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Subject ECONOMICS

Paper No & Title 8: Economic Planning in India: Overview & Challenges

Module No & Title 21: Poverty Inequality & Unemployment Trends in India

Module Tag ECO_P8_M21

ECONOMICS PAPER No. 8: Economic Planning in India: Overview & Challenges

MODULE No. 21: Poverty Inequality & Unemployment Trends in India
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TABLE OF CONTENTS
1. Learning Outcomes
2. Introduction
3. Trends in Poverty
4. Trends in Inequality
5. Trends in Unemployment
6. Conclusion

ECONOMICS PAPER No. 8: Economic Planning in India: Overview & Challenges

MODULE No. 21: Poverty Inequality & Unemployment Trends in India
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1. Learning Outcomes

After studying this module, you shall be able to know about

 All three heads are inter-related & wide spread.

 These are the social evils, if not abandoned, will continue to spread like epidemic
& eat the host up.
 Solutions to all the three are sustainable & self-development.
 Utilization of country’s resources plays an important role.
 Population growth at such rates has been linked to these evils.

2. Trends in Poverty
Poverty in India is a prolonging concept, & a range of methods have been anticipated to
measure it. The authorized measure adopted by Indian govt., before 2005, was based on
food security & it was defined as per capita expenditure for a person to consume enough
calories & be able to pay for associated essentials to survive. Since 2005, Indian govt
adopted the “Tendulkar” methodology which was a move away from the traditional
calorie measure to a measure of basket of goods & used rural, urban & regional minimum
expenditure per capita necessary to survive.
Since 1990, the World Bank regularly revises its definitions & benchmarks to measure
poverty. The definition in use from 2005 to 2013 is revised to $1.25 per day income on
purchasing power parity (PPP) basis. Semi-economic & non-economic indices have also
been suggested to measure poverty in India; like, the Multi-dimensional Poverty Index
which places 33% weight on number of years spent in school & education & 6.25%
weight on financial condition of a person, in order to determine if that person is under
poverty line.
The diverse definitions & distinctive small sample surveys used to determine poverty in
India, have brought about a broad estimates of poverty from 1950s to 2010s. The Indian
govt.’s estimate of 2012 placed 21.9% of its population below the official poverty limit.
However, according to the 2011 estimates of World Bank, about 23.6% of Indian
population, or about 276 million people, lived below $1.25 per day on calculations based
on 2005's PPP International Comparison Program. Moreover, with respect to United
Nation's Millennium Development Goal (UNMGD) programme 270 million or 21.9% of
Indians lived below poverty line of $1.25 in 2011-2012.

Poverty has been there from ages in India. Under the British colonial rule, from late 19th
century through early 20th century, poverty deepened & peaked in the 1920s. Famines &
diseases killed millions of people. After India’s independence in 1947, though, mass
deaths from famines were prevented, but poverty increased manifold, peaking in the
ECONOMICS PAPER No. 8: Economic Planning in India: Overview & Challenges
MODULE No. 21: Poverty Inequality & Unemployment Trends in India
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1960s. With rapid economic growth since 1991, there has been a sharp decline in extreme
poverty in India. But, the population living above poverty line also live a fragile
economic life. Moreover, lives of hundreds of millions are affected because of lack of
basic essentials of life such as safe drinking water, sanitation, housing, health
infrastructure etc. According to the revised methodology of the World Bank based on
PPP, estimated that the world had 872.3 million people below the new poverty line, of
which 179.6 million people lived in India. In other words, India which accounts for
17.5% of total world's population had 20.6% of worlds’ poorest in 2011.
India revised its historical method of poverty calculation which was based on sustenance
food standard with “Tendulkar” methodology having the official poverty rates based on
its Planning Commission’s data which defined poverty not in terms of annual income, but
in terms of consumption or spending per individual over a certain period for a basket of
essential goods. Further, this methodology has set different poverty lines for rural &
urban areas. Since 2007, India has set its official poverty line at Rs. 26 a day ($0.43) for
rural areas & about Rs 32 per day ($0.53) for urban areas. These numbers are lower than
the World Bank's income-based definition poverty line of $1.25 per day, but the
definition is similar to China's US$ 0.65 per day official poverty line.

