Poverty, Unemployment, and Inequality in India: notes and MCQs for Sta

Poverty, Unemployment, and Inequality in India is part of Economic and Social Development. Below are notes on 55 sub-topics, followed by practice MCQs from State PSC and UPSC papers (coming soon).

Economic Factors

Low capital formation, low agricultural & industrial productivity, unemployment & underemployment, high inflation (often linked to deficit financing), high population growth, unequal distribution of income & assets, lack of access to credit/markets.

Illiteracy & low skill development, poor health & nutrition, caste system & social exclusion, gender inequality, lack of access to basic services (education, healthcare).

Institutional & Policy Factors

Ineffective implementation of poverty alleviation programs, corruption, poor governance, land reforms not fully implemented.

*Note:* Increase in government expenditure is typically a policy response to address economic issues, not a direct cause of poverty.

Consequences of Poverty

Malnutrition, poor health outcomes, high infant & child mortality rates, lower life expectancy.
Low literacy levels, high school dropout rates, child labor.
Social exclusion, vulnerability to exploitation, increased crime rates.
Low overall economic productivity and hindering national development.

Economic Indicators

Income level, consumption expenditure, unemployment rate, asset ownership (land, house, vehicles).

Illiteracy rate, access to safe drinking water & sanitation, access to healthcare, malnutrition prevalence, infant & child mortality rates, housing quality (e.g., size of dwelling), school enrollment rates.

*Note:* 'Job opportunities' is an economic factor related to employment availability, not typically classified as a social indicator of poverty itself, but lack of them leads to economic poverty.

Bullock-Capitalist

Refers to a class of farmers in rural areas who possess some land and resources but are not considered wealthy or large landlords; they typically use traditional farming methods.

Hali System

A historical system of bonded labor, predominantly found in certain parts of India, particularly among agricultural laborers, where individuals were tied to a landlord for debt.

Causes and Impacts of Rising Inequality

Amartya Sen: *Inequality Re-examined*.
Joseph E. Stiglitz: *The Price of Inequality*.
Anthony B. Atkinson: *Inequality: What Can Be Done?*.
Thomas Piketty: *The Economics of Inequality*.

Causes of Rising Inequality

Globalization, skill-biased technological change, regressive tax policies, weakening of labor unions, financialization, inherited wealth, unequal access to quality education/ healthcare, policy choices (e.g., deregulation).

Impacts of Rising Inequality

Slower economic growth, increased social instability and crime, erosion of social cohesion, political polarization, poorer health outcomes, limited social mobility, perpetuation of poverty cycles.

Concepts and Measurement of Poverty in India (Absolute vs. Relative, Poverty Lines, MPI)

Concepts of Poverty:

Absolute Poverty: Lack of minimum income/resources to meet basic needs (food, shelter, clothing). Defined by a poverty line.
Relative Poverty: Poverty in comparison to others in society, often measured by income/wealth inequality.

Types of Poor (based on chronic/transient nature):

Chronic Poor: Always poor or usually poor (below poverty line most of the time).
Transient Poor: Regularly move in and out of poverty (Churning Poor) or occasionally poor (rich most of the time, but sometimes poor due to fluctuations).
Non-Poor: Always above the poverty line.

Poverty Line (PL):

A minimum level of consumption expenditure needed to meet basic needs.
Defined by a Poverty Line Basket (PLB) including food (calorie intake), clothing, footwear, fuel & light, educational, and medical requirements.
In India, PL is primarily based on consumption expenditure, not income, due to difficulty in assessing fluctuating incomes.
Poverty line varies across time and countries due to differing basic needs.

Poverty Measurement Indicators:

Head Count Ratio (HCR): Percentage of the population below the poverty line.
Poverty Gap (PG): Difference between poverty line and actual income/expenditure level of those below it; total income needed to bring all poor up to the PL.
Sen Index: A composite poverty measure.

History & Committees for Poverty Estimation in India:

Dadabhai Naoroji (1867-68): First to conceptualize poverty as a measurable indicator in India, using the "Jail Cost of Living" method.
Dandekar and Rath (1971): First to propose a poverty line based on per capita calorie intake for both rural and urban areas. Estimated 40% rural and 50% urban population below PL in 1960s.
Alagh Committee (1979): First to set poverty lines based on nutritional requirements.

