GS Paper: Poverty & Development Issues

Poverty in India had increased between 2012 and 2020.

What is Poverty?

• Fundamentally, the concept of poverty is associated with socially perceived deprivation with respect to basic human needs (Tendulkar, 2009).
• This is a crucial definition to consider since the Tendulkar committee’s estimation method is the last officially recognized method for arriving at poverty numbers in India.

A relative term

• If you think about it for a moment, poverty is a “relative” concept.
• Poverty is essentially about how you are “relative” to those in your surroundings.
• For example, with Rs 1,000 in your pocket, you may be “rich” if those around you have no more than Rs 100 with them.
• But, in another setting, say around those who have no less than Rs 10,000 with them, you will come across as “poor”.
• As such, as long as there are variations in the income and/or wealth levels in a society, there will be “poverty”.

What is abject poverty?

• Apart from the relative nature of poverty, there is such a thing as abject poverty.
• It typically refers to a state where a person is unable to meet its most basic needs such as eating the minimum amount of food to stay alive.

What is a Poverty Line?

• From the point of view of policymaking, poverty levels typically refer to some level of income or expenditure below which one can reasonably argue that someone is poorer than the rest of the society.
• The whole point of the bulk of policymaking is to improve the living standards of the poorest in the country.
• But to design policies, one must first know what the target group is, how much does it earn (or spend, since robust data on income is not easily available).
• This is done by choosing a “poverty line” — or a level of income or consumption expenditure that divides the population between the poor and non-poor.

Why define a Poverty Line?

The purpose behind choosing a poverty line is two-fold.

(A) To accurately design policies for the poor

• Doing so allows you to target your policies towards the two poorest people in the country.
• Often such policies are redistributive in nature — such as giving subsidised food grains or providing some kind of social security like MGNREGA.
• In an ideal world a government would have the resources to help everyone in the economy but in reality, even the government’s works within some financial or budgetary constraints.

(B) To assess the success or failure of government policies over time

• Over time the overall GDP doubles but the income of the general public falls.
• Hence the government would know that its policies are not bearing fruit.

Poverty Estimation in India

• Planning Commission Expert Group (1962): It formulated the separate poverty lines for rural and urban areas at ₹20 and ₹25 per capita per year respectively.
• VM Dandekar and N Rath (1971): They made the first systematic assessment, based on National Sample Survey (NSS) data. They suggested providing 2250 calories per day in both rural and urban areas.
• YK Alagh Committee (1979): It constructed a poverty line for rural and urban areas on the basis of nutritional requirements and related consumption expenditure.
• Lakdawala Committee (1993): It suggested that consumption expenditure should be calculated based on calorie consumption as earlier. State specific poverty lines should be constructed. It asked for discontinuation of scaling of poverty estimates based on National Accounts Statistics.
• Tendulkar Committee (2009): The current official measures of poverty are based on the Tendulkar poverty line, fixed at daily expenditure of ₹27.2 in rural areas and ₹33.3 in urban areas is criticised by many for being too low.

What has happened in India’s fight against poverty?

• There are two ways to assess India’s performance.

1. One is to look at the headcount ratio of poverty which is the percentage of India’s population that was designated to be below the poverty line
2. The other variable to look at is the absolute number of poor people in the country

• If one looks at the headcount ratio then India made rapid strides since 1973.
• Even though India is home to possibly the largest number of poor people in the world, there has been no official update on India’s poverty levels since.

Who oversees the Poverty Level?

• Poverty levels are updated by using the Consumer Expenditure Survey, which is conducted by the National Statistical Office (NSO) once every five years.
• The last such survey was conducted in 2017-18.
• That survey reportedly showed that for the first time in four decades consumer expenditure in India had fallen.

What are the latest findings?

• Poverty levels, as well as the absolute number of poor, had risen between 2011-12 and 2017-18.
• The government claimed that the survey suffered from “data quality” issues.
• The next round of the Consumer Expenditure Survey (CES) was supposed to be conducted in 2021.

Causes of rise in Poverty

• GDP growth decline: It is a fact that India’s GDP growth rate had registered a secular deceleration between the start of 2017 and 2020.
• Jobless growth: The second and related factor is the unprecedented rise in joblessness.
• Wages decline: Millions were pulled out of poverty between 2004 and 2011 due to sharp rise in non-farm employment and associated wages. But for many of those workers, real wages have either fallen or stagnated.
• Pandemic impact: Covid induced lockdown sent millions of workers back to villages, seeking MGNREGA work at minimum wages.