The World Bank’s international poverty line definition which is based on purchasing
power parity basis is inspired by the reality that the price of same goods, & services such
as a haircut, are quite different in local currencies around the world. This accounts for a
realistic definition & comparison of poverty must consider these differences in costs of
living. On this basis, currency fluctuations & nominal numbers become less important.
The definition is based on the local costs of a basket of essential goods & services that
people can purchase. By World Bank's 2014 PPP definition, India's poverty rate is
significantly lower than previously believed.
According to the United Nations report, about 30 crore people still live in extreme
poverty in India even as the Millennium Development Goal (MGD) programme will
expire in December.
Despite India’s meteoric GDP growth rate (about 9%), poverty in India is still pervasive,
especially in rural areas where 70% of India’s 1.2 billion populations live. India adopted
the United Nation's MGD in 2000 with an aim to free millions of its population from
extreme poverty, hunger, illiteracy & poor health.
Although India is one of the fastest growing economies of the world, yet its incomes are
hardly redistributed across the population. It spends only 1% of its GDP on health, which
is half that of China, who is already planning on increasing its spending on GDP to a
substantial amount (3 to 4%). Russia & Brazil spend around 3.5% of their respective
GDPs on health.
Indian govt. is aware that poverty is the biggest hurdle to overcome if it needs to fully
develop the nation. A wide variety of anti-poverty policies have been introduced since the
1950s, which took effect after 20 years of implementation. Though the decline in poverty
went from 60% to 35% between the 70s & the early 90s, globalization & liberalization
policies have made this trend go backwards in the 90s. How? & why? Weren’t the effects

ECONOMICS PAPER No. 8: Economic Planning in India: Overview & Challenges

MODULE No. 21: Poverty Inequality & Unemployment Trends in India
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of joining the global market place supposed to create growth? Why has India lagged
behind China for so long? What has gone wrong?