Rural: 2400 calories/person/day.
Urban: 2100 calories/person/ day.

Lakdawala Committee (1993):

Used CPI-IW for urban and CPI-AL for rural areas for poverty estimates.
Disaggregated poverty lines by states.

Tendulkar Committee (2009):

Chaired by S.D. Tendulkar.
Moved away from purely calorie-based PL; incorporated private expenditure on health and education for the first time.
Used an all-India urban poverty line basket as a reference to derive both rural and urban poverty levels.
Methodology based on Mixed Recall Period (MRP) for NSSO consumption surveys.
Poverty Lines (2011-12, per capita per day): Rural: ₹27.20, Urban: ₹33.33.
Poverty Rates (based on Tendulkar methodology):
2004-05: 37.2%
2009-10: 29.8% (approx. 30-33%)
2011-12 (68th NSSO round): 21.9% (Rural:

Rangarajan Committee (2014):

Chaired by C. Rangarajan.
Recommended separate consumption baskets for rural and urban, including normative levels of adequate nourishment, clothing, house rent, conveyance, and education.
Poverty Lines (2011-12, per capita per day): Rural: ₹32, Urban: ₹47.

National Sample Survey Office (NSSO): Carries out surveys for determining the poverty line by collecting household consumption expenditure data.
Recall Methods for NSSO Consumption Surveys:

Uniform Recall Period (URP): 30day recall for all items.
Mixed Recall Period (MRP): 365day recall for 5 non-food items (clothing, footwear, durables, education, institutional medical expenses) and 30day recall for food, fuel, personal care, and other non-food items. Tendulkar Committee recommended MRP.

Multidimensional Poverty Index (MPI):

Global MPI:

Published jointly by United Nations Development Programme (UNDP) and Oxford Poverty and Human Development Initiative (OPHI).
Replaced the Human Poverty Index (HPI) in 2010.
Measures acute deprivations across 3 equally weighted dimensions:
1. Health (1/3 weight): Indicators: Nutrition (1/6), Child Mortality (1/6).
2. Education (1/3 weight): Indicators: Years of Schooling (1/6), School Attendance (1/6).
3. Living Standards (1/3 weight): Indicators: Cooking Fuel, Sanitation, Drinking Water, Electricity, Housing, Assets (each 1/30 weight).
A household is multidimensionally poor if its deprivation score is 33.3% or greater (deprived in at least one-third of the weighted indicators).
India's progress (Global MPI 2018): 271 million people moved out of poverty between 2005-06 and 2015-16. Bihar was the poorest state (2018).

National MPI (India):

Estimated and published by NITI Aayog.
Uses the same 3 dimensions and 10 indicators as the Global MPI.
Deprivation Criteria for "Nutrition" indicator: A household is deprived if any single member (e.g., any woman aged 15-49 years with BMI below 18.5 kg/m² or any child aged 0-59 months) is identified as undernourished.

UNDP Categories of Poverty: Income Poverty and Human Poverty.
Committees NOT related to poverty estimation: R. Swaminathan Committee.
Proxy Indicators for Prosperity: Private car ownership, type of commercial stores, number of petrol pumps.

Causes of Inequality in India

Unequal ownership of assets (land, capital), laws of inheritance, corruption & smuggling, regional disparities, unequal access to quality education & healthcare, caste/religious discrimination, gender bias, informalization of labor, and skill-biased technological change.

Scheduled Tribes (STs) < Scheduled Castes (SCs) < Other Backward Classes (OBCs) < Muslims.

Regional & Gender Inequality Example

Haryana exhibits high economic standing alongside a historically low sex ratio.

Key Books & Authors on Inequality/Poverty

*The Third Pillar: How Markets and the State Leave the Community Behind* - Raghuram Rajan
*Poor Economics: Rethinking Poverty and the ways to end it* - Abhijit Vinayak Banerjee & Esther Duflo
*God as Political Philosopher: Buddha's Challenge to Brahminism* Kancha Ilaiah Shepherd
*Looking Away: Inequality, Prejudice and Indifference in New India* Harsh Mander

Government Initiatives for Employment Generation and Skill Development

Fourth Five Year Plan (1969-74) onwards: Marked a serious concern for solving the unemployment problem, integrating social justice with economic growth objectives.