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The NITI Aayog has recently proposed a revision in the National Food Security Act (NFSA), 2013 for lowering the coverage of both rural and urban population to save up to Rs 47,229 crore annually.

National Food Security (NFS) Act

• The NFS Act, 2013 aims to provide subsidized food grains to approximately two-thirds of India’s 1.2 billion people.
• It was signed into law on 12 September 2013, retroactive to 5 July 2013.
• It converts into legal entitlements for existing food security programmes of the GoI.
• It includes the Midday Meal Scheme, Integrated Child Development Services (ICDS) scheme and the Public Distribution System (PDS).
• Further, the NFSA 2013 recognizes maternity entitlements.
• The Midday Meal Scheme and the ICDS are universal in nature whereas the PDS will reach about two-thirds of the population (75% in rural areas and 50% in urban areas).
• Pregnant women, lactating mothers, and certain categories of children are eligible for daily free cereals.

Key provisions of NFSA

• The NFSA provides a legal right to persons belonging to “eligible households” to receive foodgrains at a subsidised price.
• It includes rice at Rs 3/kg, wheat at Rs 2/kg and coarse grain at Rs 1/kg — under the Targeted Public Distribution System (TPDS).
• These are called central issue prices (CIPs).

Try this PYQ:

Q.With reference to the provisions made under the National Food Security Act, 2013, consider the following statements:

1. The families coming under the category of ‘below poverty line (BPL)’ only are eligible to receive subsidized food grains.
2. The eldest woman in a household, of age 18 years or above, shall be the head of the Household for the purpose of issuance of a ration card.
3. Pregnant women and lactating mothers are entitled to a ‘take-home ration’ of 1600 calories per day during pregnancy and for six months thereafter.

Which of the statements given above is/are correct?

(a) 1 and 2 only

(b) 2 only

(c) 1 and 3 only

(d) 3 only

What has NITI Aayog asked for review?

• A revision of CIPs is one of the issues that have been discussed.
• The other issues are updating of the population covered under the NFSA, and beneficiary identification criteria.
• Under sub-section (1) of Section 3 of the Act, the term “eligible households” comprises two categories — “priority households”, and families covered by the Antyodaya Anna Yojana (AAY).
• Priority households are entitled to receive 5 kg of foodgrains per person per month, whereas AAY households are entitled to 35 kg per month at the same prices.

Provisions for review

• Under Schedule-I of the Act, these subsidised prices were fixed for “a period of three years from the date of commencement of the Act”.
• While different states began implementing the Act at different dates, the deemed date of its coming into effect is July 5, 2013, and the three-year period was therefore completed on July 5, 2016.
• However, the government has yet not revised subsidised prices.
• The government can do so under Schedule-I of the Act, after completion of the three-year period.
• To revise the prices, the government can amend Schedule-I through a notification, a copy of which has to be laid before each House of Parliament as soon as possible after it is issued.
• The revised prices cannot exceed the minimum support price for wheat and coarse grains, and the derived minimum support price for rice.

The question of coverage

• The Act has prescribed the coverage under “eligible households” — 75% of the rural population and up to 50% of the urban population.
• On the basis of Census 2011 figures and the national rural and urban coverage ratios, 81.35 crore persons are covered under NFSA currently.
• This overall figure has been divided among the states and UTs, based on the NSSO Household Consumer Expenditure Survey 2011-12.
• Section 9 of the Act deals with an update of coverage of the population under the Act.
• However, given the population increase since then, there have been demands from the states and union territories to update the list by ensuring an annual updating system under NFSA.

Propositions by NITI Aayog

• The NITI Aayog has suggested that the national rural and urban coverage ratio be reduced from the existing 75-50 to 60-40.
• If this reduction happens, the number of beneficiaries under the NFSA will drop to 71.62 crores (on the basis of the projected population in 2020).
• To make these changes in the law, the government will have to amend sub-section (2) of Section 3 of the NFSA. For this, it will require parliamentary approval.

Implications of the move

• If the national coverage ratio is revised downward, the Centre can save up to Rs 47,229 crore (as estimated by the NITI Aayog paper).
• On the other hand, if the rural-urban coverage ratio remains at 75-50, then the total number of people covered will increase from the existing 81.35 crores to 89.52 crore —an increase of 8.17 crore.
• This estimate by the NITI Aayog is based on the projected 2020 population, and, according to the paper, will result in an additional subsidy requirement of Rs 14,800 crore.