Poverty in India: Types of Poverty, Causes of Poverty, Vicious Circle of Poverty

Poverty in India

People living in poverty are often socially excluded and marginalized. Their right to effectively participate in public affairs is frequently ignored, and thus elimination of poverty is much more than a humanitarian issue, as it is more of a human rights issue. Thus, eradication of poverty and hunger is the basis of all development process.

During the last two decades, India has lifted more than 100 million of its citizens from extreme poverty; still, it is home to a very large number of people living in abject poverty.

Common Cited Causes of Poverty in India

The above-mentioned reasons are at best half-truths. In reality causes of poverty are much more complex.

The True causes of poverty in India are:

Poverty as Lack of Freedom and Capabilities.

Note for Students:

  • Why are People Poor?

People are poor because they lack choices both economic and social.

  • Why do they lack Choices?

They lack choices because they do not have basic freedoms and capabilities.

  • What are basic Freedoms and capabilities?

The freedoms through which people can empower themselves, the capabilities through which poor can take their decisions. The broad freedoms that poor lacks are: Freedom of Choice; Freedom of Justice etc.

  • Why do the poor lack Freedoms and Capabilities?

They lack it because of the following reasons:

  • The government is not willing to provide them.
  • The Institutions of empowerment are weak.
  • Ours is an Entitlement based system, in which the political parties and the government prefer to take short-term measures of the distribution of freebies to attract voters.
  • The Political system does not believe in Empowering people through long-term measures of Education, awareness, Justice, Health and Productivity.
  • Huge presence of Inequality.
  • Lack of understanding of the nature of poverty.
  • What are the solutions?

Empowerment of people through social development and education.

Providing to the poor all sorts of Choices, from which he can choose the best. In short making the poor of the country capable.

The Vicious Circle of Poverty.

The Vicious Circle of Poverty

Poverty Head Count Ratio versus Poverty Gap Ratio

Poverty Head Count Ratio Poverty Gap Ratio
The Poverty Head Count ratio measures the proportion of population whose per capita income/ consumption expenditure is below the official Poverty line or in simple terms is measures the total number of people living below the poverty line. The Poverty Gap Ratio is the gap by which mean consumption of the poor below poverty line falls short of the poverty line.

It indicates the depth of poverty; the more the PGR, the worse is the condition of the poor. While the number of poor people indicates spread of poverty, PGR indicates the depth.

The number of people living below poverty line has decreased from 74.5 Million in the year 1993-94 to 52.8 Million in the year 2011-12. During 2004-05 to 2011-12, PGR also reduced in both rural and urban areas. While the rural PGR declined from 9.64 in 2004-05 to 5.05 in 2011-12 in the urban areas, it declined from 6.08 to 2.70 during the same period. A nearly 50% decline in PGR both in rural and urban areas during 2004-05 to 2011-12, reflects that the conditions of poor have improved both in urban and rural areas.
Head Count Ratio is a simpler measure. It is widely used and represents the cut-off point below which people are considered as poor. The poverty gap index can be interpreted as the average percentage shortfall in income for the population, from the poverty line
HeadCount ration does not reflect the severity of poverty. A higher poverty gap index means that poverty is more severe.

Absolute versus Relative Poverty

Absolute Poverty Relative Poverty
Absolute poverty is when we consider every poor person as equal. The general definition of poverty which is valid at all times and for all economies is called absolute poverty.

Absolute poverty approach considers a poor in India as equal to a poor in the USA.

The simplest definition of being poor is ‘being unable to subsistence’ that is, being unable to eat, drink, have shelter and clothing.

A common monetary measure of absolute poverty is ‘receiving less than $1 a day…’’. (In 2008, the World Bank revised this figure to $1.25 a day, and then again to $1.90 a day in 2015.)

The difficulties involved in the application of the concept of “absolute poverty”, made some researchers to abandon the concept altogether. In place of absolute standards, they have developed the idea of relative standards that is, standards which are relative to particular time and place. In this way, the idea of absolute poverty has been replaced by the idea of relative poverty.

Just as conventions change from time to time, and place to place, so will definitions of poverty. In a rapidly changing world, definitions of poverty based on relative standards will be constantly changing. Hence, Peter Townsend has suggested that any definition of poverty must be “related to the needs and demands of a changing society.

It can be argued that poverty is best understood in a relative way – what is poor in New York is not the same as what is poor in Mumbai (where over 50% of the population live in slums.


Himanshu Arora
Doctoral Scholar in Economics & Senior Research Fellow, CDS, Jawaharlal Nehru University

User Avatar

By B2B

Revisiting the Basics

Notify of
Newest Most Voted
Inline Feedbacks
View all comments
5 years ago


User Avatar
5 years ago

Very nice study material sir . Thank you sir

User Avatar
1 year ago

If there is any previous years questions ask in this chapter


Join us across Social Media platforms.

💥Mentorship New Batch Launch
💥Mentorship New Batch Launch