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POVERTY IN PUNJAB: A DISTRICT LEVEL STUDY

Review of Literature 18

CHAPTER 2

REVIEW OF LITERATURE

Review of literature helps the researcher not only in understanding the issues involved

but also in planning and execution of the experiences of others. Further, the knowledge of

possible gap of empirical research provides cue to plug those gaps to the extent possible

which in turn helps in making empirical research socially more meaningful. The present

chapter reviews the empirical findings of some of the studies related to poverty, its problems

and prospectus. Major issues that emerge from empirical studies on poverty concern defining

and measuring poverty, extent of shift and factors affecting it, its spatial distribution,

inconsistency between official poverty estimates and other estimates, and finally an

evaluation of the performance of poverty alleviation programmes. However, it is of course,

not possible to refer and comment in detail on all the studies conducted but a brief review of

the selected studies is given below.

2.1 Defining and Measuring Poverty

Various studies have been conducted in India on the basis of consumption

expenditure definition of poverty given by Expert Group of Planning Commission (1962),

calorie criteria recommended by Task Force (1977) and state specific poverty line proposed

by Expert Group of Planning Commission (1993). Studies reviewed below concentrate on

defining and estimating poverty (a brief of these studies is presented in Table 2.1).

Minhas (1970) estimated poverty during 1956-57 to 1967-68 on the basis of the

definition given by the Expert Group of Planning Commission (1962). Dandekar and Rath

(1971), Bardhan (1973), Rudra (1974) and Ahluwalia (1978) defined poverty on the basis of

calorie criteria. Ravallion and Datt (1996) used three poverty measures: Headcount Ratio,

Poverty Gap Index and Squared Poverty Gap Index to estimate poverty during 1950-90.

Mehta and Venktaraman (2000) found that the people on “Official Poverty Line”

had means sufficient to acquire only 1968 calories per capita per day in the rural areas and

1800 per capita per day in urban areas which is quite less than required i.e. 2400 calories per

capita per day in rural and 2100 calories per capita per day in urban areas. In India, this is due



to changing food preferences. Many of the poverty indices used so far have been criticised on

the ground that they do not take into consideration non- income variables, which are essential

for preparing poverty index. They opined that much of the problem on measurement of

poverty has been on poverty measures. Further, most commonly used poverty measures are

Headcount Ratio, Poverty Gap Index, Sen Index, Foster-Greer-Thorbecke Index, Human

Poverty Index, and Capability Poverty Index. Normally poverty in India is measured by

‘Headcount Ratio’. The incidence of poverty has been estimated by the Planning

Commission in India at the state level using Headcount Ratio as a measure of poverty.

Sundaram and Tendulkar (2003) used Headcount Ratio, Poverty Gap Index and

Squared Poverty Gap to measure change in poverty ratio during 1994-2000.Gaur (2005)

using deprivation indices for three parameters, i.e. per capita state domestic product, per

capita expenditure on medical and public health, per capita expenditure on education,

prepared inter-state human poverty indices for 20 major states. He applied methodology of

deprivation index as developed by Anand and Sen (1994).

Gupta (2005) found that income and consumption measures failed to confine

significant aspects of deprivation experienced by the poor. He applied Human Poverty Index

and Capability Poverty Index to estimate poverty for different states. He estimated that

human poverty ranged between 23 per cent in Kerala to 54 per cent in Bihar during 1991-93.

Ray and Lancaster (2005) estimated poverty under alternative definitions of poverty

line i.e. nutrient based poverty estimates. The authors used P1, P2, P3, and P4 Headcount

ratios for alternative poverty lines: PL1-Official Poverty Line (calculated using consumer

expenditure data of NSSO); PL2-Calorie Norm Poverty Line ( based on age and gender

specific calorie requirement); PL3–Nutrient Price Based Food Expenditure Poverty Line

(calculated as per the recommendation of Indian Council for Medical Research);and PL4-

Nutrient Price Based Total Expenditure Norm Poverty Line ( obtained by adding an

allowance for non-food expenditure to PL3). They calculated Headcount ratios for female

headed households and SC households separately. Headcount ratios (P1 to P4) are 20.5, 47.5,

48.1, 36.6 respectively for female headed households and 33.8, 64.4, 59.6, 44.7 respectively

for SC households in rural areas. It is 19.7, 34.3, 30.6, 15.7 for female headed households and



32.6, 46.1, 47.4, 27.5 for SC households, respectively in urban areas. Their results show

higher headcount ratios (P1-P4) among SC households than among female headed

households. Further P2 based on Calorie Norm Poverty (PL2) is observed maximum for all

studies in rural as well as in urban areas. Their study also underlines the importance of the

public distribution system. The significance of this study lies in considering non-food

expenditure along with food expenditure for constructing poverty line. Further, their

projected poverty line includes disparity in food preferences due to regional, class, caste and

other non-demographical factors that official poverty line did not consider.

Sen and Chakarborty (2005) computed human poverty and capability poverty index

for 1993-94 and 1999-2000. Their study indicate that rank co-efficient of correlation between

income poverty and capability poverty is very high (0.68 and 0.59 for 1991-92 and 1998-99,

respectively).

Himanshu (2010) first explained the methodology of expert group approach and then

suggested a new poverty line for India. The Planning Commission’s estimates of poverty are

based on food expenditure plus implicit allowance for non-food expenditure. For food

expenditure, it relies on Recommended Dietary Allowances (RDA) i.e. 2400 calories per

capita per day for rural areas and 2100 calories per capita per day in urban areas. While

calculating implicit allowance for non-food expenditure, it is assumed that health and

education are to be provided by the state. After that, state-wise poverty line is calculated from

all India poverty line by applying Fisher’s indices. Then state-wise poverty line is updated by

using Consumer Price Index for Agriculture Labour (CPI-AL) for rural areas and Consumer

Price Index for Industrial Workers (CPI-IW) for urban areas. Official poverty estimates for

2004-05 are 28.3 per cent in rural and 25.7 per cent in urban areas. But NSS estimates are

79.8 per cent for rural areas and 63.9 per cent for urban areas. Looking at this discrepancy,

the paper proposes a new set of poverty line using consumption expenditure survey of 2004-

05. For constructing new poverty line, the author used NSS data for food, fuel, clothing,

footwear which account for 75.8 per cent of consumption of poor; and for education

expenditure, employment unemployment survey (EUS) of NSS 61st round has been used. For

health expenditure, the author has used 60th round survey of NSSO. All this cover 90 per cent

of consumption basket of the poor. It was assumed that the actual food expenditure of poor is



sufficient to afford nutritionally balanced diet as suggested by the National Institution of

Nutrition (NIN). Also, he suggests that the new poverty line should be based on Mixed

Reference Period consumption.

Thus, the theoretical literature on defining and measuring poverty includes various

studies by several economists like Minhas (1970), Ojha, Dandekar and Rath (1971), Bardhan

(1973), Rudra (1974), Ahluwalia (1978), Ravallion and Datt (1996), Malik (2000), Sundaram

(2001), Rajan (2002), Mishra and Rao (2003), Sundaram and Tendulkar (2003), Sundaram

and Tendulkar (2004), Gaur (2005), Gupta (2005), and Himanshu (2010). They computed

the proportion of people below poverty line by headcount ratio. Further, various studies have

been conducted which stressed the need to develop poverty index based on income and non-

income variables. Economists like Meenakshi and Ray (2002), Meenakshi and

Vishawanathan (2003), Radhakrishna (2004) and Ray and Lancaster (2005) define poverty

on the basis of nutrition criterion.

2.2 Extent of Shift and Factors Affecting Poverty

Various studies have concentrated on the shift in the percentage of Indian population

below poverty line. These studies have shown that poverty declined during 1990s. However,

there is disagreement regarding the extent of decline in poverty (a brief of the study has been

presented in Table 2.2). The difference in the extent of poverty decline is ascribed to various

reasons like difference in methodologies, measures and samples etc.

