The Hindu Business Line : Poverty, not just an economic phenomenon

Despite over half a century of battle against poverty, the problem is still formidable, having acquired new dimensions with the growing rural-urban divide. There is, thus, the need to adopt innovative approaches to tackle the extreme poverty that persists in some sections. Empowering the poor with institutional interventions has not succeeded to the extent desired, says S. D. Naik.

Poverty cannot be tackled in toto without improving the quality of governance with pro-poor concerns.

POVERTY reduction — and its eventual elimination — has been one of the major goals of development policy since Independence. This was to be brought about by attaining higher economic growth, raising livelihood opportunities of the poor through endowment of land and non-land assets, generating employment opportunities, and through large-scale food-for-work programmes.

There have been several initiatives to tackle the problem of poverty since the early 1950s. The first was the launch of the Community Development programme in 1952, which aimed at integrated development at the local level through co-operation of people. While some programmes achieved partial success, others have had only a marginal impact.

We can see two distinct periods with regard to the trends in poverty. The first, spanning the years from the beginning of planning to the mid-1970s, did not see any significant decline in poverty ratios. But there was a substantial reduction in poverty during the second phase, spanning the closing quarter of the twentieth century.

Persons living below the poverty line declined from a half to roughly one-quarter of the country's population during the second phase. Economists have attributed this to the acceleration in the growth rate of the economy to 5.6 per cent from 3.5 per cent per annum during the first period.

However, the pace of poverty reduction slowed down during the post-reform period despite GDP growth remaining relatively higher. This was mainly because of the deceleration in the growth rates of agriculture and rural employment over the past decade and the consequent increase in rural poverty. Of the 260 million people below the poverty line in 1999-2000, 193 million were in the rural areas as against 67 million in the urban.

Thus, it is seen that despite over half a century of battle against poverty, the problem not only remains formidable, but has now acquired new dimensions with the growing rural-urban divide and its concentration in the backward States of Bihar, Orissa, Madhya Pradesh and Uttar Pradesh. The share of these four States in India's rural poor rose from 53 per cent in 1993-94 to 61 per cent in 1999-2000.

Evidently, there is a need to adopt new and innovative approaches to tackling the problem of hard-core poverty, particularly among scheduled castes, scheduled tribes and other weaker sections of society. In this context, a new publication: Handbook of Poverty in India (Perspectives, Policies and Programmes), edited by R. Radhakrishna and Shovan Ray and published by Oxford University Press analyses the intellectual efforts and policy concerns in the country that evolved since the early 1950s, successes and failures as also the latest thinking on various facets of poverty in India by renowned experts on the subject. It covers wide-ranging areas from income poverty and human development to the basic causes of poverty and possible socio-economic strategies for poverty eradication.

The volume also raises the definitional and methodological issues that would need to be addressed. Major findings listed in the handbook are summarised below.

Profiles of the poor

Based on the findings of the National Sample Surveys (NSS), Planning Commission estimates and showcasing the work of some of the foremost scholars in development economics, this handbook reveals that poverty in India is not merely an economic phenomenon but also a social one; it is disproportionately high among scheduled castes (SCs) and scheduled tribes (STs).

Over 80 per cent of the poor in the country now belong to socially-disadvantaged groups such as SCs, STs and other backward castes. Indices of human development, such as levels of literacy, gender disparities, provision of basic needs such as drinking water and health-care show, in general, poor performance in less developed States and among the socially disadvantaged groups. Nutritional poverty persists at a high level with nearly 50 per cent of the children still being malnourished.

Macro-level data substantiates the fact that tribals constitute the poorest category not merely in economic terms but in all aspects of human development. They are deprived of access to quality education and health-care; they are resource-poor and their traditional sources of livelihood are dwindling. This not only impedes their engagement with mainstream development, it also keeps their entitlements and capabilities low.

The composition of the poor has been changing and rural poverty is now increasingly concentrated in the agricultural labour and artisan households while urban poverty is found more in the casual labour households. The share of agricultural labour households, which accounted for 41 per cent of rural poor in 1993-94, rose to 47 per cent in 1999-2000. Casual labour households accounted for 32 per cent of urban population living in poverty in 1999-2000, increasing from 25 per cent in 1993-94.

