Is Poverty Relevent for Growth ???
--> Posted on 2009-08-19 08:33:46 By Har Amol Singh
Below Poverty Line (BPL), the three words of a hell. We rarely spare a thought for those living Below the Poverty Line and what life means to them. Government claims that number of such people and families is decreasing slowly, and yes it is, BUT very slowly. These are the people who just get below that a dollar a day, sleep empty stomach and get lost in the over a billion crowd of India.
India has made notable progress in terms of income and human poverty reduction over the decades, particularly in the 1990s. In spite of this, one third of the population is still below the poverty line. In addition, a fifth of the population with income above the poverty line is vulnerable to receding back into poverty due to unexpected income loss and other shocks. The challenges of reducing income poverty for this huge mass of population and creating employment opportunities for them are enormous. There are also big challenges in reducing human poverty and enhancing capability.
To realize the country’s growth potentials, there is a need for increasing investment through raising domestic public and private savings and generating more external resources. Also in particular, there is also a need for upgrading the stock of infrastructure to support diversification of production, raise productivity, expand trade, provide basic services and reduce poverty. There are many parameters on which poverty depends such as education, agriculture, employment level, dependence on agriculture, etc. These have been discussed as below,
Poverty Index
When people like Lakshmi Mittal, Azim Premji, Anil and Mukesh Ambani have successfully placed themselves within the 100 richest billionaires of the World in the Forbes listing, India has also placed herself as the 48th poorest nation with 31.4 percent value in the Human Poverty Index (HPI). Barbados tops the rank in the HPI among the developing countries with a value 2.5 percent. According to the report 16 percent of the population still remains and live with out having sustainable access to improved water resources and there is a probability at birth for 15.3 percent of the population of not surviving to the age of forty. In India 34.7 percent of the population live with an income below $ 1 a day and 79.9 percent below $ 2 a day. According to the planning commission report 26.1 percent of the populations live below the poverty line. Although we claim that the ratio of poverty has come down from 53.9 percent during 1958 to 26.1 percent during 2000 but the absolute number reveals the reality which depicts that the incidence of poverty has indeed increased from 220.6 million in 1958 to 260.3 million during 2000. Nearly nine out of 10 pregnant women aged between 15 and 49 years suffer from malnutrition and about half of all children (47%) under-five suffer from underweight and 21 percent of the populations are undernourished. India alone has more undernourished people (204 million) than all of sub-Saharan Africa combined. Recognizing the access to food, the former Prime Minister noted that 268 million people are still considered food insecure in India.
Education Level:
Education happens to be the least a government can provide to its citizens, else the cost of not providing education will me much more dearer to a government and the nation’s future. Education level has a direct impact on the economic progress of the country and thus there are many reasons to find a link between education and economic growth. Few of the most basic reasons are:
1. Intelligent electorate choice: The first this an educated man would do is to stop voting for uncommitted, uneducated goons behind the grab of statesmen.
India, which is plagued by the mafiya and the gunda raj and who have direct linkages with the politics makes sure that light of education doesn’t fall upon these masses so as to keep them in dark. This enables them to muster votes of the uneducated by alcohol, money or power. There is a growing distress in the educated population of the country who form the minor part as compared to the large pool of uneducated vote bank.
2. Standard of Living: Rise in Standard of living has been directly linked to the level of education. High growth and rapid progress is not possible in a society whole population is not literate. There is a there is a link between scientific advance and the way in which education has facilitated the development of knowledge. People with only very limited education often find it difficult to function at all in advanced societies. Education is needed for people to benefit from scientific advance as well as to contribute to it.
3. Income Level: If people with education earn more than those without, shouldn’t the same be true of countries? If not the rate of change of output per hour worked, at least the level of output per hour worked in a country, ought to depend on the educational attainment of the population. If spending on education delivers returns of some sort, in much the same way as spending on fixed capital, then it is sensible to talk of investing in human capital, as the counterpart to investing in fixed capital. The process of education can be analysed as an investment decision.