Ravallion and Datt (1996) using time series of consistent consumption for 40 years

(1950-90) and on the basis of poverty measures made an attempt to assess the extent to which

India’s poor shared the country’s economic growth. Three poverty measures used by the

authors for this study are: the headcount index; the poverty gap index; and the squared

poverty gap index. The results of the study broadly indicate that rural growth reduced

poverty; urban growth benefitted only urban poor; and growth in the primary and tertiary

sectors reduced poverty both in rural and urban areas; and finally it is concluded that

secondary sector growth did not reduce poverty in either of the rural or urban areas.



Table 2.1: Defining and Measuring Poverty

Author/

Year

Study

Period

Study

Level Methodology

Minhas

(1970)

1956-57 to

1967-68

National • He estimated poverty on the basis of

definition given by Expert Group Planning

Commission, 1962.

Ravallion and

Dutt

(1996)

1950-90 National • They used three poverty measures: -

Headcount Ratio, Poverty Gap Index and

Squared Poverty Gap Index to estimate

poverty during 1950-90.

Mehta and

Venktaraman

(2000)

National • He found that “Official Poverty Line” was

adequate to purchase only 1968 calories in

rural areas and 1800 calories per capita per

day in urban areas

Sundaram and

Tendulkar

(2003)

1994-00 National • They used Headcount Ratio, Poverty Gap

Index and Squared Poverty Gap to measure

poverty ratio.

Gaur

(2005)

1981-02 National • He prepared Deprivation Index to depict

inter-state human poverty index for twenty

major states.

Gupta

(2005)

1991-93 State • He applied human poverty index and

capability poverty index to estimate poverty.

He found that in different states poverty

ranged from 23 per cent to 54 per cent.

Ray and

Lancaster

(2005)

1987-88 to

1999-00

National • They considered non-food expenditure also

for constructing poverty line. Their projected

poverty line incorporated disparity in food

preferences due to regional, class, caste and

other non-demographical factors.

Sen and

Chakarborty

(2005)

1993-94 to

1999-00

National • Their study specifies that income poverty and

capability poverty has very high rank co-

efficient of correlation.

Himanshu

(2010)

2004-05 National • His paper proposes a new set of poverty line

using consumption expenditure survey of

2004-05.



Malik (2000) using data based on NSSO from 1952 onwards showed that there was

no long-term trend in poverty reduction from 1952-1973. But, thereafter up to 1986-87, a

sharp decline in poverty has been observed. The decline however at a lower rate has been

reported to continue till 1989-90. The study also showed that there took place a sharp

increase in poverty in 1992 which declined after 1993-94. Trends in rural poverty have been

found to observe a close proximity with trends in agricultural wages. The author pointed out

the fact that the period of decline in poverty is one when rural poverty declines faster than

urban poverty. He found that the initial impact of economic reforms undertaken by the

government in 1990s was adverse. But subsequently a reversal of adverse trend has been

observed.

Sundaram (2001) examined the incidence of poverty on the basis of the monthly per

capita consumption expenditure. The author developed empirical relationship between

employment and poverty in 1990s. He compared data for 1993-94 with that of 1999-2000. He

computed the proportion of population below poverty line by gender, age and rural/ urban

location. The study estimated 7.5 per cent decline in incidence of poverty among agricultural

labour households, 6 per cent fall among other labour households, and 2.3 per cent fall

among self-employees. Overall, the study emphasized that the results based on NSSO data

55th round confirmed the direction of change i.e. decline in poverty over 1990s. The same

conclusion was found valid for major states. The study found that, rural poverty and urban

poverty declined in eight out of the fifteen major states.

Rajan (2002) studied the impact of international trade on 100 developed and

developing countries during 1960-90. The author provided the empirical evidence that the

countries that managed to reduce poverty were those that have adopted trade liberalization

policies. Trade leads to rapid growth and it reduces poverty at the same time. But only

growth cannot be taken as a sufficient condition for poverty reduction, so the author further

suggested the need of social safety nets to protect the poor from the bad impacts of

liberalization. He emphasized that trade liberalization should be backed by sound macro

policies, strong institutions and good investment environment.

Mishra and Rao (2003) made an attempt to show that trade liberalization accelerates

growth and thereby reduces poverty. The study, is based on cross- country regression



analysis from 1978-79 to 1999-2000 period. They discussed macro-economic policies such as

growth performance, investment, agricultural export, and recent policy developments in their

paper. The authors on the basis of their study prepared analytical framework and model

estimation. They examined relationship through auto regressive integrated moving average

method (ARIMA), in which the dependent variables are explained by their own past i.e.

lagged trends. The study shows that the lower tariff during the process of economic reforms

in 1991 reduced the relative prices of manufacturing. It influenced the terms of trade in

favour of agriculture and lifted private investment in agriculture. These have facilitated in

increasing the aggregate crop output over the period. The increase in agricultural output has

reduced rural poverty.

Sundaram and Tendulkar (2003) found that poverty declined during 1994-2000.

They examined rural and urban poverty separately for 15 states. For comparison they

resolved the problem of comparability of monthly per capita expenditure in 50th (1993-94)

round based on URP (uniform reference period) and 55th (1999-2000) round based on MRP

(mixed reference period) by re-computing the data of 50th round on the basis of MRP (mixed

reference period). While measuring changes in poverty over 1990s at the state-level, the

authors calculated the headcount ratio (HCR), i.e. size of the poor population; the poverty

gap index (PGI) i.e. the depth of poverty; and squared poverty gap (FGT) i.e. the severity of

poverty. The study found that poverty increased over the six years from 1993-94 to 1999-

2000 in Assam, Madhya Pradesh and Orissa. Assam recorded rise in poverty in terms of

HCR, PGI and FGT. Madhya Pradesh showed a rise in HCR, and a decline in PGI and FGT.

Orissa registered a decline in HCR, and rise in PGI and FGT. In the remaining 12 states, a

decline in poverty ratio has been observed. The weighted average of PGI on MRP (mixed

reference period) of 15 states declined from 0.0933 to 0.0653 and FGT declined from 0.0308

to 0.0202. The crux is that despite diversity across the states, poverty declined in 1990s.

Sundaram and Tendulakar (2004) examined the change in magnitude of poor in

Indian labour force between 1993-94 and 1999-2000. The authors estimated size of poor in

labour force in four segments: rural males, rural females, urban males and urban females.

They presented the gender, activity status, and rural urban composition of these groups based

on employment and unemployment for the 50th and 55th rounds of NSS. The study found that



poverty prevalence is more among rural and urban women workers than those for men. The

aggregate magnitude of working poor was estimated to be 93.9 million in rural India and 20.9

million in urban India in 1994. Total number of working poor was 114.8 million, which was

30 per cent of the working force. As per the estimates, from a level of 115 million, the

number of working poor declined by a little over 12 million, almost entirely in rural area. The

overall picture that emerged from the study is that there is a correlation between reduction in

poverty and education. Education endowment increases the productivity of workforce and

reduces poverty. Thus, the overall picture presented is that poverty declined in 1990s.

Mehta and Bhandari (2005) explored trends in poverty in Asian developing

countries. The paper examined trends in poverty in Asian countries using international

poverty line at less than $1 and $1.08 per day (a standardized global poverty line at 1993

purchasing power parity) and using national poverty line. The whole frame work shows that

poverty incidence has remained same between 1987 and 1993. After 1993, incidence of

poverty appears to have declined rapidly again (World Bank, 1997). The authors pointed out

that there are two causes of the low rate of poverty reduction in South Asia: first, low

economic growth in the poorest countries; and secondly, persistent inequalities (in income

and non-income dimensions) that prevented the participation of poor in growth. They

concluded that pro-poor, sustainable economic growth, social development, good governance

and micro finance can reduce poverty. Micro finance provides financial services to low

income clients, like landless marginal farmers or poor urban dwellers etc. Micro financing

has potential to increase the physical capital of poor and it builds human and social capital.

