In August 1947, India began a Tryst with Destiny, after 200 years of oppression and subjugation, the country was finally free. The world’s largest democracy was formed with hopes of a better future for all. But what was the Destiny of India? Was it impoverishment and suffering? Or progress and development? The country that was once popularly called The Golden Bird, because of its wealth, was looted and plundered during the British Raj. A better future for all meant that all Indians would now be able to live a free, secure life and have a standard of living comparable to other developed and industrialized nations. Unfortunately, with 71 years of Independence, poverty still remains to be one of the most pressing issues and reality for India. Despite being one of the fastest growing economies, 22% of India’s population is living below the poverty line. According to World Bank estimates, in 2014, 58% of India’s population lives on less than $3.10 per day. Economic growth is taken as the most important determinant of poverty reduction; therefore, this article highlights the impact of the former on the later.
A historical perspective
For the first three decades since Independence the Indian economy grew at an extremely slow pace, averaging to about 3.5 per cent per annum, popularly dubbed as the Hindu rate of growth. The National Statistical Survey Office (NSSO), which was first started in the 1950s, indicate that poverty during this period increased. Various factors were responsible for the slow growth during this period these included the rise of the tertiary sector and sluggish growth of manufacturing and agriculture. As a result of this, the benefits to the rural poor of this growth were miniscule, while on a comparative scale this sector-specific growth benefitted the urban poor more, these benefits were also limited. From 1951 to 1974, the percentage of its population living in poverty rose from 47 to 56 per cent. In head count terms, the number of poor people rose steadily from 171 million in 1951 to a 321 million in 1974 (Fox, 2002).
The economy grew at the rate of 5.5 per cent in the 1980s significantly impacting the rate of poverty reduction. In the agricultural sector, pricing reforms and new technologies (the green revolution) led to increasing in production. Between 1974 and 1990, GDP per capita grew at an annual rate of 2.4 per cent, and agricultural output also grew faster, at 3 per cent (Fox, 2002).
The reforms after the economic crisis of 1991 contributed to economic growth and the GDP rose by leaps and bounds. This implied a steady decline in poverty from 54% in 1974 to 26% in 1999-2000. This stands in agreement with the belief of a majority of economists that periods of rapid economic growth lead to significant reductions in the incidence of poverty. These include Baghwati, Drèze and Sen who identify the need for reasonable rates of economic growth leading to poverty reduction. Dreze and Sen also identify that along with economic growth, levels of various other social indicators such as literacy and life expectancy are significant factors impacting poverty. India has historically had low levels of social indicators like literacy and life expectancy and therefore a higher level of poverty. Thus, it becomes imperative to focus on the improvement in these social indicators to attain the objective of poverty reduction.
Using the Planning Commission’s official poverty lines established in 2001, Angus Deaton has indicated that between 1994 and 2001, the rural poverty rate fell from 37.2 per cent to 30.2 per cent while urban poverty fell from 32.6 per cent to 24.7 per cent. This implies that the national poverty rate fell from 36.2 per cent to 28.8 per cent (Datt & Ravallion, 2002).
Despite these variations in the rates of economic growth during different periods, there has not been a drastic decline in poverty, even though there have been periods with significant lows. In a country as populated and diverse as India, marginal declines in poverty do not put a dent in the overall condition of the poor. Majority of the population is still suffering and finding it difficult to fulfil their basic needs.
The 12th Five-year plan: Proposals and outcomes
In October 2012, the government rolled out the 12th five year plan (2012-17) that highlighted three possible scenarios; the first one is strong and inclusive growth with 8% growth in GDP, the second one being the insufficient action scenario with 6-6.5% growth in GDP and the third scenario being a policy logjam with -5.5% growth in GDP. The main objectives of the 12th Five Year plan were to reduce poverty and regional inequality across and within states. There were several key objectives of the 12th Five Year Plan. These included a reduction in headcount poverty by 10%, growth of the agricultural sector, reduction in the mortality rates namely Infant Mortality Rate and Maternal Mortality Rate, reduction in Total Fertility Rate and finally the generation of work opportunities in the non-farm sector by providing skill development opportunities to individuals.
