Poverty and Unemployment

Assessment of the growth experience: Poverty and Unemployment

  • Poverty and unemployment are closely related
  • High poverty has a multiplier effect on quality of life, deprivation, malnutrition, illiteracy and low human resource development.


  • Poverty lines
    • Normative nutritional requirement per person per day at some base point.
    • This is debated
    • 2400 cal (rural), 2100 cal (urban)
    • Nutrient requirement then needs to be translated to monetary terms.
  • Poverty has declined as per NSSO estimates.
  • However, recent committees like the Tendulkar committee have reviewed the methodology of measuring poverty and concluded that poverty levels are much higher than those presented through the NSSO estimates.
  • Data on poverty reduction <put>
  • Rural-urban and regional disparity
    • Even when poverty has declined there has been a marked disparity in its reduction in rural and urban areas as well as across different regions in the country
    • — states have poverty ratio below the national averagepoverty and unemployment
    • Significant reduction in Andhra, Gujarat, Haryana, Karnataka, Kerala, Maharashtra, Punjab and WB
    • Most poor states of Bihar, MP, Orissa and UP have shown little progress in poverty reduction
    • Over 54 pc of India’s poor lived in these states in 2004-05
    • These states have more poor than 26 sub-Saharan African countries according to the 2010 HDR
    • North-western states (P, H, HP, J&K) comprise only 2.2 pc of India’s poor. Rural urban disparity is minimal
    • More than half of India’s urban poor live in the states of Maharashtra, MP, UP and TN
    • There is no evidence for convergence in the incidence of poverty across the states of India
    • Coeffcient of variation (CV) of poverty reveals widening inter-state inequalities in poverty reduction. Between 1993-94 and 2004-2005 CV increased from 36 to 54.
  • Non-income dimensions of poverty
    • NFHS-3 and District level Household Survey on Reproductive Health
      • 46 pc children under 3 and 49 pc children under 6 malnourished
      • 79 pc children anaemic
      • 59 pc deliveries did not take place in institutional agencies
      • 32 pc have no electricity, 55 no toilet
    • Multidimensional Poverty Index
  • Economic Growth and Poverty
    • Necessary for poverty reduction, but not sufficient
    • This is because
      • Poverty is not only income poverty. There are various other unfreedoms. The MDPI captures this well
      • Enabling role of basic education, good health, land reforms, social security
      • The fruits of economic growth may not be automatically utilised to expand basic social services
    • Eliminating deprivation is as much a matter of public action as one merely of economic growth.
    • There has been no significant acceleration in the process of poverty reduction during 1980-2005 despite an acceleration in the growth of per capita GDP
  • Since public action is required, schemes such as NREGS and SGSY are important
  • Chronic Poverty
    • Higher among rural casual labour households than urban casual labour households
    • Varies significantly across social and occupational groups and is highest for SCs
  • Poverty in India vs other developing countries
    • China
      • Poverty in China declined from 53 pc in 1981 to 8 pc in 2001. In the same period India reduced poverty by 17 pc
      • India fares badly even on non-income dimensions of poverty like malnutrition, infant mortality
      • Concerns about equity and disparity remain in China too. India has fared better than China in achieving lower inequality
    • Poverty and Planning/inclusive growth
    • Strategy to deal with the problem
      • Recognize that poor are hetrogenous. So strategies need to be specifically designed to deal with chronic poor and other poor
      • Design safety nets
      • Strengthen livelihood and make them more productive


The World Bank defines poverty in absolute terms. The bank defines extreme poverty as living on less than US$1.90 per day> (PPP), and moderate poverty as less than $3.10 a day. Types of Poverty Absolute poverty measures poverty in relation to the amount of money necessary to meet basic needs such as food, clothing, and shelter. The concept of absolute poverty is not concerned with broader quality of life issues or with the overall level of inequality in society.

poverty and unemployment. The concept of absolute poverty is based on absolute norms for living (measured in terms of consumption expenditure) laid down according: to specified minimum standard and all such individuals or groups whose consumption expenditure is found to be below this standard are classified as poor. Under the relative concept of poverty, a family (or an individual) is deemed to be poor if its level of income or consumption expenditure falls below a predetermined level.

Poverty and unemployment. Poverty in India is measured as the head-count ratio of the population living below the official ‘poverty line’, which is calculated using the methodology prescribed by the Expert Group on Methodology for Estimation of Poverty appointed by the Planning Commission in order to arrive at a threshold consumption level of both food and non-food items. The methodology uses the Consumer Expenditure Surveys (CES) conducted by the National Sample Survey Office (NSSO) of India once every five years to attain the poverty line; and, hence, poverty figures in India are obtained once every five years. The Planning Commission’s latest poverty line, using methodology suggested by the Tendulkar Committee in 2010, is apparently defined as the spending of Rs. 27.20 per capita per day in rural areas and Rs.33.40 per capita per day in urban areas.

Unemployment is a phenomenon that occurs when a person who is actively searching for employment is unable to find work. Unemployment is often used as a measure of the health of the economy.Different types of Unemployment are as follows:-

  • Structural unemployment focuses on the structural problems within an economy and inefficiencies in labor markets. Structural unemployment occurs when a labor market is not able to provide jobs for everyone who is seeking employment.
  • Frictional unemployment is when workers leave their old jobs but haven’t yet found new ones. Most of the time workers leave voluntarily, either because they need to move, or they’ve saved up enough money to allow them to look for a better job.Frictional unemployment is short-term and a natural part of the job search process.
  • Cyclical unemployment is a type of unemployment that occurs when there is not enough aggregate demand in the economy to provide jobs for everyone who wants to work. In an economy, demand for most goods falls, less production is needed, and less workers are needed.
  • Disguised unemployment exists where part of the labor force is either left without work or is working in a redundant manner where worker productivity is essentially zero. It is unemployment that does not affect aggregate output.


Obsession with economic growth?

  • Economic growth helps in advancing living standards and in battling poverty
  • Growth, however, should not be taken to be an end in itself
  • Sustainable economic growth
  • Focus on development
  • The good thing about economic growth is that it generates resources for the government to spend according to its priorities


India-China comparision

Parameter India China
LE 64.4 73.5
IMR 50 17
U-5 MR 66 19
Literacy 65 94
Mean years of schooling 4.4 7.5


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