Himanshu (2007) found that poverty did decline during 1993-2005, but the annual

rate of reduction during this period had been lower than that of in 1970s and 1980s. The

author confirms the earlier findings that the 1990s has indeed been the lost decade for

poverty reduction. In this study, a little reduction in poverty has been observed in 1993-2000;

the bulk of decline having occurred in 1999-2005. Poverty declined faster during 1999-2005

but the annual rate of decline was lower than that of in the previous decade of 1983-1994.

The picture emerging from the poverty reduction during 1999-2005 shows that poverty

reduction at national level was due to poverty reduction in the states with above national

average poverty till 1999. Further, his research paper shows evidence of improvements in

non-income indicators during 1993-2005.



Thakur (2010) examined the impact of growth on poverty and income distribution.

He found that, at all India level, headcount ratio was 53.07 per cent in 1977-78 and declined

to 39 per cent in 1991. Inverse relation between growth and poverty has been observed in this

study. Quoting the IGIDR (Indira Gandhi Institute of Development and Research) estimates,

the author noticed that the Gini co-efficient was 27.71 per cent in rural areas in 1991. During

1997-98, it increased to 30.11 per cent in rural areas. Thus, with development, magnitude of

inequality has widened during post reform period, as per the study of the IGIDR, the World

Bank (1955), the Planning Commission (1977) and the Tendulkar estimates.

Some empirical studies in India like Ravallion and Datt (1996), Malik (2000),

Sundaram (2001), Rajan (2002), Mishra and Rao (2003), Sundaram and Tendulkar (2003),

Himanshu (2007), Mehta Rekha and Santosh Bhandari (2005) and Thakur (2010) have

observed reduction in poverty during the post reform period. Poverty reduction is observed to

be associated with economic growth. However, rate of reduction and factors affecting

poverty differ from study to study.

2.3 District Level Studies

A number of efforts have been made by researchers to investigate poverty at district

level (see Table 2.3 for a brief summary).

Mukherjee (2002) made an attempt to examine hunger at micro level. Using

secondary data with Participatory Learning and Action (PLA) techniques, he carried micro

study in 8 villages in various states. He found that while on the one hand we have the highest

production of food, and on the other, we have largest number of people going to bed hungry.

It is a harsher reality that the average Indian is hungry because they don’t have food to get

required nutrition. Even for 30 per cent of the poorest people, their food intake provides them

with only about 1600 calories.

Kozel and Parker (2003) reviewed the nature and evolution of poverty in Uttar

Pradesh (UP). The authors used data collected by NSS, 55th round, administrative records,

participatory studies and consultations. Along with the UP state sample of NSS, 55th round

data on a set of monitoring indicators was collected by the Government of Uttar Pradesh. For

the same households, a special poverty module (Schedule 99) was prepared. The new module

included information on many indicators, e.g. access to education, health services,

infrastructure (water, sanitation), and use of specific anti-poverty programme. The authors

found that poverty in UP is related to material deprivation, deprivation of human resources,



Table 2.2: Empirical Studies at a Glance: Extent of Shift and Factors Affecting Poverty

Author/ Year Study

Period Study Level

Data

Source Conclusion

Ravallion and Datt (1996)

1950-90 National Secondary • Rural growth reduced overall poverty.

• Urban growth reduced only urban poverty.

Malik (2000)

1952-94 National Secondary NSSO data

• The decline in poverty during the study period was due to decline in rural poverty faster than urban poverty.

Sundaram (2001)

1993-00 National Secondary data based on NSSO 55th round

• Rural poverty and urban poverty declined in the eight of the fifteen major states.

Rajan (2002)


• Trade liberalization policies reduce poverty.

Mishra and Rao (2003)


• The increase in private investment in agriculture has contributed to reduction in rural poverty.

Sundram and Tendulkar (2003)

1994-00 State Level Secondary • Despite increase in poverty in a few states, overall poverty declined in 1990s.

Sundram and Tendulkar (2004)

1993-00 National Secondary 50th and 55th round of NSSO data

• There is a correlation between reduction in poverty and education.

Mehta and Bhandari (2005)

1987 onwards

International Secondary • After 1993 incidence of poverty declined rapidly in Asian developing countries.

• Low economic growth and persistent inequalities were the two causes of the low rate of poverty reduction in poorest countries of South Asia.

Himanshu (2007)

1993-2005

National Secondary • Rate of poverty reduction was lower in 1993-05 in comparison to 1970s and 1980s.

Thakur (2010)

National Secondary • At all India level, headcount ratio was 53.07 per cent in 1977-78 and it declined to 39 per cent in 1991.



social contacts, voice and power. Poverty data for UP reveals considerable regional

differences, and shows that levels of poverty increases from west to east. The authors

concluded that programme and policies designed to redress poverty must be aware of its

various dimensions.

Murgai and Suryanarayan (2003) pooled central and state samples for Karnataka

from the NSSO 55th round to examine regional variations in poverty. Using official poverty

line, the authors estimated district-wise headcount ratios and poverty gap. The broad picture

that emerged from poverty estimates is that urban poverty in Karnataka is the same as at the

all India level, but it is higher than its rural poverty. The study also found concentration of

poor in northern districts and significant variation in poverty levels within divisions.

Krishna et al. (2004) selected 36 villages from three districts of Andhra Pradesh.

Almost all the selected villages had majority of SC, ST and OBC groups. Their study reveals

that 65.5 per cent of households in these villages were poor 25 years back and 63.5 per cent

are poor today; the net change is negligible. It is merely 1.9 percentage points. Further, 14.1

per cent of all households were found to have escaped poverty. At the same time, 12.2 per

cent of households were found to have simultaneously fallen into the trap of poverty over 25

years. The extent of poverty varied considerably from village to village. Percentage of

households in poverty decreased in 22 out of 36 villages, but it increased in the remaining 14

villages. A combination of factors i.e. ill health, health related expenses, social and

customary expenses, high-interest rate on private debt, large size of family, laziness and

drunkenness etc. were major causes of poverty. Jobs in private and government sectors,

irrigation, government assistance and new agricultural technologies helped in escaping

poverty. The authors suggested one set of policies to promote households to escape from

poverty, another and different set of policies to prevent descent into poverty. The author

suggested both sets of policies simultaneously to deal separately with these two trends.

Kohli (2005) conducted a study for whole of the state of Rajasthan as well as for its

different regions during 1987-88 and 1993-94. For the analysis of poverty, the state was

divided into four regions. The author computed region-wise different measures of poverty i.e.

HCR, PGI and FGT. The study found that rural poverty declined in all the regions. Highest

poverty was observed in southern Rajasthan. Regional variations increased during this

period. Rate of decline in urban poverty was less than rural poverty. Urban poverty increased

in the east and the south-east of Rajasthan. Increase in urban poverty was due to migration of

rural poor to urban areas. A social poverty index was constructed by the author. Positive rank

correlation co-efficient was found between economic poverty and social poverty. The author



concluded that if economic poverty is to be removed, policies should be made to reduce

social poverty. Further, growth does not trickle down to the poor, so development decisions

should be taken at micro level.

Sailbala (2005) made an attempt to study the pattern of poverty in rural Orissa and

role of education in reducing poverty. Using the secondary data for the year 1992-93, she

calculated percentage of families below poverty line by social groups, by income categories

and by occupation status. The study reveals that incidence of poverty was high among the

lower income categories, scheduled tribes and marginal farmers. It also found a strong

inverse relationship between education and poverty. The study suggested that the government

should educate people to promote their participation in poverty eradication programme.