3. Trends in Inequality
A narrative could explain no less.
“What do you dream of doing?” Mohammed Sanwar Sheikh looks taken aback for a
moment. He is standing amidst the din of heavy machines at the construction site of yet
another building in a mill compound at Lower Parel, Mumbai. About 150 workers have
been working day & night to build a spanking new office complex. “I want to build,” he
says, “a home in my village. A pucca building.”
Sheikh, 17, arrived in Mumbai a month ago from Madhupur Donga village, 200 km from
Kolkata. It is observed that he earns between Rs 80-150 a day, a lot more than the Rs 40
he got as an agricultural laborer in his village, & that too only when work was available.
He has already managed to send Rs 2,000 home to his parents & younger brother. The
builder he is toiling to construct this building for perhaps earns Rs 100,000 a day merely
by renting out the buildings that so many Mohammed Sheikhs have labored to construct.
Not much far away from the under-construction site, a few of the builder’s cars are
parked in an exclusive garage. The fleet includes a Porsche, a Lexus & a Mercedes. The
next time he cruises by in one of them, if someone were to stop him & ask, “Hey, why
are you showing off so much?” he might well reply that his India is shining.
It’s true. He has nothing to worry about. As Jayati Ghosh, an economist & chairperson of
the State Commission on Welfare of Farmers points out in Income Inequality in India
(People’s Democracy, February 2004), “The period since the neo-liberal economic
reforms were introduced in India, led to dramatic increase in income inequality. The most
intense & notable improvement in consumption has been of those who were already the
richest people in India, that is, the top 20% of the urban population.”
The per capita consumption of this segment has increased by about 40% since 1989-90.
The real figures may be higher than it because National Sample Surveys underestimates
the consumption of the rich, according to Ghosh. “This is the highest & most rapid
increase in the consumption of the rich that has ever been recorded in India,” she writes.
On the other h&, for Mohammed Sheikh, & 600 million other people like him who
constitute the bottom 80% of India’s rural population, per capita consumption has
declined significantly since 1989-90.
“Inequality in India has grown faster in the last 10-12 years than any other time in our
history since the colonial raj,” P Sainath, senior journalist, says. The evidence is
especially stark in such areas as health. In 2003, a national newspaper reported the deaths
due to malnutrition-related causes, of over 9,000 children below the age of 6. This was in
15 largely “adivasi” populated districts of Maharashtra, just a few kilo-meters from
super-specialty private hospitals in Mumbai.
All over the country people are dying of diseases that should not kill them. For instance,
1.99 per 1, 00,000 people in India still die of tuberculosis every year (UNDP). & it is not
specialized care they need, but basic preventive care. “Specialized care is highly
overrated. It is possible to care intensively without Intensive Care Units,” Dr. Subhash
ECONOMICS PAPER No. 8: Economic Planning in India: Overview & Challenges
MODULE No. 21: Poverty Inequality & Unemployment Trends in India
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Daga, head of the pediatric ward at Cama & Albless Hospital, Delhi, says. With low-cost
technology & standardized protocols of treatment interventions, Dr. .Daga has nursed
around 450 malnourished & anemic children back to health in the last four years. This
health turnaround costs the exchequer Rs 250 per child for 15 days of treatment. Dr Daga
believes it is possible to replicate such low-cost treatment of diseases in rural areas.
Instead, the Govt. of India reduced its expenditure on the children’s nutrition programme
from Rs 79.2 million to Rs 77.7 million in the 2003 budget (Rama chandran, Public
‘Unhealthy Policy’, Frontline, March 15, 2002). Govt. expenditure on health as a
percentage of GDP declined from 1.3 in 1990, to 0.6% in 2002. The World Health
Organization well below the 5% of GDP recommends this. While the budgetary
allocation in the health sector by the central govt over the last decade has been more or
less stagnant, in the states it has declined from 7% to 5.5%.
Drawing on data collected from 1995-2000, the Human Development Report 2002
(UNDP) report indicates that in India less than 50% of the population has access to
essential drugs, 47% of children below the age of 5 are underweight, 31% of population
has adequate sanitation facilities, & only 42% of births are attended to by a skilled health
staff. In short, the public health care expenditure of the country does not match peoples’
health demands.
According to other recent studies & estimates, there are on an average only 4.48
hospitals, 6.16 dispensaries & 308 beds for every 100,000 of India’s urban population. In
rural areas, the situation is worse, with 0.77 hospitals, 1.37 dispensaries, 3.2 Public
Health Centers & just 44 beds for every 100,000 people. In 1997, an estimated 68% of
the hospitals, 56% of dispensaries, 37% beds & 75% of allopathic doctors were in the
private sector (Ravi Dug gal, 2002; ‘Right to Health’ (Mimeo), CEHAT, Mumbai).
Despite this dismal picture, today, in the name of sect oral reforms, many public health
services are no longer provided free of cost. The Citizens Report on Governance &
Development 2003, Social Watch India indicates that the level of public expenditure in
the health sector of India is the lowest in the world, & is lesser than that in Pakistan,
Bangladesh, & Sri Lanka. Of the aggregate expenditure that is spent on health, 83% is
allocated to private spending while 43% of the poor depend on public sector hospitals for
care. Moreover, privatization & deregulation of the health system has resulted in rising
prices for drug. The new National Health Policy 2002 legitimizes the ongoing
privatization of health.
Not only health but these figures intend to showcase the real & reel backwardness of the
country.

