

    • Sharp slowdown: Poverty fell from 37% (2004–05) to 22% (2011–12), a 15-point drop, but only to 18% by 2022–23, a mere 4-point reduction in over a decade.
    • Absolute poverty numbers: Number of poor declined from 250 million to 225 million in 10 years — a decline of only 10%, compared to a much faster fall earlier.
    • GDP correlation: GDP growth slowed from 6.9% (2004–12) to 5.7% (2012–23), consistent with slower poverty reduction.

    Why has the poverty reduction slowed since 2011-2012?

    • Slower GDP Growth: Average GDP growth declined from 6.9% (2004-05 to 2011-12) to 5.7% (2011-12 to 2022-23), correlating with slower poverty reduction.
    • Declining Real Wage Growth: Growth in rural wages slowed down significantly — from 4.13% annually before 2011-12 to 2.3% after 2011-12.
    • Rising Agricultural Workforce with Lower Productivity: After a decline in agricultural workers till 2017-18, 68 million workers joined agriculture post-2017-18, leading to lower agricultural productivity and wages, which hampers poverty reduction.

    How do the Poverty trends vary across Indian States? 

    • Significant Poverty Reduction: Some states have shown marked improvement in reducing poverty levels after 2011-12. Eg: Uttar Pradesh has notably decreased its poverty rate during this period.
    • Slow Progress: Historically poor states continue to struggle with slow poverty reduction due to persistent socio-economic challenges. Eg: Jharkhand and Bihar have experienced much slower declines in poverty rates.
    • Stagnation: Several large and economically important states have seen poverty reduction stagnate, with little change over the years. Eg: Maharashtra and Andhra Pradesh show almost no improvement in poverty reduction post-2011-12.

    What are the steps taken by the Indian Government? 

    • Implementation of Social Welfare Schemes: The government has launched various targeted welfare programs to support the poor and vulnerable groups. Eg: Pradhan Mantri Awas Yojana for affordable housing.
    • Focus on Employment Generation: Programs aimed at creating jobs, especially in rural areas, to increase income and reduce poverty. Eg: Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).
    • Financial Inclusion Initiatives: Efforts to increase access to banking and financial services for the poor. Eg: Jan Dhan Yojana, which promotes opening of bank accounts for the unbanked.
    • Agricultural Support and Reforms: Policies to improve farmers’ incomes and agricultural productivity to support rural livelihoods. Eg: PM-Kisan Samman Nidhi, providing direct income support to farmers.
    • Health and Education Programs: Investments in healthcare and education to improve human capital and break the cycle of poverty. Eg: Ayushman Bharat health insurance scheme for poor families.

    Way forward: 

    • Rural Wage & Productivity Growth: Boost rural wages and agricultural productivity by implementing reforms, improving access to technology, and providing skill development to increase income and reduce poverty sustainably.
    • Data Accuracy & Monitoring: Improve data collection and real-time monitoring of poverty indicators to ensure precise measurement, enabling better-targeted policies and effective poverty alleviation programs.

    Mains PYQ:

    [UPSC 2015] Though there have been several different estimates of poverty in India, all indicate reduction in poverty levels over time. Do you agree? Critically examine with reference to urban and rural poverty indicators.

    Linkage: Estimates consistently show a reduction in poverty over time rather than the underlying surveys or methodologies used to produce them, answering this question effectively would require knowledge that various estimates exist, often derived from different data sources or approaches.

  • [pib] Time Use Survey (TUS), 2024

    Why in the News?

    The National Statistics Office (NSO), under the Ministry of Statistics and Programme Implementation (MoSPI), has released the Time Use Survey (TUS) 2024, marking the second nationwide survey of its kind after 2019.

    What is the Time Use Survey (TUS) 2024?

    • The TUS, 2024 is a nationwide survey conducted by the National Statistics Office (NSO) under the Ministry of Statistics and Programme Implementation (MoSPI).
    • It is the second edition of the survey, following the first TUS conducted in 2019.
    • Purpose: TUS measures how individuals allocate their time across paid work, unpaid domestic work, caregiving, learning, leisure, and other daily activities.
    • India is among a few countries, including Australia, Japan, Korea, the US, and China, that conduct National Time Use Surveys.
    • Unlike traditional surveys that focus solely on employment, TUS captures both economic and non-economic activities, highlighting gender roles, social structures, and lifestyle changes.