Sidhu et al. (2005) made an empirical analysis of economic conditions of agricultural

labour in rural Punjab. On the basis of value of crop productivity, they divided districts of

Punjab in three regions, and selected one district from each region. They surveyed 150

agricultural labour households from three districts namely Fatehgarh Sahib, Bathinda and

Ferozepur. They calculated levels and patterns of income, distribution of income, levels and

pattern of consumption, distribution of consumption and incidence of poverty. Their focus

was on determinants of poverty. Their study estimated that 41 per cent of agricultural labour

was below poverty line. Their average propensity to consume was 1.07, which is greater than

one, implying that there is agricultural deficit. About 84 per cent of the households were

found under debt and it is to be noted that 85 per cent of their debt was from non-institutional

sources. Also, 84.88 per cent of debt was used for non-productive purposes. The study

recommended that income level of poor people can be increased by increasing wage rate and

creating opportunities of labour employment. Further, top priority should be given to

development of non-farm sector. They suggested that mass campaign should be launched

against intoxicants and conservative social values.

A thorough analysis of empirical literature on district level studies on poverty reveals

that there is variation in poverty level. Further, some of the district level studies endeavored

to examine extent of poverty by income group, social group and occupation categories. Other

studies examined the factors affecting poverty at district level. However, a few studies

concentrated on construction of composite poverty index. Under the thrust of poverty

reduction, most of the district level studies suggested that poverty decisions should be taken

at micro level and maximum participation of the poor should be ensured.



Table 2.3 : Empirical Studies at a Glance: State and District Level Studies

Author /

Year

Study

Period

Study

Level Data Source Conclusion

Mukherjee

(2002)

Haryana, U.P., West Bengal

Primary data of 8 villages

• 30 per cent of people took only about 600 calories.

• Despite surplus food production, a large number of people go to the bed hungry.

Kozel and Parker

(2003)

1993-00 Study of Uttar Pradesh

Secondary 55th round of NSSO Data, CSO Data

• By land 33.2 per cent, by education 31.1 per cent and by occupation 32.4 per cent people live below poverty line.

• In UP poverty was not only due to material deprivation but also due to poor human resource, inadequate social contacts.

Murgai and Suryanarayan

(2003)

1993-94 State Level Secondary 50th round of NSSO Data

• 16.8 per cent rural people and 22.6 per cent urban population is BPL.

• The urban poverty in Karnataka was at par with India, but it was higher than rural poverty level.

Krishna et al.

(2004)

2000 and 25 years ago (1975)

District Level

(Andhra Pradesh)

Primary Data of 36 Villages of 3 districts of Andhra Pradesh were surveyed.

• In Andhra Pradesh about 65.5 per cent were poor in 1975 and it reduced to 63.5 per cent in 2000.

• The reasons for falling in to poverty and escaping poverty are different, so one set of policies is required to enable households to escape from poverty and another to prevent households from falling into poverty.



Author /

Year

Study

Period

Study

Level Data Source Conclusion

Kohli

(2005)

1987-94 State Level

(Rajasthan)

Secondary NSSO rounds Sarvekshana, Economic Survey

• In 1987-88, 43.29 per cent, and, in 1993-94, 27.98 per cent people were poor in

Rajasthan.

• To remove economic poverty, focus should be on policies to remove social poverty.

Sailbala

(2005)

1992-93 District Level

Rural Orissa

Secondary Data

• Incidence of poverty was high among lower income categories, scheduled tribes and marginal farmers.

• 79.0 per cent rural were poor.

• A strong inverse relationship between education and poverty is observed.

• Government should educate people for their participation in poverty alleviation programmes.

Sidhu et al.

2005

2001-02 Rural Punjab

Primary data of 160 households from 8 villages trough the personal interviews.

• They recommended that income level of poor people (41 per cent of agricultural labour) can be increased by increasing wage rate and employment level.



2.4 Identification of the Poor

Identification of poor households is very important for result oriented implementation

of government poverty alleviation programme. But official calorie based definition of

poverty excludes many poor from below poverty line. There are various scholars who have

suggested broader criterion, for identification of poor. A few studies conducted for

identification of poor have been mentioned below (see Table 2.4 for a brief summary of this

section).

Rao (1998) is of the view that poverty is a multi-faceted phenomenon; and

identification of poor on the basis of income may not be acceptable. There is need to replace

the conventional norm with multiple indicators. He has quoted the survey conducted in

Senapannallur, a backward village in Trichy district of Tamil Nadu state, during 1985. The

sample of 300 households was classified on the basis of income earned of Rs.700 per annum

into poor and non-poor. At this income level, almost 75 per cent of households were found

below poverty line. A list of 56 indicators of poverty, based on the perceptions of the poor

was prepared. A three stage process was pursued on the basis of these 56 indicators of

poverty. For each indicator, mean and standard deviation were calculated separately for poor

and non-poor. After calculating T-test for difference of mean or proportions selected

indicators were retained on which poor differ from non-poor. These indicators were further

analysed. Some indicators were dropped on the basis of correlation analysis. With the help of

discriminant function technique, the indicators with low discriminating power were deleted

and indicators with higher discriminating power were selected. In this way eight indicators

were selected in all. But the set of selected variables used were not sufficient to replace

income criterion. He emphasized the fact that there was need of inclusion of few more

indicators for comprehensive analysis.

Rudra et al. (1998) emphasized that the effective implementation of individual

beneficiary oriented programme of the government depends on identification of poor

households; otherwise non-poor households get the support under poverty alleviation

programme by hiding their income. The authors suggest a much broader criterion for

identification of the poor, which is different from official working group criterion. They

pointed out that on the basis of schedule on “Fulfillment of Basic Needs” consisting 17 items

related to basic needs of food, clothing, bedding, shelter, health care etc. poor household can

be judged by median and quartiles of deprivation score.



Slanthi (1998) highlighted drawbacks in existing criteria of identification of poor. A

few of the drawbacks pointed out are: i) The calorie norm is calculated on least cost diet; ii)

The qualitative dimension is completely ignored; iii) Inter-regional, intra-regional, inter-

personal and intra-household variations in calorie intake are ignored; iv) Ignoring two

important needs, i.e. health and education, and v) Poverty is analysed in absolute terms, not

in relative terms. He suggested that there is need of alternative criteria for identification of

the poor.

Guruswamy and Abraham (2006) established that Planning Commission has been

defining poverty on the basis of a nutritional norm of 2400 and 2100 calories respectively in

rural and urban India. They argued that poverty line that takes into account only food

consumption and ignores other basic needs of non-food requirements is in fact a “Starvation

Line”. They stressed that the new poverty line should include proper nutrition, drinking water

availability, shelter, hygiene, clothing and education. According to them, the present poverty

line has three major problems viz: poor class does not even meet the calorie norm; only

calories standard is not enough; no norm is specified for non-food basic needs. So, there is a

need to redefine poverty in India. It should include the cost of nutrition, healthcare, clothing,

etc. In addition to this, there are some needs that cannot be quantified in money terms such as

access to water, education, sanitation etc. To take decision on the basis of only food in-take is

aiming too low. By including minimum cost for nutrition, health, clothing, energy and

miscellaneous (Rs.573, Rs.30, Rs.17, Rs.55, and Rs.164, respectively) the poverty line

calculated is approximately Rs. 840 per capita per month. On the basis of above calculated

poverty line of Rs. 840 per month, a household of five people should earn Rs. 4200 per

month or Rs.50, 000 per year and should have access to pucca house with the facilities of

electricity and toilet connected to a sewage system. Children of the household should have

access to education and they should have access to water within 1 to 15 meters of the

dwelling unit. They defined a person as poor if MPCE is less than Rs. 840 or does not have

access to basic amenities. At this expenditure level, 84.6 per cent of rural, 42.4 per cent of

urban and 68.8 per cent of India’s population is below poverty line. Their calculated poverty

ratio is over two-and-a- half times of official poverty ratio.

Majumder and Basu (2006) concentrated on four states of India, i.e. Andhra

Pradesh, Kerala, Punjab and West Bengal. They used NSSO 50th round (1993-94) data for



rural and urban sector separately. They pointed out that most of the studies on poverty are

based on the assumption that there is equal distribution of funds among all the members of

the households. But in reality women don’t receive appropriate share. So, women living in

non-poor households may actually be poor. In this way, there is under estimation of female

poverty and over estimation of male poverty. When the unequal sharing aspect is taken into

account the results are quite different.