4. Trends in Unemployment
The Labor Bureau under Union Ministry of Labor & Employment released an Annual
Employment & Unemployment Survey report. According to the report for 2012-13,
Sikkim has the maximum number of unemployed people while Chhattisgarh has the
minimum number of unemployed people in the country. Overall the unemployment rate
in the country is 4.7%. In Northern India, Jammu & Kashmir has the maximum
ECONOMICS PAPER No. 8: Economic Planning in India: Overview & Challenges
MODULE No. 21: Poverty Inequality & Unemployment Trends in India
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unemployment rate followed by Himachal Pradesh, Delhi, Chandigarh, and Punjab &
Haryana. Unemployment rate in rural area is 4.4% whereas in urban area it is 5.7%.
According to a National Sample Survey Office (NSSO) last year also there was a dip in
India’s employment rate that had gone down to 38.6% in 2011-12 (July-June) from
39.2% in 2009-10. With this unemployment rate had gone up from 2.5% to 2.7%. In the
year 2004-05 the employment rate was 42%. In the 5-year period falling between 2004-
05 & 2009-10, around 2.7 million new jobs were created where as in the previous 5-years
60 million new jobs were created.
As per the survey, number of women who lost their jobs was more than that of men.
Number of employed men between 2009 & 2012 remain almost same but number of
employed women dropped from 18% to 16%. Though in terms of percentage it looks
small but the actual figures are really daunting. About 90 lakh women in the rural sector
lost their jobs in the period of just two years. On the other h&, in urban areas, 35 lakh
women were added to the workforce. Overall unemployment rate in females was more as
compared to males.
For females the unemployment rate was 7.2% whereas for male it was 4%. Kerala, being
the most literate state in India had the highest rate of unemployment which is close to
10% among the large states. Whereas, rate of unemployment in West Bengal was 4.5% &
in Assam it was 4.3%. At the same time, Monster.com through its Monster Employment
Index India, revealed decline in job creation. Monster is one of the biggest online job
portals. Because of the global economic conditions, Indian employers have posted less
number of jobs in this job portal. The Monster Employment Index is a monthly measure
of job posting online activity & is based on a real-time assessment.
The same sluggish growth has been shown by the Naukri Job Speak Index of
Naukri.com. Number of workforce in agriculture sector has gone down & for the first
time it is below 50%. The agricultural sector has 49% of the workers whereas
manufacturing sector has 24% & services sector has 27% workforce. India needs to
consider employment as a major driver of the growth in economy. Economic growth in
2009-10 was 9.3% whereas in 2011-12 it came down to 6.2%. The jobless youth in
country has the only option of self-employment & if he does not possess specific skill
then youth has to do low paying jobs like hawking magazines & selling newspapers.
On the other hand youth is now more interested in skill based job as salary is better. This
has been shown by an increase in the education loans in India. As per the data by
Reserve Bank of India, the past 4 years, saw outstanding education loan in the category
of personal loan, which has almost doubled. But, there is also a rise in the number of
defaulters of education loan which clearly indicates the unemployment in India
especially, for students who are looking for a job. According NSSO report, illiterate
population has the lowest unemployment rate, because this segment of the society is
ready to do low paying jobs.
Educated youth is facing the most of unemployment that shows lack of skill based
employment opportunities in India. The unemployment impacts not only financial
condition but also spreads to many social impacts like theft, violence, drug taking, crime,
health & also leads to psychological issues. Moreover, poverty is directly related with

ECONOMICS PAPER No. 8: Economic Planning in India: Overview & Challenges

MODULE No. 21: Poverty Inequality & Unemployment Trends in India
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unemployment as well as inequality. Long-term unemployment can actually ruin the

family & the society.
The total figure of unemployment obtained from the 1961 census is on the low side
mainly because it is not practical in a massive operation like the census to identify all the
unemployed persons & partly because of the concept used in the census. For this same
reason it makes no sense to compare unemployment figures between 1951 & 1961 even
in the States for which information is available. Although it may be too early to think of
the next census, it is a matter for consideration in what manner better results could be
obtained in the 1971 census in respect to unemployment.
The NSSO provides the proportion of unemployed persons separately in the rural & the
urban population in the country as a whole since its fourth round of enquiry in 1952. The
following are the calculations of unemployment on the basis of its rounds of enquiry as
applied to the total population interpolated between the period 1951 & 1961 on the
assumption of rural-urban composition as observed in 1961:
Estimate of Unemployment on the basis of NSSO data from the above table it may be
seen that the pattern of unemployment has not moved in one direction, but this could be
explained by changes in definitions & concepts used in the various rounds of enquiry.
However, the number unemployed went up from 4.26 to 6.48 million between 1956 &
1961. With the standardization of concepts & definitions of unemployment, it may be
expected that the future rounds of enquiry will provide comparable estimates over a
period of time.
There is, however, need to examine in what direction these concepts could be improved
& better adopted to yield more reliable estimates of unemployment, in fact the need of
the hour is to develop sustainably & promote “Make In India” to increase employment.

5. Conclusion
As we all know poverty, inequality & unemployment are inter-twined. At this level of
poverty in the country most individuals are caught in the vicious circle from which
escape is difficult. Poor people have lesser access to health care facilities & decent level
of education. This results in malnutrition & lowers the chances of getting employment of
reasonable remuneration. This further raises inequality & dissatisfaction among the
people. Thus each of these problems is bigger than they seem to be & there is an urgent
need for the govt. to address these issues.

ECONOMICS PAPER No. 8: Economic Planning in India: Overview & Challenges

MODULE No. 21: Poverty Inequality & Unemployment Trends in India