With poverty removal as the primary objective, adequate significance was given to the growth of agriculture which would then have its impact on the rural poor. Historically, the agriculture sector employs a major proportion of the country’s workforce especially the rural poor, ideally, this should lead to increased productivity in the agricultural sector thereby causing an increase in both output and income and thus a reduction in poverty. By the same token, an adverse outcome in agriculture puts a large number of poor under stress.
The way forward: the 3 Year Action Plan
After the completion of the 12th Five Year Plan, the Niti Aayog proposed the 3 year action agenda from 2017-18 to 2019-20 with a specific focus towards poverty reduction and access of all individuals to a minimum standard of living. These 3-year Action Agenda have highlighted various Key Agenda items that are necessary to be achieved in order to attain the objective of reduction of poverty. These include reduction of fiscal deficit to 3% by 2019, shifting additional revenues to high-income sectors such as education, health, agriculture and rural development, doubling of farmer’s incomes by 2022, job creation through industry and services, urban development with an objective of lowering of land prices. An increase in expenditure on education, health and agriculture is bound to improve the condition of the poor and have a significant impact on poverty alleviation
Farmers make up a considerable portion of India’s workforce, nearly half of it. Hence, for India to flourish, it becomes essential that its farmers and the farm economy prosper. It is against this background that the prime minister Narendra Modi has called for doubling farmer’s incomes by 2022. To achieve this goal, the Action Agenda outlines a strong programme for agricultural transformation. It includes numerous measures to raise farm productivity, bring remunerative prices to farmers, put farmers’ land to productive uses when they are not able to farm it themselves and improve the implementation of relief measures. The Plan offers an ambitious agenda for empowering the rural population through improved road and digital connectivity, access to clean energy, financial inclusion and Housing for All. Enhancing agricultural productivity requires of efficiently using inputs, introducing new technologies and shifting from low to high-value commodities (NITI Aayog, 2017).
Several economists and studies suggest that economic growth in India has been jobless, however, contrary to these assertions the Employment Unemployment Surveys (EUS) of the NSSO, have consistently reported low and stable rates of unemployment. The main issue that the country faces is not unemployment but severe underemployment. Underemployment causes individuals to work below their capacity, as a result of which they aren’t able to achieve their full potential. This further leads to lower productivity, lesser output and lower incomes. The objective of job creation in the service and industrial sectors aims to eliminate this problem. With individuals working at their full potential, economic growth will increase, pulling out families from the vicious cycle of impoverishment.
Numerous policies and schemes have been launched to deal with the issue of poverty in India, with every new policy comes attached a string of hope for the poor, a belief that maybe this time the suffering will end and maybe they can finally stop fighting for basic necessities like food, water and sanitation. However, most of these fall prey to corruption and leakages and other selfish objectives of the Governments and politicians. Moreover, most government policies are planned thoroughly, however, their operation plans are not developed and monitoring practices are absent. This acts as an impediment to their implementation. Policies are announced and implemented during the election period to garner votes and abandoned as soon as the elections are over. This sporadic implementation leads to immense losses of the government budget, time and effort. The poor become disillusioned with the government and eventually stop expecting a better future. In this scenario, the 3 Year Action Agenda launched by the government provides clear-cut aims and objectives which if implemented efficiently go a long way in the direction of improving the conditions of both the urban and rural poor. Therefore, implantation of policies is the greatest challenge to our country, one that has persisted for a very long time and needs to be overcome immediately.
Fox, J.W. (2002). Poverty in India Since 1974 A Country Case Study. Nathan Associates Inc. 1-13
Datt, G. & Ravallion, M. (2002). Is India’s Economic Growth Leaving the Poor Behind? Journal Of Economic Perspectives. 16, 89-109.
NITI Aayog. (2017). Draft of the Three Year Action Agenda. 2017-18 to 2019-20. Government of India.
Subscribe to our weekly newsletters.
Get all our posts, blogs and video content via e-mail.