Dreze and Khera (2010) made an attempt to explore simple method of identification

of BPL households on the basis of exclusion and inclusion criteria. The BPL census

conducted in 2002 based on a "Scoring method" to identify BPL households has had serious

conceptual defects. Their study shows that hardly half of all household in the poorest

monthly per capita consumption expenditure quintile have had a BPL card, while 18 per cent

of households in the richest quintile had this. Even the wealth index found high rate of

exclusion from BPL list among the underprivileged social groups. They criticised scoring

method because it lacks transparency as well as verifications. The study suggests exclusion

and inclusion criteria for identification of ‘Social Assistance Base’. Person possessing simple

list of durable assets: car, refrigerator, landline telephone, scooters and coloured television

and amenities like electricity, tap water and flush toilet and multi-storied pucca house is also

considered as base line exclusion criteria. They formulated four sets of exclusion

criteria. They suggested inclusion criteria as a complement to exclusion criteria.The priority

groups suggested for inclusion criteria are: SCs/STs households, landless households,

households with no adult member educated beyond class 5, single women households and

agriculture labour households. They further suggested different ways of merging exclusion

and inclusion criteria for identification of ‘Social Assistance Base’ (SAB).

From the above literature on identification of poor, it is clear that poverty is not only

material deprivation but also deprivation of social contacts and power. So, its various

dimensions must be considered for identification of poor.

2.5 Inconsistency between Official Poverty Estimates and Other Estimates

In this section an effort has been made to explore the gaps of various poverty

estimates. (a brief of the studies is presented in Table 2.5).



Datt, et al. (2003) states that following 30/30/365 days recall estimates, the NSS 55th

round shows reduction in poverty. The Planning Commission’s (2001) estimate also indicates

that national poverty rate fell by about 10 per cent, from 36 per cent in 1993 to 26 per cent in

1999. The rural poverty rate is also estimated to have fallen from 37 per cent to 27 per cent.

If the 7/30/365 day estimates from the 55th round are compared with the past 7/30/365 day

estimates rounds (51st to 54th) an increase in poverty by 2 percentage points in the rural and

by 5 percentage points in urban area between 1994 and 1999 is observed.

Table 2.4 : Empirical Studies at a Glance: Identification of the Poor

Author /

Year

Study

Period

Study

Level Conclusion

Rao

(1998)

1985 District • Poverty being a complex phenomenon, there

is need to replace conventional indicators with

a set of correlated indicators.

Rudra et al.

(1998)

1990-91 Five

Districts of

West

Bengal

• Suggested comprehensive criterion for the

identification of poor.

• Poor household can be judged on the basis of

schedule on “Fulfillment of Basic Needs”

covering 17 items.

Slanthi

(1998)

1960-61 to

1980-81

National • Identifying the drawbacks in existing

criterion for the identification of poor, he

suggested an alternative criterion for the

identification of poor.

Guruswamy

and Abraham

(2006)

1993-03 National • There is need to redefine poverty line on the

basis of basic needs such as nutrition, drinking

water availability, shelter, hygiene, clothing

and education.

Majumder

and Basu

(2006)

1993-94 State • Female poverty is underestimated and male

poverty is over estimated as women do not get

their fair share of household resources.

• This feature of unequal sharing affects the

rank of the state.

Dreze and

Khera

(2010)

2004-05 National • They suggested exclusion and inclusion

criterion for identification of poor.



Gupta (2003) found that the expert committee method of poverty estimation

excluded many poor from below poverty line. He is of the view that the poverty line both in

rural and urban areas was estimated by updating the nominal value of the poverty line

expenditures of 1973-74 through appropriate price deflators. The index used by committee

for updating poverty line was based on ‘Laspeyre’s formula’. This resulted in an

underestimation of poverty.

Rath (2003) stated that poverty line by Dandekar and Rath (1971) was calculated on

the basis of household consumer expenditure survey of 1961-62 by NSSO. But from 1972

onwards, though NSSO carried out a large sample consumer expenditure survey but the

tabulated calorie data was not published. Rather, in poverty determination, focus has shifted

from calorie based approach to income based approach. He examined a method of estimating

poverty on the basis of price indices. His study based on the NSSO data has created a detailed

price index structure for each state of India. It used maximum individual commodities and

subsequently he found deep disconnection between income poverty and food consumption.

Complexity of monetary poverty and nutritional status has been observed. Increasing income

and declining calories intake among poor in many states has shown declining poverty

incidence of monetary poverty. The results of the studies based on price indices and those of

the expert group are noticeably different.

Ravallion, et al. (2003) found that there are discrepancies between National Accounts

Statistics (NAS) and National Sample Survey (NSS) estimates of poverty. Final consumption

expenditure of NAS is based on commodity flow approach whereas NSS collects data from

the household survey. The poverty estimates based on consumption measured through NSS

are, therefore, higher than that of obtained from NAS. There are also conceptual differences

between the two measures. National Accounts Statistics (NAS) includes expenditure of

NGOs and religious institutions in compiling national accounts. So, their estimates show

lower poverty ratios as compared to National Sample Survey (NSS) estimates. Besides this

the difference in method and coverage, the extent of difference also matters. NSS

underestimates consumption level and ignore consumption growth. Thus it is underestimating

the rate of poverty reduction also. There is inconsistency between NSS and NAS as regards

poverty estimates and poverty reduction. An alternative source of household survey data for



India is the Market Information Survey of Household (MISH) done by NCAER, but this

survey does not include food consumption. So, consumption poverty measures are not

comparable with NSS.

Sundaram and Tendulker (2003) observed National Accounts Statistics (NAS) has

wider coverage than and National Sample Survey (NSS) estimates. The estimation procedure

of NAS and NSS is quite different. PFCE from NAS is an indirect, residual macro level

estimation. Where as HCE drawn from NSS is a directly observed over a period of given

time. Further, there are differences in the estimation procedure also. NSS is sensitive to co-

operation from respondent households. NAS is required for economic policy formulation. As

a result, NAS results are updated periodically. Due to above differences the estimates of

consumption are lower in NSS as compared to NAS. Poverty ratios are therefore higher in

case of NSS. The estimates of poverty of NSS are considered reliable as it is based on direct

observation.

Himanshu (2008) observed that the international poverty line of $ 1 per day per

person was taken for international comparison programme for the first time in 1991. This

poverty line was updated at $ 1.08 and $ 1.25 cut off in 2001 and 2005 respectively. The new

World Bank estimates put the total number of poor in the world at 1.4 billion (25 per cent of

world population) which is 400 million more than previous World Bank estimates of global

poverty. The World Bank estimates for poverty in India based on $ 1.25 cut off line in 2005

is 41.6 per cent. Asian Development Bank using $ 1.35 per day per capita cut off estimates

poverty in India at 63.9 per cent. The Planning Commission, estimated poverty in India at 27

per cent for 2004-05. It clearly indicates that Indian poverty line underestimates poverty in

India. The reports (2005) of the World Bank and the Asian Development Bank estimate that

India is a country with largest number of poor in the World. It accounts for 1/3rd of the total

poor in the developing countries of the world.

Patnaik (2010) collected data of average monthly per capita expenditure (AMPCE)

and average calorie intake by expenditure classes. This data was collected from NSS reports

508 and 513 relating to the 61st round for the period 2004-05. The study reveals that with

mean expenditure level of Rs. 1014.3, average calorie intake of 2100 is possible. In urban



areas 64.5 per cent population spends less than Rs. 1014.3 yet, the official Planning

Commission figure of urban poverty is 25.7 per cent. The difference between 64.5 per cent

poverty ratio on the basis of nutrition norm and 25.7 per cent official poverty ratio is 38.8

percentage points. It implies that two- fifth of urban poor have been excluded from the set of

the officially poor in 2004-05. The author calculated the poverty percentage on nutrition

norms and compared it with the official poverty ratio for all 18 states for 2004-05. The results

show an alarming scenario that 60 to 80 per cent of urban population in these 18 major states

did not have access to 2100 calorie intake. Patnaik analysed that, in Punjab, officially only

7.1 per cent of urban persons were poor at poverty line of Rs. 466.2, i.e. less than Rs. 16 per

day. At this spending level, only 1435 calories could be accessed, i.e. deficit of 665 calories

from urban nutrition norm. In order to reach 2100 calories, Rs.1280 MPCE was required. In

this way, nearly 68.8 per cent of urban population was below poverty line. The study shows

that actual urban poverty ratio is 70 per cent whereas officially it is only 7 per cent. The study

further recognized that food grain allocation from central pool to most states is inadequate.