According to a research poverty is related to literacy by the fallowing equation:
Poverty = 63.38 – 0.468 ( Literacy Rate)
Thus, this suggests that a 1 % increase in literacy decrease poverty by 0.46 percent. To put this in perspective, if we are able to increase literacy by 10 percent, poverty will get reduced by almost 5 percent. However, when we talk about literacy, we should talk about functional literacy. According to a survey by, Aurobindo Smriti Sishu Udyan, an NGO in villages of Bengal and Orrisa, ‘the functional literacy rate in India does not exceed 37.5 percent.’* This “fictional Literacy” includes the ability of not only to just read, right or sign one self’s name, goes well beyond to the use of education in daily lives. Hence, if stress is laid on quality education, the effect of literacy on poverty will be much more as given by the equation. Hence it will be more effective in reducing the poverty and will help in national growth.
Health and Poverty
"The biggest enemy of health in the developing world is poverty." Kofi Annan
Health issues are directly related to poverty. Poverty creates ill-health because it forces people to live in environments that make them sick, without decent shelter, clean water or adequate sanitation. As per the data provided in the human development report, the total infant mortality rate for India is 67 deaths/1,000 live births and the maternal mortality ratio is 540 per 100,000 live births. Due to various causes also 93-children/ 1000 live births die before they reach the age of five.
The Millenium Development Goals (MDGs) aim towards the reduction of maternal and child mortality. Low incomes, relatively higher prices, bad healthcare and neglect of basic education can all be influential in causing and sustaining the extraordinary level of under nutrition in India. Yet, it has been shown that, even after taking note of low levels of these variables, “one would have expected a much higher level of nutritional achievement. In most of Asia where the Green Revolution boosted food supplies, hunger and undernutrition have continued to decrease since 1981.
Trends in HDI, HPI, Socio-economic and demographic variable: As per the reports of UNDP on HDI, India’s value has been improved during the decade, but its rank has not improved much. The HPI is still high due to the high percentage of undernourished children. The rank of HPI has come down from 59 in 1997 to 55 in 2004. The States with high incidence of human poverty are Bihar, Orissa, Madhya Pradesh and Rajasthan, which had lower HD.
Healthier workers are likely to be able to work longer, be generally more productive than their relatively less healthy counterparts, and consequently able to secure higher earnings than the latter, all else being the same; illness and disease shorten the working lives of people, thereby reducing their lifetime earnings. Better health also has a positive effect on the learning abilities of children, and leads to better educational outcomes (school completion rates, higher mean years of schooling, achievements) and increases the efficiency of human capital formation by individuals and
households.
Malnutrition And Relationship With Poverty
Malnutrition has long been recognized as a consequence of poverty. It is widely accepted that higher rates of malnutrition will be found in areas with widespread poverty. Malnutrition is the result of marginal dietary intake compounded by infection.
It is estimated that nearly 30% of infants, children, adolescents, adults and elderly in the developing world are suffering from one or more of the multiple forms of malnutrition, 49% of the 10 million deaths among children less than 5 years old each year in the developing world are associated with malnutrition, another 51% of them associated with infections and other causes.
Poverty declined during the 90s to below 30 per cent, especially in the country’s rural areas. But this impressive record hides the uncomfortable fact that 193 million people are still poor and await a change in their fortunes. Poverty has declined mainly because of better economic growth, improvement in real wages and the spread of poverty alleviation programmes.
Mortality has fallen by 50 per cent and fertility by 40 per cent, but malnutrition has come down by just 20 per cent. The Tenth Five-year Plan notes ruefully that under-nutrition among pregnant women and low birth weight has not shown any appreciable decline. The country has less than 20 per cent of the world’s children but accounts for over 40 per cent malnourished children.
