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Trends in Poverty

South Asia is home to the largest number of poor in the world, and India accounts for the largest percentage of the region’s share. The long-term performance of the Indian economy with respect to poverty reduction has been mixed, with poverty actually increasing in the first two decades after India became independent in 1947. However, there has been a sustained reduction in poverty since the 1970s. Figure 1 below shows trends in poverty incidence over four decades, measured by the Head Count Ratio of people under the national poverty line. Rural poverty declined from 55.7 percent in 1974 to 37.4 percent in 1991, while urban poverty fell from almost 48 percent to 33.2 percent during the same period, with the major proportion of this decline occurring between 1978 and 1987 (Appendix 1). Estimated poverty rates increased after the macroeconomic crisis in 1991, though these estimates were based on a relatively smaller sample.

The latest estimates for poverty in India, for 1999-2000, are deliberately not included in figure 1 since they are at the center of considerable controversy. According to these estimates, poverty in India had declined to 27.1 percent in rural areas with a national figure of 26 percent. However, the most recent household expenditure survey used a different methodology, resulting in a lack of comparability between the latest estimates and all earlier ones. The debate surrounding the latest poverty estimates in India is quite intense and wide-ranging, though largely arid at this stage given the fundamental lack of comparability between the latest estimates and those before. In a widely cited analysis, using official poverty lines of the Planning Commission, Deaton (2001) finds poverty in India declined from 36.2 percent in 1993-94 to 28.8 percent in 1999-2000. Unfortunately, though, the actual status on poverty in India as of date is ambiguous, with considerable skepticism attached to official figures.

Even with the latest questionable estimates, India remains the epicenter of poverty, both within South Asia and in the world, with as many as 259 million people below the national poverty line. In terms of the international poverty line of USD 1 per day (measured at 1993 purchasing power parity exchange rates), there are 358 million poor in India. If instead we use the norm of USD 2 per day, almost 80 percent of India’s vast population is below poverty line, (World Bank (2003)).

In terms of the non-income dimensions of poverty too, India continues to display intense poverty with relatively poor indicators of social and human development relevant to the MDGs such as infant and maternal mortality, literacy levels, and gender inequalities, (Table 1). To the extent Poverty Targeted Programs (PTPs) can ameliorate these non-income dimensions of poverty, as is often their stated objective, these data only serve to highlight the importance and necessity of well functioning PTPs in the country.

Table 1[PDF: 531.2kb] | 53 pages]

Poverty in India is overwhelmingly rural, with more than 70 percent of the poor in rural areas. As might be expected, small and marginal farmers and landless rural labor are important contributors in aggregate poverty. Poverty is also disproportionately higher in population groups belonging to Scheduled Tribes (STs) and Scheduled Castes (SCs), (see table 2 and Box 1 below).

Table 2: Characteristics of the poor
(Percentage of rural households below the poverty line, 1983, 1987-88, 1993-94)

Livelihood Category 1983 1987-88 1993-94
1 Self-employed: Agriculture 38.99 35.88 27.11
2 Self-employed: non-Agriculture 42.89 36.11 29.13
3 Rural labor: Agriculture 63.2 59.63 50.56
4 Rural labor: non-Agriculture 44.13 43.66 34.62
5 Others 29.8 25.4 23.27
6 All households 46.8 42.25 34.7
7 Female-headed households - 41.1 32.7
Source: Long and Srivastava (2002)

Box 1: The Poor, the Very Poor and the poorest

ADB's Participatory Poverty Assessment in Kerala (2002) differentiated between the characteristics of the poor, the very poor and the poorest.

"Although the poor may have a small plot and hut to live in, they do not have basic amenities and physical assets."

"The very poor… are those who do not have more than one source of income, however irregular that income might be." The very poor are frequently engaged in casual coolie jobs which do not yield steady income. The very poor include those who have lost everything on account of fire or other disasters. This type of poverty… could be a temporary state, provided the victim has 'social capital' to leverage government and community resources to rebuild their lives."

"The majority of these communities [poorest] belong to various tribes who live in remote forest areas. There is also a significant proportion of Scheduled Castes… who depend excessively on the forests for their livelihood. Families where the head of household is either mentally or physically challenged, or too old or chronically sick to work would fall into the category of the poorest. There are some women-headed households where the dual task of earning a livelihood and managing the family erodes the earning capacity of women. Then we have beggars who are totally destitute and are categorized as the Poorest."
(adapted from Long and Srivastava (2002))

Download this Discussion Paper [ PDF 531.2KB| 53 pages ].

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    The views expressed in this paper are the views of the authors and do not necessarily reflect the views or policies of the Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.

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