The study suggests going reverse to universal distribution system.

In short, inconsistency between official poverty estimates and other estimates has

been observed by many empirical studies. This has been attributed to differences in coverage,

concepts, time period, and estimation procedure.

2.6 Performance of Poverty Alleviation Programmes

Poverty is a multi-dimensional problem. War against poverty has, therefore, to be

fought in different sectors from several angles. In order to alleviate poverty, different policies

and programme are required. Various studies, e.g. Ahluwalia (1978), Shrinivasan (1985),

Dev (2000) show that agriculture has direct impact on poverty. Substantial literature is

available to examine performance of poverty alleviation programmes.

Rangnekar (1958) analyzed that agriculture is basic and vital to Indian economy.

Therefore, the first task is to tackle the agricultural problem, to boost agricultural production

and to plant some dynamism in rural economy.



Table 2.5 : Empirical Studies at a Glance: Inconsistency Between Official Poverty

Estimates and other Estimates

Author/

year

Study

Period

Study

Level Conclusion

Datt et al.

(2003)

1994-99 National • The NSS 55th round compared with (51st to

54th), shows 10 per cent reduction in poverty

on the basis of uniform recall period

(30/30/365) but on the basis of mixed recall

period (7/30/365) the poverty decreased by 2

percentage points in rural area and 5

percentage points in urban area during

period 1994-99.

Gupta

(2003)

1983-02 National • The direct method of poverty estimation

(Expert Committee Criterion on calories

basis) showed lower percentage of population

below poverty line.

Rath

(2003)

1977-78 to

1993-94

State • Compared his results with those of Planning

Commission and found them to be

considerably different.

Ravellion

(2003)

National • NAS estimates show significantly lower

poverty ratios as compared to NSS estimates.

Sundaram and

Tendulkar

(2003)

National • The estimates of NSS are reliable as these are

based on direct observation.

Himanshu

(2008)

1991

2001 and

2005

National • Indian Poverty Line underestimates poverty

in comparison to estimates of World Bank

and Asian Development Bank.

Patnaik

(2010)

2004-05 State • The urban poverty is 70 per cent whereas the

official poverty is only 7 per cent in Punjab.

• Even the state estimates of BPL population

are not correct though they are much higher

than the Planning Commission estimates.



Dev (2000) made an attempt to find out the impact of economic reforms on poverty.

He examined that trends in poverty are directly related with consumption data and indirectly

with employment data. After discussing various determinants of poverty, he found that

expenditure on rural roads and agriculture has had a better impact than government spending

on poverty alleviation programme.

Datt (2003) states that public distribution system which was started as a price support

programme for consumers during the period of food shortage of 1960s, provides food

security for the poor. Radhakrishan report also highlighted that though there occurred decline

in poverty as a result of public distribution subsides but there is dire need of reforms in public

distribution system. It can be made more successful if there is proper identification of poor.

According to him this work of identification of poor should be transferred from bureaucrats

to Panchayats. It should be implemented for those households which are participating in

employment programmes i.e. single mothers with children, non- income tax paying

households and all landless agricultural labourers. In urban areas, the benefit should be given

to the people living in slums and non-taxpaying households. The benefit should go only to

deserving people.

Gupta (2003) examined various determinants of poverty. He analyzed that per capita

consumption increases when the average earning rate of the employed increases due to

technology policy, labour intensity in production, proper education and training etc. and

dependency ratio decreases (number of economically active member increases). To bring

reduction in poverty, there is need to focus on population policy, technology policy, labour

intensity in production, proper education and training, labour laws, giving equal opportunity

to the work force and last but not the least, at macro level, an appropriate sectoral pattern of

growth.

Krishna et al. (2004) emphasized that government assistance schemes need to be

targeted. Broad based approaches covering entire states do not enable scarce resources to be

utilized in the most efficient manner. The most effective public policies to be applied in any

region are best identified through careful micro level analysis.



Dhawan (2005) states that since three-fourth of total population of the world is living

in rural areas, rural development is central to the development efforts of any nation. He found

that proportion of poor people has declined, but the number of poor people has increased.

Poor people lack education, health, adequate shelter etc. Assistance given by government for

development of key areas like agriculture, health, sanitation and education etc. should be

properly utilized. For poverty reduction policies, there should be a direct contact with poor.

Poor should have access to information. Rural institutions should be pro-poor. The coalition

and cooperation of poor among themselves and with others provides best hope for the poor.

For poverty reduction, various policies as national resource management, finance

management (since rural poor lack reliable access to financial services), NGO services, and

social capital development have been suggested.

Prabhat (2005) analysed that an employment guarantee scheme should be universally

operational within a specified time-horizon. It should avoid tokenism. The subsequent study

by Ranjan and Lancaster (2005) established that public distribution system is useful for

backward classes as an anti-poverty programme. Another attempt made to observe the

effectiveness of poverty alleviation programmes has been made by Vaidyanathan (2005).

He emphasised that the campaign for a wider and better funded National Employment

Guarantee Scheme must be combined with a campaign to mobilize elected members of

Panchayat (Panchayatdars) all over the country. Government should empower Panchayatdars

to plan and implement all local development programmes.

Mahajan and Kumar (2007) evaluated the performance of SGSY programme in

Himachal Pradesh. They concluded that the programme was not performing well. In four

years of implementation, only 12.26 per cent of BPL families were covered under the

programme as against the overall objective of 30 per cent of BPL families in five years in the

state. The available funds were not fully utilized in any year in the state. The main emphasis

of the programme was on coverage of BPL families by organizing them into self-help groups.

It is noticed that only 50 per cent of the self-help groups were functioning as per the

guidelines. The swarozgaries were facing difficulties in getting financial assistance under

SGSY programme in the state. They suggested that the government should make some efforts

so that the benefits of anti-poverty programmes reach the poor at grass root level.



Muthalagn (2007) is of the opinion that it is incorrect to say that all the poverty

eradication programmes have failed. He observed that lot of achievements have taken place

in rural and urban India over the period due to various anti poverty programmes like

Swarnajayanti Gram Swarojgar Yojana (SGSY), Indira Awaas Yojana (IAY), Sampoorna

Grameen Rozgar Yojana (SGRY), National Food for Work Programme (NFFWP), Swarna

Jayanti Shahari Rozgar Yojana (SJSRY), Valmiki Ambedkar Awas Yojana (VAMBAY),

Pradhan Mantri Gramodaya Yojana, Pradhan Mantri Gram Sadak Yojana, Antyodaya Anna

Yojana. Poverty eradication is expected to make better progress in the coming years than in

the past due to the increasing emphasis on the importance of education, reservation of seats in

government jobs and the increasing empowerment of women. These measures have

contributed much to the eradication of poverty in India.

Ramachandran and Kavitha (2007) found that more than a billion of poor people

lack access to the basic financial services which are essential for them to manage their lives.

Good management of even the smallest assets can be crucial to very poor people, who live in

precarious conditions, threatened by lack of income, shelter and food. To overcome poverty,

they need to be able to borrow, save and invest and to protect their families against risk. But

with little income or collateral, poor people are seldom able to obtain loans from banks and

other formal financial institutions. Even when they do have income or collateral, the amounts

they require are often too small to apply for loan.