Inclusive Development/Growth

Aims to ensure all sections of society, especially the vulnerable and marginalized, participate in and benefit from economic growth.

Key Target Groups for Inclusion

Marginal and small farmers, landless agricultural laborers, Scheduled Castes (SCs), Scheduled Tribes (STs), women, minorities, and persons with disabilities.

Scope

Inclusive development targets individuals and communities across all geographical areas (rural, urban, semi-urban) by addressing their specific socio-economic vulnerabilities and disadvantages.

It seeks to provide equal opportunities and access to resources for everyone, thereby not excluding any group based solely on their residential location (e.g., semi-urban areas).

Impact of Economic Reforms and Globalisation on Poverty, Unemployment, and Inequality

Post-1991 economic reforms led to significant structural shifts in the Indian economy.

Worker Productivity

Urban worker productivity generally increased. Rural (agricultural) worker productivity growth often slowed down or stagnated, contributing to widening urban-rural productivity gaps; a universal "decrease" across all rural sectors is not uniformly observed.

The percentage share of rural areas in the total workforce generally declined due to urbanization and diversification away from agriculture.

Rural Non-Farm Economy

The growth in the rural non-farm economy (e.g., construction, trade, transport, services) significantly increased, providing alternative livelihoods.

Rural Employment

The overall growth rate of rural employment, particularly in the agricultural sector, decreased post-liberalization.

Poverty Impact

Poverty levels generally declined post-reforms, though the rate of decline and regional disparities remained subjects of study.

Inequality Impact

Economic liberalization often correlated with increased income and wealth inequality, both between urban and rural areas and across different social groups.

Interlinkages

Unemployment, and Inequality

Poverty, unemployment, and inequality are fundamental challenges afflicting the Indian economy.
India's development programmes are oriented towards achieving economic growth alongside social justice to address these core issues.
Interlinkages

Unemployment & Poverty

Lack of employment/income directly leads to poverty; underemployment also contributes.

Inequality & Poverty

Wide income/wealth disparities perpetuate poverty by limiting access to resources (education, healthcare, capital) for the disadvantaged.

Unemployment & Inequality

Unequal access to education, skills, and opportunities results in unequal employment outcomes, thereby exacerbating income inequality.

Effective poverty reduction strategies necessitate incorporating both self-employment and wage employment.

Self-employment

A major form of employment, particularly in rural areas (e.g., agriculture, small businesses), fostering economic independence and local development.

Wage employment

Provides income but exclusive reliance can lead to over-dependence on employers, limiting bargaining power and autonomy.

A balanced approach using both self-employment and wage employment helps in:

Providing diversified income sources and reducing vulnerability of the poor.
Strengthening the asset base of diverse population segments.
Narrowing the gap between the rich and the poor, contributing to more equitable development.

Measurement and Trends of Inequality (Gini Coefficient, Palma Ratio, Lorenz Curve)

Gini coefficient: Measures the extent to which the distribution of income among individuals or households within an economy deviates from a perfectly equal distribution.
Gini coefficient range: 0 (perfect equality) to 1 (perfect inequality).
Higher Gini coefficient indicates higher inequality.
Gini coefficient can be derived using the Lorenz curve.
Lorenz curve: A graphical representation of income (or wealth) distribution.
Lorenz curve plots cumulative percentage of income against cumulative percentage of the population (ordered from poorest to richest).
The greater the area between the Lorenz curve and the line of perfect equality (a 45degree diagonal line), the higher the inequality.
Palma ratio: The share of all income received by the 10% people with highest disposable income divided by the share of all income received by the 40% people with the lowest disposable income.
PISA score (Programme for International Student Assessment): Assesses how far students near the end of compulsory education have acquired some of the knowledge and skills essential for full participation in society.
Human Trophic Level: A measure of the energy intensity of diet composition.

