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Economics Ncert XI • Chapter • 4 • Summary

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  • Some of the most challenging issues facing India today are poverty, development of rural India and building infrastructure.
  • We are a billion-strong country today and our human capital is the biggest asset; it needs investment in health and education.
  • We need to understand the concept of employment and the need for creating more employment in our country and also look at the implications of development on our environment and call for sustainable development. There is a need to critically assess government initiatives in tackling all these issues

Chapter – Poverty

No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. Adam Smith


  • The pattern of development that the successive five year plans envisaged laid emphasis on the upliftment of the poorest of the poor (Antyodaya).
  • While addressing the Constituent Assembly in 1947, Jawaharlal Nehru had said, “This achievement (Independence) is but a step, an opening of opportunity, to the great triumphs and achievements that await us… the ending of poverty and ignorance and disease and inequality of opportunity.”
  • More than one-fifth of the world’s poor live in India alone

Who are the Poor?

  • The poor people possess few assets and reside in kutcha hutments with walls made of baked mud and roofs made of grass, thatch, bamboo and wood. The poorest of them do not even have such dwellings. In rural areas many of them are landless. Even if some of them possess land, it is only dry or waste land.
  • Starvation and hunger are the key features of the poorest households.
  • Poor people also face unstable employment. Malnutrition is alarmingly high among the poor.
  • They borrow from money lenders who charge high rates of interest that lead them into chronic indebtedness.
  • Most poor households have no access to electricity. Their primary cooking fuel is firewood and cow dung cake. A large section of poor people do not even have access to safe drinking water.
  • Scholars identify the poor on the basis of their occupation and ownership of assets. They state that the rural poor work mainly as landless agricultural labourers, cultivators with very small landholdings, landless labourers who are engaged in a variety of non-agricultural jobs and tenant cultivators with small land holdings where the urban poor are largely the overflow of the rural poor who had migrated to urban areas in search of alternative employment and livelihood, labourers who do a variety of casual jobs and the self-emloyed who sell a variety of things on roadsides and are engaged in various activities.

What is Poverty?

  • Poverty is hunger. Poverty is being sick and not being able to see a doctor. Poverty is not being able to go to school and not knowing how to read. Poverty is not having a job. Poverty is fear for the future, having food once in a day. Poverty is losing a child to illness, brought about by unclear water. Poverty is powerlessness, lack of representation and freedom.

How are the Poor identified?

  • If India is to solve the problem of poverty, it has to design schemes to help the poor out of their situation. For these schemes to be implemented, the government needs to be able to identify who the poor are. For this there is need to develop a scale to measure poverty, and the factors that make up the criteria for this measurement or mechanism need to be carefully chosen.
  • In pre-independent India, Dadabhai Naoroji was the first to discuss the concept of a Poverty Line. He used the menu for a prisoner and used appropriate prevailing prices to arrive at what may be called ‘jail cost of living’. However, only adults stay in jail whereas, in an actual society, there are children too. He, therefore, appropriately adjusted this cost of living to arrive at the poverty line. For this adjustment, he assumed that one-third population consisted of children and half of them consumed very little while the other half consumed half of the adult diet. This is how he arrived at the factor of three-fourths; (1/6)(Nil) + (1/6)(Half) + (2/3)(Full) = (3/4) (Full). The weighted average of consumption of the three segments gives the average poverty line, which comes out to be three-fourth of the adult jail cost of living.
  • In post-independent India, there have been several attempts to work out a mechanism to identify the number of poor in the country. In 1962, the Planning Commission formed a Study Group. In 1979, another body called the ‘Task Force on Projections of Minimum Needs and Effective Consumption Demand’ was formed. In 1989 and 2005, an ‘Expert Group’ was constituted for the same purpose.
  • For the purpose of defining poverty we divide people into two categories; the poor and the non-poor and the poverty line separates the two. However, there are many kinds of poor; the absolutely poor, the very poor and the poor. Similarly there are various kinds of non-poor; the middle class, the upper middle class, the rich, the very rich and the absolutely rich.
Poverty line
Poverty line
  • Categorising Poverty

    There are many ways to categorise poverty.