Simrit (2007) focused on the role of economic freedom and inequality in education

and land assets as determinants of growth, inequality, poverty and malnutrition. She

conducted study on 37 countries to find out whether government intervention is desirable for

improving the nutrition levels in an economy. The study stressed the need of government

intervention in the form of transfers and subsidies. It recommended quality and targeted

intervention in the country to control rampant poverty.

Thakur and Singh (2007) made an attempt to study the implementation and impact

of anti-poverty Programmes such as Rural Development programme, Indira Awas Yojana,

Swaranajayanti Gram Swarozgar Yojana on the household assets, employment and income

among general caste, scheduled caste and scheduled tribe households in the rural areas of



Himachal Pradesh. They took a sample of 250 households following multi-stage random

sampling. Then they made holding-wise analysis i.e. marginal farmers, small farmers and

medium farmers. They observed that, among the general class and scheduled tribes, the

proportion of beneficiaries who expressed satisfaction with the distribution of benefits of

Anti-Poverty Programmes increased with increase in the size of holdings. All the households

of medium size holding were satisfied with distribution of benefits. Of the beneficiary

holders among scheduled castes, only small farmers were satisfied with the distribution of

benefits under these programmes. Thus the better-off benefited the most and the least well-

off the least under the Government anti-poverty programmes. The percentage increase in the

value of assets among general caste households worked out to 9.78, 6.83 and 2.52 per cent on

the marginal, small and medium size of holdings respectively. The percentage increase in

income worked out to 17.61, 20.45 and 12.24 per cent for these households respectively.

Further, increase in employment in terms of standard man days worked out to 16.80, 19.88

and 13.10 per cent among general caste marginal, small and medium size holdings

households. The same pattern was observed among scheduled caste and scheduled tribe

households. The higher percentage increase in household income and employment among the

small holdings is because many households included in beneficiary category had more

productive assets. He stressed on the need for more transparency in selection of beneficiaries.

Thiyam (2007) endeavored to analyse district-wise poverty in Manipur. His study

reveals that more than 50 per cent of the people below poverty line are illiterate. They are

landless and marginal farmers. Studies in Manipur have shown that poverty is inversely

related with the size of land holding. He suggested that land reform measures should be

implemented properly for poverty alleviation.

Dinesha and Jayasheela (2008) observed that India is a land of villages and

improvement in housing conditions in the villages is very significant, as it raises the level of

living and provides better opportunities for work. So efforts from government as well as

people to achieve the goal of housing for every household are a need of the hour. Narayana

(2008) observed that India’s poverty can be reduced only by making farm, non-farm and

informal activities economically viable. For tackling poverty in India, there should be

prioritisation of agriculture over other sectors, as agriculture is the backbone and nerve centre



of people. Use of cost saving farm practices, provision of institutional credit, revitalisation of

traditional occupational skills, formulation of federation for networking of artisans and

craftsmen, improvement of public distribution system and infusing people against different

major risks (weather risks, crop risks, health risks and price risks) have been suggested.

Patil (2008) pointed that our full potential as a nation will be realized only when

women, who constitute about half of our population, can fully realize their potential.

Swaminathan (2008) observed that poverty persists under conditions where human resource

is under-valued. He pointed out that once Grameen Gyaan Abhiyan (GGA) national

movement for knowledge empowerment of rural families is started, it will lead to human

resource development. This in turn will lead to shift the pattern from unskilled to skilled

work in villages and hence freedom from hunger and poverty.

Mukesh et al. (2009) using data collected from employment surveys of the NSSO for

the period 1983,1993-94,1999-2000 and 2004-05 found that more than 50 per cent of the

households that are poor according to official poverty line depend on earning from unskilled

labour (agricultural labour and other labour). They confirmed that there is association

between poverty and agricultural wages. They found that rapid growth of non-farm sector

draws labour from land in limited amount and the labour force in agricultural sector remains

large. The best way to improve their living standard would be boosting farm productivity

Ram et al. (2009) examined the distribution of BPL cards. They analyzed the

possession of BPL cards on the basis of wealth index. This wealth index is constructed using

key variables like consumer durables, water, sanitation facilities etc. It also includes

individual items like motorcycle, scooter, car, tractor, television and refrigerator, landline

telephone, mobile phone, type of house as well as size of land holdings. Their analysis has

been presented at national level and at the state level. At national level, 27 per cent of

households in India hold BPL cards which is close to Planning Commission estimates on

poverty (2000). About two-fifth of poor and one-fifth of non-poor households possess BPL

cards. Only 39 per cent of poor people hold BPL cards. Majority of poor do not have BPL

cards. They further studied percentage distribution of household possessing BPL cards by

social characteristics like education, caste system and habitation. Near about 7 per cent of



household with high school and above education hold BPL cards. It was found that rural

urban differences in possession of BPL cards by these characteristics are not significant. At

state level, in economically weaker states like Orissa and Bihar, a higher proportion of non-

poor households possess BPL cards. In Andhra Pradesh and Karnataka, the number of non-

poor households having BPL cards is higher than the poor households. Even the households

which have pucca houses with three or more rooms and having vehicles with the facilities

like television, refrigerator and land holdings of more than five acres also possess BPL cards.

It indicates that welfare schemes prepared for poor people are siphoned off to the non-poor

also. So, focus should be on identification of poor to make poverty reduction successful.

There is need to search methods to identify poor for welfare schemes rather than depending

only on BPL cards.

Kumar (2010) is of the view that prevailing poverty alleviation programmes also

need reforms. There is an urgent need of diverting spending pattern from help-base to

growth-base. Sharma (2010) prepared poverty index on the basis of minimum food and non-

food expenditure at 2000-01 prices. The ratio of non-food expenditure to the minimum food

expenditure for the poor worked out to 54.58 per cent for all holdings (landless, marginal,

small and medium holdings). She calculated that by providing due allowances to the non-

food items the percentage of poor among landless, marginal and small size of holdings works

out to 46.37, 41.52, and 31.29 respectively before and 42.24, 36.36, and 26.50 per cent after

implementation of poverty alleviation programmes.

An examination of various studies by Rangnekar (1958), Dev (2000), Datt (2003),

Gupta (2003), Krishna et al. (2004), Prabhat (2005), Ranjan and Lancaster (2005), Dhawan

(2005), Thiyam (2007) , Swaminathan (2008), Narayana (2008), Patil (2008), Dinesha and

Jayasheela (2008), Mukesh et al. (2009), Ram et al. (2009), Mukesh et al. (2009), and

Sharma (2010) pointed out that focus on agriculture, economic reforms, public distribution

system, access to information, land reforms along with proper implementation of poverty

eradication programmes, welfare schemes, public distribution system including better

opportunities for work, and women empowerment can lead to reduction in poverty.



Table 2.6: Empirical Studies at a Glance: An Evaluation of the Performance of Poverty

Alleviation Programmes

Author /

Year

Study

Period Conclusion

Rangnekar

(1958) -

• Agriculture is indispensable to Indian economy.

• The first and foremost task of government should be to tackle the agricultural problem in rural economy.

Dev

(2000)

1973-94 • Expenditure on rural roads and agriculture has proved useful for poverty alleviation.

Datt

(2003)

1951-00 • Public distribution can be made more successful if there is proper identification of poor.

• This work of identification of poor should be shifted to panchayat so that the benefit should reach the deserving people.

Gupta

(2003)

1987-98 • For reduction of poverty it is required to increase average earning rate of employed and reduce dependency ratio by concentrating on various policies.

Krishna et al. (2004)

1975-00 • Government assistance schemes need to be targeted for poverty alleviation.

• The most effective public policies to be applied in any region are best identified through careful micro level analysis, and it should not be broad based approach.

Dhawan (2005)

• Despite decline in proportion of poor people, the number of poor has increased.

• National resource management, finance management, NGO services and social capital development can contribute effectively in poverty reduction.

Prabhat (2005)

• Employment guarantee scheme should be widely operational within a specified time-horizon and avoid tokenism.