    Key Highlights of TUS 2024:

    • 75% of males and 25% of females (aged 15-59 years) participated in employment-related activities in 2024.
    • In 2019, the participation rate was 70.9% for males and 21.8% for females, reflecting a 3.2% increase in female workforce participation.
    • Decline in unpaid domestic work for women from 315 minutes/day (2019) to 305 minutes/day (2024), indicating a shift towards paid employment.
    • 41% of women and 21.4% of men in the 15-59 age group engaged in caregiving.
    • Women spent 140 minutes/day, while men spent 74 minutes/day on caregiving.
    • Male involvement in child-rearing and elder care is rising, signaling changing gender roles.
    • 89.3% of children (6-14 years) participated in learning activities, dedicating an average of 413 minutes/day.
    • Leisure time has increased – People aged 6 years and above spent 11% of their daily time on cultural, leisure, mass media, and sports activities, compared to 9.9% in 2019.
    • 16.8% of people engaged in producing goods for personal use, spending 121 minutes/day.
    • In rural areas, 24.6% of individuals (15-59 years) participated in household production.
    • Unpaid domestic services participation: 81.5% of women, 27.1% of men.

    PYQ:

    [2013] Disguised unemployment generally means:

    (a) large number of people remain unemployed
    (b) alternative employment is not available
    (c) marginal productivity of labour is zero
    (d) productivity of workers is low

    [2023] Most of the unemployment in India is structural in nature. Examine the methodology adopted to compute unemployment in the country and suggest improvements.

     

  • A pragmatic picture: Economic Survey

    Why in the News?

    The Budget session of Parliament has started at a time when India’s economic situation is shifting. After four years of strong growth following the pandemic, the economy is slowing down.

    What are the key projections for India’s economic growth in FY 2024-25?

    • Projected GDP Growth: The National Statistical Office (NSO) has estimated that India’s GDP will grow by 6.4% in FY 2024-25. This figure marks a decline from the 8.2% growth recorded in FY 2023-24 and is lower than earlier forecasts which ranged from 6.5% to 7%.
    • Sectoral Performance: The slowdown is attributed to weaker performance in sectors such as manufacturing and services. The first half of FY 2024-25 is expected to see a growth rate of around 6%, necessitating a stronger performance of 6.8% in the second half to meet the annual target.
    • Comparative Estimates: While the NSO’s estimate stands at 6.4%, other organizations like the International Monetary Fund (IMF) have projected a slightly higher growth rate of 7%, reflecting differing outlooks on economic recovery and consumer demand.

    How does the Economic Survey address challenges such as inflation and global uncertainties?

    • Food Inflation Concerns: Despite the overall decline in inflation, food inflation remains a challenge, rising from 7.5% in FY24 to 8.4% in the same period due to supply chain disruptions and adverse weather conditions. 
      • The survey emphasizes the need for improved agricultural practices and climate-resilient crops to manage these risks effectively.
    • Inflation Trends: The survey reports a reduction in retail inflation from 5.4% in FY24 to 4.9% during April-December 2024, indicating a positive trend towards achieving the RBI’s target of around 4% by FY26, contingent on stable global commodity prices and favorable domestic agricultural output.
    • Global Economic Uncertainties: The survey highlights that ongoing geopolitical tensions and global trade risks pose significant challenges to inflation management, necessitating careful policy interventions to mitigate potential impacts on the domestic economy.
    • Policy Recommendations: To address these challenges, the Economic Survey advocates for strategic policy measures, including enhancing supply chain resilience, improving data collection for better price monitoring, and fostering an environment conducive to investment and growth.

    What structural reforms are recommended to enhance long-term economic stability?

    • Deregulation and Ease of Doing Business: The Economic Survey advocates for significant deregulation to foster a more conducive business environment. It stresses that the government should “get out of the way” of businesses by minimizing micro-management and enhancing accountability among regulators.
    • Empowering Small Firms: Recommendations include empowering small enterprises, enhancing economic freedom, and ensuring a level playing field across sectors to stimulate growth and investment.
    • Focus on Domestic Demand: The budget is expected to prioritize boosting domestic demand through increased government spending, particularly in infrastructure and capital projects, as a countermeasure against global uncertainties and inflationary pressures.

    Way forward: 

    • Strengthen Domestic Resilience – Focus on boosting domestic consumption and investment through targeted fiscal measures, infrastructure expansion, and support for MSMEs to counter global uncertainties.
    • Enhance Inflation Management – Implement climate-resilient agricultural policies, improve supply chain efficiency, and strengthen monetary-fiscal coordination to maintain stable inflation and ensure sustainable growth.

    Mains PYQ:

    Q Is inclusive growth possible under market economy? State the significance of financial inclusion in achieving economic growth in India.(UPSC IAS/2022)