Per Capita Income, Poverty and Growth
It is a fact that richer the people, lesser will be the poverty, and higher will be per capita income. This fast is bolstered by the fact that within India, states which have higher per capita income have lover poverty as compared to states whose per capita incomes are lower. According to the Indiastat.com, per capita income of Punjab is highest with about $6000 while that of Bihar is at about $3000. Correspondingly the poverty in Punjab is about 5 percent of its population while that of Bihar, it is at 40 percent. At the same time growth rates of these states depict the same story. Poverty ridden state has a growth rate of only about 1 percent while growth rate of Punjab stands at about 3.2 percent. This shows a clear picture of Poverty: i.e. lesser the poverty, higher is the growth and higher is the per capita income. Higher per capita income means better standard of living.
Poverty and Savings
Savings are very important in a nations economic growth and development. Higher savings leads to higher investment and thus higher circulation of money into the economy. This leads to a higher multiplier effect thereby nudging the growth up. However, if the population is living in destitution, they won’t have enough money to sustain their basis needs leave apart the savings.
If we look at the past trend of India, as and when poverty has decreased, savings have increased. In 1991, we had 45 percent of our population below poverty line and our savings were meager 20 percent with the country growing at the Hindu Growth Rate of 3 percent. With the decrease in poverty to 26 percent below poverty line and stress on savings by the government our savings rates have risen to 37 percent in 2007 in simultaneous with the growth of 8 to 9 percent.
Recommendations
1. Promoting Entrepreneurship and private investment
The private sector leads in the creation of jobs, and tomorrow’s jobs will come in large measure from the growth of entrepreneurship and of small and medium-sized enterprises. An educational system and policy environment that promotes a culture of entrepreneurship and a business climate that encourages enterprises to start up and grow is essential to a thriving economy.
2. Promoting employability and adaptability
Investing in people and people’s investment in their own education and job skills increase the rate of economic growth. This is because education increases productivity and the ease with which new technologies can be absorbed. Education, skills, and the ability to learn also expand opportunities beyond a narrow range of occupational choices: they increase employability, in short. This, in turn, facilitates people’s ability to adapt to change – their adaptability – and improves the functioning of the labour market.
3. Assisting the working poor more directly by generating decent and productive employment
Policies need to recognize that employment is central to the objective of poverty reduction, and, for the working poor, initiatives to increase their productivity, level of the decency of their work, and income-generating capacity, particularly in the informal economy, are key elements of an employment strategy. A “trickle-down” approach to poverty reduction is ineffective. So, too, is redistribution alone. That there need be no trade-off between decent work and poverty reduction through employment can be illustrated by initiatives directed toward the working poor.
4. Ending discrimination in the labour market
Violations of human rights have macroeconomic costs that an employment strategy can address. The evidence is particularly clear in the case of discrimination of whatever kind. Discrimination restricting access to an education or the labour market, choice of occupation or to credit undermines output and productivity growth by preventing the most productive job matches from occurring. Ending discrimination in education against women, for example, tends to lead to higher female earnings, greater investment in healthier and better-educated children, and a lower rate of population growth – all determinants of future economic growth. Beyond overt discrimination, institutional constraints that discourage the labour force participation of population groups are appropriate areas of reform.
Conclusion
Studying the various parameters, it becomes apparent that poverty major role in economic growth of a country. It has an inverse relationship with the various parameters such as GDP, Health, Malnutrition, employment, etc. Poverty and its effect cannot be studied in isolation but in connection to other parameters as well. Poverty brings with itself destitution, hunger, sufferings apart from holding the country back.
Other factors such as crime, equality, etc also have its roots in poverty. So if a country has to progress and reach its goal of providing equality, opportunity to all, it has to consider its poor people and aim to reduce the menace of poverty from its soil.
As said by Pandit Jawhar Lal Nehru in his speech at the midnight of independence, “the service of India means the service of millions who suffer , it means ending poverty and ignorance and disease and inequality of opportunity…. So long as there are tears and sufferings, so long our work will not be over.”
There is a need to realize economic prosperity for a nation is not about economics alone. A nation cannot be run like a Departmental Store with the only motive of profit maximization. Economic prosperity encompasses social development, which is crucial to the soul of a nation.
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