Ranjan and

Lancaster

( 2005)

1987-00 • Public distribution system is beneficial for backward classes

as an anti- poverty programme.

Vaidyanathan

(2005)

• Government should empower Panchayatdars to plan and

implement all local development programmes for a wider

and better funded National Employment Guarantee Scheme.

Mahajan

(2007)

1998-04 • SGSY programme was not performing well in Himachal Pradesh.



Muthalagn

(2007)

1977-07 • Rural and urban poverty reduced in India over the period due to effectiveness of various anti-poverty programmes.

• Poverty eradication is likely to make better progress in the coming years, due to focus on education, reservation of seats in government jobs and the increasing empowerment of women.

Ramachandra and Kavitha

(2007)

1997-07 • Access to the basic financial services is denied to poor people

Simrit (2007) 1980-00 • Economic freedom can reduce poverty and malnutrition.

Thakur and Singh

(2007)

2003-04 • The better-off benefited the most and the least well-off benefited the least under the Government anti-poverty programmes.

• There is need for more transparency in selection of beneficiaries.

Thiyam

(2007)

1973-00 • Land reform measures should be enforced aptly for poverty alleviation.

Dinesha and Jayasheela (2008)

1991-01 • Collective effort of the government and the people to achieve the goal of housing for every household is the need of the hour.

Narayana (2008)

• To tackle poverty, there should be prioritization of agriculture over other sectors and insuring people against major risks.

Patil (2008) • Need of women empowerment for poverty alleviation.

Swaminathan (2008)

• Grameen Gyaan Abhiyan (GGA), a national movement for knowledge empowerment of rural families, would contribute to human resource development and eliminate hunger and poverty.

Mukesh et al. (2009)

1983,

1993-94,

1999-00 and 2004-05

• There is association between poverty and agricultural wages.

• The best way to improve the living standard of farm workers would be-boosting farm productivity, rather than shifting them from farm to non-farm sectors.

Ram et al.

(2009)

• Increased focus on identification of poor helps in poverty reduction.

• There is need to explore methods to find out the eligibility of beneficiary for welfare schemes rather than depending only on BPL cards.



2.7 Studies on Punjab Economy

A number of studies on poverty in Punjab have also been conducted. A brief of the

studies has been given below.

Basin (2002) studied urban poverty in Ludhiana. She took sample of 300 households.

She applied poverty line of Rs. 215 per capita per month income at 1993-94 prices, an

updated version of poverty line specified by the expert group i.e. Rs 143.11 per capita per

month at 1987-88 prices. She calculated it on the basis of simple average of consumer price

index of industrial workers (CPIIW) and consumer price index of non- manual employees

(CPINM), a methodology prescribed by the expert group. She used two poverty norms: i)

Conservative poverty line of Rs. 215.According to conservative norm, 30 per cent of sample

households lived in abysmal condition of poverty; ii) Modified poverty norm, i.e. calculated

by inflating conservative norm by 10 per cent. This was applied since additional amount is

required to satisfy non-food needs. Modified poverty norm put the poverty ratio at 38 per

cent.

Chahal (2002) found a dismal scenario of unemployment in Punjab. He observed that

number of unemployed persons as per the live register of the employment exchange of the

state has increased from 3.00 lac in 1975 to 5.5 lac in 2001.The sub- division and

fragmentation of land holdings due to laws of succession and inheritance has reduced the

average size of land holdings from 3.89 hectare to 3.61 hectare over this period. The number

of landless households is also increasing. The industrial development in the state is very

slow. Whatever jobs are created by this sector are usurped by migrant cheap labour of Uttar

Pradesh, Bihar, Madhya Pradesh and Orissa etc. As a result, rural youth remains unemployed

or underemployed. This problem can be managed by changing laws of inheritance, land

reforms, industrialization, diversification of rural economy, diversification of agriculture (like

poultry, fishery, piggery, mush-room cultivation etc), crop diversification (cultivation of

cotton, sugarcane, oilseeds, fruits and vegetables, fodders for milk production, etc),

establishing agro-industries (like sugar factories, cotton textile mills, processing units for

fruits, vegetables, oilseeds and milk etc.), boosting agricultural exports, training rural youth

for various development activities.



Singh (2003) is of the opinion that in a densely populated labour-surplus economy,

with high incidence of poverty, the rural non-farm sector can play an important role in

generating rural income and employment. With the development of agriculture sector, there

is increase in demand of non-agricultural activities; as a result, employment in rural non-farm

activities is increasing. Using NSS data in his study he focused on the features and

identification of determinants of rural non-farm employment in India. By applying factor

analysis method he found that literacy rate, unemployment rate, per hectare output and Gini-

coefficient of land holdings are significantly related to rural non-farm employment. Literacy

rate followed by unemployment rate proved to be the most important factor affecting

percentage of rural non-farm employment. He found that education helps in growth of rural

non-farm employment as it improves the skills of a person which is required to start a modern

rural non-farm service enterprise. Moreover, educated persons have more access to

information, available facilities and assistance from public institutional systems, which help

to start and expand non-farm sector enterprises. He stressed on the need to raise the level of

literacy, especially rural literacy to get a positive change in rural non-farm employment

scenario.

Kuldeep and Dhindsa (2005) are of the opinion that promotion of rural non-farm

sector is important in providing gainful employment and supplementing income to surplus

labour in the agriculture sector and to landless labourers in rural areas. They emphasized that

income of farmers in agricultural sectors is magnified by multiple linkages with the non-farm

sector. The study further observed that the incidence of self-employment in rural Punjab is on

the way out and casual labour is increasing. They there are hazards of casual work like low

wage rate, irregular and uncertain employment and uncongenial work conditions etc. The

non-farm activities like manufacturing, construction, transportation, storage and

communication etc. should be expanded through promotional policies and investment in

infrastructure at village and small town levels. This will draw off labour from agriculture

labour market and increase the agricultural wages and productivity.



Table 2.7: Empirical Studies at a Glance: Studies on Punjab Economy

Author / year Study Level Conclusion

Basin (2002) Ludhiana • Conservative norm, put the poverty ratio at 30 per cent

• Modified poverty norm put the poverty ratio at 38 per cent.

Chahal (2002) Punjab • Unemployed persons has increased from 3.00 lac in 1975 to 5.5 lac in 2001

Singh (2003) Punjab • There is need to raise the level of literacy, especially rural literacy to get a positive change in rural non-farm employment scenario.

Kuldeep and

Dhindsa (2005)

Punjab • Promotion of rural non-farm sector is important in supplementing income to surplus labour in the agriculture sector in rural areas.

Overall speaking from the studies on poverty reviewed above it is evident that there

exists vast literature on each and every aspect of poverty. It can be easily concluded that there

is no unanimity regarding various issues that emerged from empirical studies on poverty i.e.

defining and measuring poverty, extent of shift in poverty, identification of poor, district

level studies, inconsistency between official poverty estimates and other estimates and

evaluation of poverty alleviation programme. Whereas some studies confined themselves to

income, others have attempted to construct (income and non-income) composite poverty

index.

After thorough review, it has been observed that scant literature is available on

poverty at district level particularly for a rich state like Punjab. Further no study based on

composite poverty index has been conducted at district level. Accordingly the justification

for the present study flows from the area covered and endeavors to use recent methodology in

the field of identification of poor and performance of poverty alleviation programme.

The review of the existing studies on measuring poverty delineates that there still

exists scant literature on measuring poverty using non- income based factors. Most of the



studies define poverty on the basis of income required for minimum calories intake and thus

suffer from the theoretical fallacies of measuring poverty on the basis of calories intake.

Hence, a substantial room exists for measuring poverty using food and non-food expenditure

requirements of both rural and urban populations. The present study tries to fill the existing

void in the literature and endeavors to define poverty line using both food and non-food

expenditure requirements.

review of literature - shodhgangashodhganga.inflibnet.ac.in/bitstream/10603/10225/9/09... · 2015....

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