No Poverty: An Indian Angle

NO POVERTY: AN INDIAN ANGLE

In 2015, members of the United Nations adopted Sustainable Development Goals (SDGs, also known as Global Goals)[1] with a vision of ending poverty, protecting the planet, and ensuring that all people enjoy peace and prosperity by 2030.

SDGs consist of 17 SDGs and 169 targets, which form part of the 2030 Agenda. The 17 SDGs are integrated, i.e., it is recognized that action taken in one area will affect the other areas as well, and the development that is to take place must balance social, economic, and environmental sustainability.  The countries have taken the pledge to Leave No One Behind and have committed to fast track progress for those who are behind first. In adopting the agenda, the countries also resolved to take transformative and bold steps needed to shift the world onto a resilient and sustainable path.

The 1st Goal of the SDGs is “No Poverty” i.e “End poverty in all its forms everywhere.”[2]Even though the number of people living in extreme poverty has dropped by more than half between 1990 and 2015, there are still too many people struggling for the most basic of human needs. Removal of poverty in all its forms remains one of the greatest challenges that we as humanity face.

AS of 2015, around 1 in 10 people ( close to 736 Million )[3] live on less than the target figure of international-$1.90 per day. Even though in developing nations such as India and China, where millions have been lifted out of poverty due to rapid growth, but because the progress has been uneven, the effect of growth has been the same on all the people. Several demographics are more affected than others; for example, women are more likely to be poor than men; children do not have access to basic education or healthcare facilities.

SDGs are a commitment to end poverty in all forms and dimensions by 2030 by targeting the most vulnerable and helping them, increasing basic resources and services, and supporting communities affected by conflict and climate-related disasters.

SIGNIFICANCE OF “NO POVERTY” IN INDIA

During the year 2013, India had the highest number of people (224 million) living below the specified poverty line specified by the UN, i.e. $1.9 per day. However, that number dropped to 73 million people over the next 5 years, as India came to the second position behind Nigeria (86 million people). India’s measures to eradicate poverty primarily include the social inclusion of the poor. As a general step towards meeting all 17 sustainability goals, the NITI Aayog has mapped all of them and 169 targets to centrally sponsored schemes and initiatives.

The key driver of the eradication of poverty in the country has been rapid economic growth (SDG 8). From 1993-2004, the GDP of the country grew at a CAGR of 6.3% Y-o-Y, while during 2005-2012, it grew at a CAGR of 8.3% Y-o-Y. While over 40% of the population was below the Tendulkar Poverty Line (earning INR 33 a day in PPP terms), only about ~21% of the population was below the poverty line in 2011-12.

Some of the programs initiated by the Government of India are –

1. Mahatma Gandhi National Rural Employment Guarantee Act which provides a minimum 100 days of wage employment per household, and produced over 2.6 Billion working days worth of employment in the year 2018[4]. However, on average, it provided only 48.75 days worth of employment over the past 4 years, which is less than half of the 100 days promised
2. The Pradhan Mantri Jan Dhan Yojana was launched to provide access to financial services like banking, financial credit, and insurance. Till date, more than 37 crore beneficiaries have been reached affected by the scheme and over INR 1 lakh crores have been deposited in the Jan Dhan accounts
3. Pradhan Mantri Ujjwala Yojana was launched in 2016 for the safeguarding of the health of women and children. The scheme has benefitted over 7 crore households, out of which over 86% have returned for a refill[5].

BUSINESS IMPLICATIONS AND RESPONSES

INCREASED TAX FLOW TO THE GOVERNMENT:

A reduction in the poverty of the economy would lead to a direct increase in the inflows to the government. Tax inflow to the government can also be achieved by increasing the tax rate. However, this could lead to people spending more time evading the tax rather than on productive activity [6]. But a general reduction in poverty increases the taxable portion of the population, thus increasing the inflow of tax. This improves the economic situation of the country, leading to a general increase in the GDP as inflows have increased with no impact on productivity. This increased inflow could then be used as spending for the welfare of the people, leading to an improvement in the living conditions of the people and an increase in the human development index.

INCREASE IN GENERAL CONSUMPTION:

Research done on the impact of MNREGA [7], shows that it improves the purchasing power of the people involved leading to an increase in household consumption, imports, supply and wages of labour. Reduction of poverty implies the same purchasing power thus, leading to the same impacts. This consumption can drive economic growth. There is an increase in aggregate demand due to the increase in purchasing power, and this increase in aggregate demand can translate to an increase in business activity in order to satisfy the demand. This has several positive ramifications some of which are an increase in employment and an improvement in the infrastructure of cities.

IMPROVEMENT IN HEALTHCARE:

The effects of the reduction in poverty are very much interconnected. As discussed earlier, government spending on welfare schemes increases and this necessarily involves spending in healthcare. There is also an increase in the effective participation of the rural population in educational institutions, leading to an increase in awareness of medical needs and facilities. This could drive the healthcare industry as there would naturally be an increase in demand for essential healthcare needs. This would lead to an increase in healthcare infrastructure, so as to satisfy the growing demand. The net result would be an increase in life expectancy which once again contributes to an improvement in HDI.

