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  • In India, the identification process of persons below the poverty line has been put to a controversy for the last few years. Planning Commission adopted the survey of National Sample Survey Organisation (NSSO) as a basis for defining poverty line and determining the number of persons below it.
  • On the basis of these criteria, Planning Commission estimated 18.96% of total population below the poverty line for the year 1993-94.
  • Later, the expert group under the chairmanship of Prof. D.T. Lakadawala found earlier estimates of poverty unreliable and suggested an alternative approach for identifying poor in which different poverty-line was determined for different states on the basis of price level of that particular state.
  • The expert group suggested that it will be most suitable to rely on the disaggregated commodity indices for Consumer Price Index for Agricultural Laboures (CPIAL) to update the rural poverty line and a simple average of suitably weighted commodity indices of consumer price index for industrial workers (CPIIW) for updating urban poverty line.
  • The poverty in India is measured by a poverty line that is probably one of the most disputed and incessantly attacked measure in the world.
  • The World Bank’s controversial poverty line has its origins in the Indian model. it is simply what can be called a “starvation line”, a line that accounts for the feeling of satiety: measured in calories.


  • 50% of Indians don’t have proper shelter;
  • 70% don’t have access to decent toilets;
  • 35% of households don’t have a nearby water source;
  • 85% of villages don’t have a secondary school;
  • Over 40% of these same villages don’t have proper roads connecting them.

Despite the country’s meteoric GDP growth rate (about 9%), poverty in India is still pervasive; especially in rural areas where 70% of India’s 1.2 billion population live.

lt is one of the fastest growing economies in the world and yet its riches are hardly redistributed across the population.

It spends only 1% of its GDP on health, which is half that of China. While we are comparing public expenditure, contrast this with Russia and Brazil, whose spending on health is around 3.5% of their respective GDPs.


  • The causes of poverty in India are nothing short of complex but a lot of progress has been made to tackle them. The economic reforms of 1991, despite spurring a huge growth of the economy, have left the country with terrible inequalities: within cities as well as between urban and rural areas.
  • They were the best opportunity to seriously tackle the causes of poverty in India and more specifically rural poverty. With two thirds of the population living in rural areas and some 500 million poor, even urban poverty stems from the rural migrations to the city.
  • It is said that “a country is poor because it is poor”. Low level of saving reduces the scope for investment; low level of investment yields low income and thus the circle of poverty goes on indefinitely.
  • Poverty is a multi­dimensional social problem. Its causes are varied.
  • Climatic conditions constitute an important cause of rural poverty. The hot climate of India reduces the capacity of people to work for which production severely suffers.
  • Frequent flood, famine, earthquake and cyclone cause heavy damage to agriculture. Moreover, absence of timely rain, excessive or deficient rain affect severely country’s agricultural production.

    The following demographic factors are accountable for poverty in India.

Rapid growth of population:

  • Rapid growth of population aggravates the poverty of the people. The growth of population exceeds the rate of growth in national income.
  • Population growth not only creates difficulties in the removal of poverty but also lowers the per capita income which tends to increase poverty.
  • The burden of this reduction in per capita income is borne heavily by the poor people. Population growth at a faster rate increases labour supply which tends to lower the wage rate.

Size of family:

  • Size of the family has significant bearing on poverty. The larger the size of family, the lower is the per capita income, and the lower is the standard of living.
  • The persistence of the joint family system has contributed to the health and earning capacity of the ruralites.

Low agricultural productivity:

  • Poverty and real income are very much interrelated. Increase in real income leads to reduction of the magnitude of poverty.
  • So far as agricultural sector is concerned, the farmers even today are following the traditional method of cultivation. Hence there is low agricultural productivity resulting in rural poverty.

Unequal distribution of land and other assets:

  • Land and other forms of assets constitute sources of income for the ruralites. But, unfortunately, there has been unequal distribution of land and other assets in our economy.
  • The size-wise distribution of operational holdings indicates a very high degree of concentration in the hands of a few farmers leading to poverty of many in the rural sector.

Decline of village industries:

  • At present consequent upon industrialization new factories and industries are being set up in rural areas. Village industries fail to compete with them in terms of quality and price.
  • As a result they are closed down. The workers are thrown out of employment and lead a life of poverty.

Immobility of labour:

  • Immobility of labour also accounts, for rural poverty. Even if higher wages are offered, labourers are not willing to leave their homes.
  • The joint family system makes people lethargic and stay-at-home. The rural peoples are mostly illiterate, ignorant, conservative, superstitious and fatalistic.
  • Poverty is considered as god-given, something preordained. All these factors lead to abysmal poverty in rural India.

Lack of employment opportunities:

  • Unemployment is the reflection of poverty. Because of lack of employ vent opportunities, people remain either unemployed or underemployed.
  • Most of these unemployed and underemployed workers are the small and marginal farmers and the landless agricultural labourers.


  • Education is an agent of social change and egalitarianism. Poverty is also said to be closely related to the levels of schooling and these two have a circular relationship.
  • The earning power is endowed in the individual by investment in education and training. But this investment in people takes away money and lack of human investment contributes to the low earning capacity of individuals.
  • In this way people are poor because they have little investment in themselves and poor people do not have the funds for human capital investment.

Caste system:

  • Caste system in India has always been responsible for rural poverty. The subordination of the low caste people by the high caste people caused the poverty of the former.
  • Due to rigid caste system, the low caste people could not participate in the game of economic progress. A Shudra was not allowed to become a trader and a Vaisya could earn his bread only by trade.
  • Birth would decide their occupation and their economic fate. “Caste system acted as a springboard for class exploitation with the result that the counterpart of the poverty of the many is the opulence of the few. The second is the cause of the first.”

Joint family system:

  • The joint family system provides social security to its members. Some people take undue Advantage of it. They live upon the income of others.
  • They become idlers. Their normal routine of life consists in eating, sleeping and begetting children.
  • In this way poverty gets aggravated through joint family system.

Social customs:

  • The ruralites spend a large percentage of annual earnings on social ceremonies like marriage, death feast etc. As a result, they remain in debt and poverty.

Growing indebtedness:

  • In the rural sector most of the ruralites depend on borrowings from the money­lenders and land-lords to meet even their consumption expenses.
  • Moneylenders, however, exploit the poor by charging exorbitant rates of interest and by acquiring the mortgaged land in the event of non-payment of loans.
  • Indebted poor farmers cannot make themselves free from the clutches of moneylenders. Their poverty is further accentuated because of indebtedness.
  • Such indebted families continue to remain under the poverty line for generations because of this debt-trap.


Indian Economy

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