Policy interventions

The major programmes initiated by the government over the years to alleviate poverty can be broadly divided into four categories:

(a) self-employment programmes;

(b) wage employment programmes;

(d) social security programmes.

The marginalisation processes operating in rural communities owing to a combination of economic and social factors appear to be the main source of poverty in India. Hence, it is argued that institutional reforms to halt and reverse these processes are of importance in reducing poverty in a sustained manner. Poverty reduction in the ultimate analysis would need changes in the structural foundation of society as a whole.

`Empowerment' of the poor is now being regarded in policy-making circles as a goal of critical importance for achieving poverty reduction in the fullest sense of that term. Empowerment, in a real sense, would need acquisition by the poor of capacity for upward mobility. Empowerment as a means of poverty removal gained currency from the Sixth Plan period and it was from the Seventh Plan onwards that special efforts were made towards empowering rural women.

Institutional interventions to empower the poor include providing access to basic amenities, food security and employment security. Land reform measures have been identified and partially implemented in some States to empower the poor, but they have not succeeded to the desired extent. Efforts have also been made to establish panchayati raj institutions (PRIs) with reservations for weaker groups in these institutions. It is an ongoing process that needs to be strengthened.

Public expenditure

India spends 7.6 per cent of GDP and 26.6 per cent of aggregate budgetary allocations on the social sector. State governments account for more than 80 per cent of this expenditure. As a proportion of public expenditure and as real per capita expenditure, there has been a significant increase in social sector spending since the mid-1990s. But there is a big question mark on the quality of expenditure. A chunk of public expenditure on social services goes towards salaries.

Discussing the cost-effectiveness and efficacy of public expenditure on poverty alleviation programmes by the Centre and the States, the handbook arrives at some interesting conclusions. For instance, it is pointed out that in credit-based self-employment programmes, group lending is more successful than lending to individuals. In general, the government-run programmes have been less successful in targeting than the NGO-based community programmes.

A comparison of some anti-poverty programmes in India shows that employment programmes fare better than food transfer programmes in terms of cost-effectiveness. In general, the subsidy-driven programmes impose a fiscal drain on the economy and they are not financially viable.

However, in public works, health, and education programmes, it is difficult to recover the costs, and the government may have the major responsibility.

Credit flows to the poor

The share of agriculture in total bank credit has witnessed a big decline from the peak of 15.9 per cent reached in March 1990. This is reflected in a sizeable reduction in the number of agricultural loan accounts. Also, the scheduled commercial banks have consistently reduced their exposure to small borrower accounts of Rs 25,000 and less. This is also reflected in a steady decline in the share of bank advances to `weaker' sections.

Thankfully, however, the micro-credit movement of the self-help groups (SHGs) has helped to some extent in containing the undesirable consequences of declining institutional credit to agriculture and the weaker sections in rural areas. Non-government organisations (NGOs) played an important role in promoting micro-credit to SHGs.

Micro-finance also helps in promoting the savings habit among the poor through SHGs. It is a better method of financial intermediation for the poor for various reasons such as credit at lower costs, reduced dependency on money-lenders, and more effective credit delivery and savings behaviour.

The major beneficiaries of this programme are women and it has helped address the socially desirable goal of raising women's status in society.

Concluding observations

Of late, the link between economic growth and poverty seems to be getting weaker though there is no denying the positive correlation between GDP growth and poverty reduction. Hence, it may be necessary to pay more attention to non-growth interventions with improvement in governance.

The differential performance of rural and urban sectors during the recent period warrants that agricultural development should receive greater attention. Also, non-agricultural employment generation and social development in rural areas should get priority focus to avoid exodus of the rural poor to urban areas.

Poverty in India cannot be tackled in toto without improving the quality of governance with pro-poor concerns. There is a need to create mechanisms for participation of marginalised groups in the development process and eventually empowering them.

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