MORE SKILLED WORKFORCE:

People will invest more in acquiring technical knowledge for landing a job. This will lead to the generation of a highly skilled workforce. The Government of India had introduced a scheme called Pradhan Mantri Kaushal Vikas Yojana for recognizing and standardizing the skill set around the nation. Under this scheme, GOI has mapped a number of Industrial Training Institute (ITI), from where any individual can get training on any specific course like plumber, electrician, etc. In 2018, a total of around 33.93 lakh individuals received training under Skill India Mission, and 10.09 lakh individuals out of these landed a job[8].

UPLIFTMENT OF WOMEN:

Increase in earning will motivate people to send their daughters to schools on a daily basis. Moreover, we will see a rise in technological and penetration in villages. Due to these changes, a girl will get more exposure to the world outside her village. This exposure will mold her thought process from regressive to advanced. Moreover, it will create an understanding of how complex things work. By providing a girl these amenities, we can ensure that they can protect themselves in the face of any tragedy, be it personal or professional.

CREATION OF NEW ADVANCED CITIES:

Due to poverty, we witness a lot of people migrating to metropolitan cities in search of livelihood. But after eradicating poverty, we can put an end to this practice, as people will generally choose to stay at their native places if their needs are being met. This step will force industrialists and the Government to make use of the labor of that particular city/ town. Due to this, the amalgamation of industries will not happen in only some cities, but it will spread across the country. It would provide relief to the problems arising from population boom like scarcity of resources.

ANALYSIS AND SUGGESTED PATH

POVERTY IN INDIA: A HISTORICAL PERSPECTIVE

At the time of independence, India inherited the ailing economy from the Britishers.19th and early 20th century saw a drastic increase in the poverty level under colonialism. Colonialism caused the destruction of the local economy and industries, made the country import-dependent. While the western world had started to bear fruits of industrialization, India could not keep up and became an agrarian economy. Over two-thirds of the population at the time of independence were dependent on agriculture. The productivity of farmlands had depended upon the whims of nature which made a large section of the population highly vulnerable. Lack of industries, low agricultural productivity, trade controls, import dependence, diversion of agricultural land from growing staples to growing indigo and poppy for export, oppressive taxation, zamindari system, lack of credit and capital transformed Indian into a region abundant in unskilled labor, poorly productive and scarce in capital and knowledge.

For a large part of post-independence history, the Indian economy was under strict government control and hence remained devoid of fruits of productivity gains due to globalization which muted economic growth and poverty continued unabated. It was only in 1991, when the government opened the country up for foreign investment, reduced trade barriers and the country was finally able to achieve a growth rate high enough to pull people out of poverty. According to a UNDP report, India was able to pull 271 million people out of poverty in 10 years time between 2005 and 2015[9].

The main drivers of poverty are as follows:

• Overpopulation
• Lack of access to quality education
• Unemployment
• Too much dependence on agriculture
• Poor management of resources

Due to poor access to education and healthcare and family planning, the problem of the increasing population continues unabated. It is difficult to allocate resources and successfully implement a poverty alleviation strategy when the number of people at the receiving hand are out of control.

While India has an abundance of unskilled labor, it also has an acute shortage of skilled workers. This is due to the poor condition of the education system and lack of infrastructure providing industrial training. Further, the overabundance of unskilled labor leads to low wages and a lack of employment security for unskilled workers.

The employment opportunities are limited even for skilled workers. The country has a substantial number of educated unemployed. Further, CMIE estimates that around 11 million jobs were lost in India in 2018[10]. Further, most organisations, especially in the unorganised sector, do not provide their employees with health insurance and other benefits.

Over 60% of the population in India is dependent on agriculture which has historically remained unproductive due to lack of irrigation and lack of scale. While the people employed in other sectors have reaped a greater benefit of the economic growth agricultural sector has remained a laggard and wages have more or less remained stagnated contributing to poverty.

Corruption at various levels of government and improper planning leads to wastage of money and resources and the intended effort to benefit the people at the bottom of the pyramid doesn’t crystallize. While the government has tried to contain the pilferage through schemes like direct cash transfers, efficient administration of funds, transparency in the delivery of service, a lot is still desired to be done.

RECOMMENDATIONS:

CHECKING POPULATION GROWTH:

In order to eradicate poverty, the most important step India needs to take is to contain its population. India has the world’s oldest government-run family planning program started in 1952. The program needs to be given more funding and rejuvenated through more promotion.

AGRICULTURAL GROWTH:

A study by Montek Ahluwalia[11] suggests a strong inverse relation between rural poverty and agricultural performance of the country. During the 1960s and 70s Haryana and Punjab saw a large decrease in poverty ratio due to the introduction of innovations in the agricultural sector. The same can be done on a national level. Regulations regarding the use of high yielding varieties can be relaxed and private investment could be allowed in important sectors such as irrigation to boost rapid growth.