Periodic Labour Force Survey (PLFS)

Conducted by National Statistical Office (NSO), Ministry of Statistics and Programme Implementation (MoSPI).

Labour Force Participation Rate (LFPR)

% of persons in labour force (employed + unemployed) in the population.

Worker Population Ratio (WPR)

% of employed persons in the population.

Unemployment Rate (UR)

% of unemployed persons in the labour force.

Methods

of

Unemployment

Measurement

Usual Status (US)

Reference Period: 365 days preceding the survey date.
Identifies persons engaged in economic activity for a relatively longer part of the reference period (183 days or more).
Used to calculate

chronic unemployment.

Current Weekly Status (CWS)

Reference Period: 7 days preceding the survey date.
A person is considered unemployed if they did not work even for 1 hour but were available for work on at least one day during the reference week.

Current Daily Status (CDS)

Reference Period: Each day of the 7 days preceding the survey date.
Measures unemployment in terms of person-days, reflecting the intensity of unemployment/ underemployment.

Unemployment Rates (NSSO 68th Round / 2011-12)

Usual Status (US) Unemployment Rate: 5.6%.
Current Daily Status (CDS) Unemployment Rate: 7.3%.

Poverty Trends (General)

Poverty concentration is high in major states of India.
Rate of fall in urban poverty is generally higher than that in rural poverty.

Bihar

Consistently had the maximum percentage of population below the poverty line (e.g., Planning Commission 2011-12, NITI Aayog MPI, NFHS-5 2019-21).

Other states with high poverty ratios include Jharkhand, Uttar Pradesh, Madhya Pradesh, Chhattisgarh, and Odisha.
As per NITI Aayog's National Multidimensional Poverty Index (PHR, descending order): Bihar > Uttar Pradesh > Madhya Pradesh > Rajasthan.
As per NFHS-5 (Multidimensionally poor 2019-21, descending order): Bihar > Jharkhand > Meghalaya > Uttar Pradesh.
Commonly cited poorest states (depending on survey/year): Bihar, Jharkhand, Uttar Pradesh.

Goa

Frequently records the minimum percentage of population below the poverty line.

Other states/UTs with low poverty percentages: Kerala, Himachal Pradesh, Delhi, Punjab.

Rural-Urban Differences (Household Consumption Expenditure Survey 2022-23)

Rural-urban difference in average Monthly Per Capita Expenditure (MPCE) is the lowest in Meghalaya.
Sikkim has the highest rural and urban MPCE.

The extent of poverty is highest among Scheduled Tribes (STs), followed by Scheduled Castes (SCs).
Tribals in states like Bihar, Odisha, Madhya Pradesh, and Maharashtra showed highest poverty incidence.

NSSO 70th Round (Situation Assessment Survey of Agricultural Households)

In Kerala, over 60 percent of agricultural households reported to have received maximum income from sources other than agricultural activities, indicating diversified rural economy.

Structural Unemployment

Arises from fundamental shifts in the economy (e.g., technological changes, shifts in demand for products, industrial restructuring). Workers lack skills required for new jobs or are geographically mismatched. It is a major type in India.

Disguised Unemployment

Occurs when more people are employed in an activity than are actually required, such that the marginal productivity of the additional workers is zero. Predominant in India's agricultural sector and rural areas; often perennial.

Educated Unemployment

When educated individuals cannot find jobs matching their qualifications or any job at all, due to mismatch between skills imparted by education and industry demands, or insufficient job creation.

Frictional Unemployment

Short-term unemployment occurring when people are temporarily between jobs, entering the workforce, or searching for new jobs.

Seasonal Unemployment

Occurs during specific seasons of the year when demand for labor is low (e.g., in agriculture, tourism, construction).

Cyclical Unemployment

Arises due to fluctuations in the business cycle (e.g., economic recessions or depressions lead to reduced demand and job losses).

Major Causes of Unemployment in India

Rapid population growth, lack of skill development/skill mismatch, inadequate manpower planning, slow industrial growth, underemployment in agriculture.

Bulk unemployment in India is observed in rural areas, predominantly characterized by disguised and seasonal forms.