POVERTY & UNEMPLOYMENT

                                                                         POVERTY

                                                                                                                                                                  (Economic Inequality)

• There are two types of poverty in an economy -

  1. Relative Poverty

  2. Absolute Poverty

① Relative Poverty -

• It is also called Comparative Poverty.

• Under this theory, the difference in income of two individuals is considered poverty.

• Methods to measure Relative Poverty -

1. Lorenz Curve -

• According to this theory, if a line making an angle of 45° is drawn between income and income receiver, then income in the country is distributed equally.

• If a country's income distribution line is below this, then it is called a condition of economic inequality.

  

2. Gini Coefficient -

• This represents the Lorenz Curve in mathematical form.

• In this, to find the coefficient, the area of the small triangle is divided by the area of the large triangle.

• Its value is always between 0 to 1.

• If the coefficient is 0, then it represents perfect economic equality.

• The higher the value of the coefficient, the more inequality is considered.

② Absolute Poverty -

• Under this theory, first of all, basic requirements for life are determined.

• Every individual who is not getting these basic facilities is considered poor.

• In India, the poverty line is determined using this theory.

• Population is divided into two categories - (i) Below Poverty Line (BPL)                                                                                                                                                                                                                   (ii) Above Poverty Line (APL)

• This method is also called Head Count Method.

                                                                                                                                                                                                                                                                                  Estimation of Poverty in India -

• In India, this work is done by NITI Aayog [Planning Commission].

• Data collected by NSSO is used for this.

• In India, individual poverty is not measured but poverty is seen for a family.

• For measuring poverty, the family is seen as a unit in which there are 5 members.

• In India, calorie consumption has been considered the basis of poverty since ancient times.

• In the world, mostly expenditure is considered the basis of poverty measurement instead of income.

• In 1868, Dadabhai Naoroji measured poverty for the first time in his book Poverty and Unbritish Rule in India.

• According to this book, a person spending less than ₹ 16 in rural areas and ₹ 35 in urban areas per year was considered poor.

• After this, the National Planning Committee was formed in 1938 by Congress under the chairmanship of Jawaharlal Nehru.

• They made 3 factors the basis for poverty -

  1. Calorie -> 2800 calorie per person per day

  2. Cloth -> 30 yards cloth

  3. House -> 10 x 10 ft²

• Apart from this, poverty was also seen on the basis of expenditure -

  • For rural area - less expenditure than 15 ₹ / month

  • For urban area - 20 ₹ / month

• In 1944, 8 big industrialists of the country considered a person spending less than 75 rupees per person per year as poor.This is also known as Bombay Plan.

• In 1962, the Planning Commission formed a working group -> According to which

  • For rural area - 20 ₹ / month } per person less expenditure

  • For urban area - 25 ₹ / month }

• In 1971, a working group was formed by Indira Gandhi under the leadership of V.M. Dandekar and N. Rath who gave the formula of calorie consumption for measuring poverty in India.

• Person consuming less than 2250 calories per day was considered poor.

• This committee is considered an important committee for poverty estimation.

• The committee was given the task to analyze all methods of poverty estimation and suggest the best method.

• To study the poverty alleviation program run by the government and find the reason for failure.

• Suggest more reliable data from NSSO and National Accounting.

• The committee made other nutrient elements the basis along with calorie consumption.

• The committee emphasized on education and health along with basic requirements.

• The committee emphasized on the mixed use of MRP and URP.

• Separate basic requirements were defined for rural and urban areas.

  • Rural Area - 4800 ₹ } per family less expenditure

  • Urban Area - 7050 ₹ } per month

• In rural areas ₹ 32 and in urban areas ₹ 47 per day per person less expenditure was considered the basis of poverty.

MIXED RECALL PERIOD (MRP) -

• Under this method, for estimation of poverty, expenditure made on durable goods like - clothes, shoes, education etc. in the last one year by a family is seen.

UNIFORM RECALL PERIOD (URP) -

• In this method, expenditure made on food items in the last one month by a family is seen.

Trickle Down Approach of Poverty Alleviation -

• Under this concept, emphasis is given on developing basic infrastructure for poverty alleviation.

• It is believed that development of infrastructure encourages production and investment and employment opportunities increase, by which poverty alleviation can be done in the long run.

Direct Method (प्रत्यक्ष विधि) -

• Under this method, government schemes are made in such a way that the poor can be helped directly.

• e.g. Sarva Shiksha Abhiyan, MGNREGA.

Sen-Bhagwati Debate -

Amartya Sen -

• He is a world famous economist of Indian origin.

• He was given Nobel Prize in 1998.

• He is a Professor at Harvard University.

• He wrote a book named 'An Uncertain Glory of India and its Contradiction' in which the direct method of poverty alleviation was described as the best for India.

• According to this book, direct method is more successful in the field of education and health and its effect is quick and wide.

Bhagwati -

• He is a Professor at Columbia University.

• He wrote a book named 'Why Growth Matters' in which Trickle down approach was described as correct for India.

• Gujarat Model of development is based on this theory.

Poverty Gap Concept -

• This concept was developed by Amartya Sen.

• According to this concept, all persons coming in BPL are not equally poor.

• Difference between less and more poor should be made on the basis of intensity of poverty in BPL families.

• While making government schemes, this difference should be kept in mind.

• Poverty Gap Index is used to measure the Gap of poverty.

  
  

                                                    UNEMPLOYMENT (बेरोजगारी)

• Such a situation in the economy in which a capable and willing person to work does not get employment, is called unemployment.

Types of Unemployment -

① Structural Unemployment -

• Unemployment arising due to structural changes in the economy is called structural unemployment.

• e.g. Unemployment arising due to change of agriculture based economy to industry or service based economy.

② Cyclical Unemployment -

• If unemployment arises due to cycle of boom or recession in the economy, then it is called cyclical unemployment.

③ Frictional Unemployment -

• If a person leaves old employment to get a new employment, then the time taken to get new employment is called frictional unemployment.

④ Disguised Unemployment - [Disguised / छद्म ]

• If it seems to a person that he is working but in reality there is no contribution in increasing his productivity, then it is called disguised unemployment.

• e.g. Working of a family of 7 persons in agriculture which can be done by two persons.

⑤ Seasonal Unemployment -

• Not getting employment in a special season is called seasonal unemployment.

• e.g. Sugar, Ice, Woolen.

⑥ Technical Unemployment -

• Unemployment coming due to technical change.

⑦ Underemployment -

• Getting employment of lower level than qualification is called Underemployment.