IMPROVE INFRASTRUCTURE:

Roads, Highways, Power, Ports are necessary for the development of an economy, which in turn is critical to remove poverty. Private investment can be allowed in these sectors for growth at a fast pace.

ACCESS TO CREDIT:

Setting up even a small business requires capital investment. Providing credit to people can greatly aid in increasing employment. Strengthening and encouraging microfinance companies will help to penetrate and serve the credit requirement of the people at the bottom of the pyramid who generally remain unserved by big banks. Hence pulling them out of poverty.

SKILL ACQUISITION:

Providing industrial training and opportunities to acquire skills that can be leveraged for employment can aid in eradicating poverty. The government needs to increase funding to schemes such as PM Kaushal Vikas Yojana.

ROLE OF CORPORATES:

In modern times the power and influence of government have declined and corporations have started to command the ownership of significant resources, know-how, and capital. It is thus natural and moral responsibility of corporations to use its resources & use their capability to address the needs of the people who generally remain underserved. These responsibilities are now also been codified in the law.

The involvement of the corporates brings specialized expertise, efficiency to these projects. Some of the efforts done by the corporates which have created high impact are as follows:

Standard Chartered Bank has three primary sustainability goals – contributing to sustainable economic growth, being a responsible company and investing in communities. They have 11 sustainability principles, which are aligned with the sustainability goals set by the UN. Their sustainability programs mainly target the issues of health, education, employability, and entrepreneurship. They grew their Agribusiness by 44% Y-o-Y in 2018 from 2017 and disbursed loans to rural development-oriented funds managed by National Bank for Agriculture and Rural Development.

KPMG is partnering with the government to improve the public healthcare and infrastructure system. The IGHS (Infrastructure, Government and Healthcare services) program is going to provide insights and recommendations towards improving public facilities.

Royal Bank of Scotland through Indian Grameen Services is providing integrated livelihood support to the at-risk tribal communities in Similipal Biosphere reserver in Odisha focussing on improving farm yields, enabling non-farm household income and land development work in convergence with government schemes. The project serves 1686 people in 36 villages[12].

REFERENCES:

[1] Goal 1: No poverty. (n.d.). Retrieved October 30, 2019, from https://www.undp.org/content/undp/en/home/sustainable-development-goals/goal-1-no-poverty.html.

[2] Goal 1 – No Poverty: SDGs: SDG Knowledge Hub: IISD. Retrieved October 30, 2019, from http://sdg.iisd.org/sdgs/goal-1-no-poverty/.

[3] Sustainable Development Goals. (n.d.). Retrieved October 30, 2019, from https://www.undp.org/content/undp/en/home/sustainable-development-goals.html.

[4] Forget 150 days employment under MGNREGA! Numbers on ground not even half of existing 100 workdays. (2019, April 3). Retrieved October 30, 2019, from https://www.businesstoday.in/current/economy-politics/congress-manifesto-150-workdays-forget-150-days-employment-under-mgnrega-numbers-on-ground-not-even-half-of-existing-100-workdays/story/333648.html.

[5] 86 per cent beneficiaries of Pradhan Mantri Ujjwala Yojana return to take second refill. (2019, July 15). Retrieved October 30, 2019, from https://www.financialexpress.com/economy/86-per-cent-beneficiaries-of-pradhan-mantri-ujjwala-yojana-return-to-take-second-refill/1644409/.

[6] Extreme Cases of Income Taxes’ Effect on Economic Growth. Retrieved October 30, 2019, from https://www.thoughtco.com/effect-of-income-taxes-on-economic-growth-1146370.

[7] PEP policy brief. Retrieved October 30, 2019, from http://www.ihdindia.org/pdf/Att13.pdf

[8] 34 lakh candidates trained, 10 lakh get jobs under Skill India Mission. Retrieved October 30, 2019, from https://www.thehindubusinessline.com/news/34-lakh-candidates-trained-10-lakh-get-jobs-under-skill-india-mission/article25994974.ece.

[9] 271 million fewer poor people in India: UNDP in India. (2018, September 20). Retrieved October 30, 2019, from http://www.in.undp.org/content/india/en/home/sustainable-development/successstories/MultiDimesnionalPovertyIndex.html.

[10] 11 million jobs lost in 2018. (n.d.). Retrieved October 30, 2019, from https://www.cmie.com/kommon/bin/sr.php?kall=warticle&dt=2019-01-08 09:28:37&msec=666.

[11] Rural Poverty and Agricultural Performance in India. Retrieved October 30, 2019, from http://planningcommission.nic.in/aboutus/speech/spemsa/msa031.pdf

[12] RBS Foundation India Annual Report. Retrieved October 30, 2019, from https://www.rbs.in/pdf/RBS-Foundation-India-report.pdf

Authored by - 

Aayush Gulati, Abhishek Rathour, Akshay Joshi, Antony J Sankoorikal, Ayush Rawat, Praphul Kabtiyal

BM-B Group 10