    • In one such way people who are always poor and those who are usually poor but who may sometimes have a little more money (example: casual workers) are grouped together as the chronic poor.
    • Another group are the churning poor who regularly move in and out of poverty (example: small farmers and seasonal workers) and the occasionally poor who are rich most of the time but may sometimes have a patch of bad luck. They are called the transient poor. And then there are those who are never poor and they are the non-poor.
Categories of poor
Categories of poor
  • The Poverty Line

    There are many ways of measuring poverty.

    • One way is to determine it by the monetary value (per capita expenditure) of the minimum calorie intake that was estimated at 2,400 calories for a rural person and 2,100 for a person in the urban area. Based on this, in 2004-2005, the poverty line was defined for rural areas as consumption worth Rs 447 per person a month and for urban areas it was Rs 579. Scholars state that a major problem with this mechanism is that it groups all the poor together and does not differentiate between the very poor and the other poor. This mechanism is helpful in identifying the poor as a group to be taken care of by the government, but it would be difficult to identify who among the poor need help the most. There are many factors, other than income and assets, which are associated with poverty; for instance, the accessibility to basic education, health care, drinking water and sanitation. The existing mechanism for determining the Poverty Line also does not take into consideration social factors that trigger and perpetuate poverty such as illiteracy, ill health, lack of access to resources, discrimination or lack of civil and political freedoms. The aim of poverty alleviation schemes should be to improve human lives by expanding the range of things that a person could be and could do, such as to be healthy and well-nourished, to be knowledgeable and participate in the life of a community. From this point of view, development is about removing the obstacles to the things that a person can do in life, such as illiteracy, ill health, lack of access to resources, or lack of civil and political freedoms. Due to various limitations in the official estimation of poverty, scholars have attempted to find alternative methods. For instance, Amartya Sen, noted Nobel Laureate, has developed an index known as Sen Index. There are other tools such as Poverty Gap Index and Squared Poverty Gap.

The number of Poor in India?

  • When the number of poor is estimated as the proportion of people below the poverty line, it is known as ‘Head Count Ratio’.
  • The official data on poverty is made available to the public by the Planning Commission.
Trends in poverty
Trends in poverty
  • It is estimated on the basis of consumption expenditure data collected by the National Sample Survey Organisation (NSSO).
  • More than three-fourth of the poor in India reside in villages.
  • In the 1990s, the absolute number of poor in rural areas had declined whereas the number of their urban counterparts increased marginally. The poverty ratio declined continuously for both urban and rural areas.
  • The number of poor in India and their proportion to total population has declined substantially. For the first time in the 1990s, the absolute number of poor has declined.
  • Five states — Uttar Pradesh, Bihar, Madhya Pradesh, West Bengal and Orissa — account for about 70 per cent of India’s poor.
  • Tamil Nadu, it reduced its people below the poverty line from 55 per cent to 29 per cent during 1973-2005. During this period, West Bengal has been just as successful; from nearly two-third, i.e., 63 per cent of the population below the poverty line the same was reduced to about 34 per cent.

What causes Poverty?

  • Lack of quality education, health care and also main victims of caste, religious and other discriminatory practices are poor.
  • Under the British, India began to export food grains and, as a result, as many as 26 million people died in famines between 1875 and 1900. The British Raj impoverished millions of people in India. Our natural resources were plundered, our industries worked to produce goods at low prices for the British and our food grains were exported. In 1857-58, anger at the overthrow of many local leaders, extremely high taxes imposed on peasants, and other resentments boiled over in a revolt against British rule by the sepoys, Indian troops commanded by the British.
  • With the rapid growth of population and without alternative sources of employment, the per-head availability of land for cultivation has steadily declined leading to fragmentation of land holdings. The income from these small land holdings is not sufficient to meet the  family’s basic requirements.
  • A large section of urban poor in India are largely the overflow of the rural poor who migrate to urban areas in search of employment and a livelihood. Industrialisation has not been able to absorb all these people. Poverty is, therefore, also closely related to nature of employment.
  • A steep rise in the price of food grains and other essential goods, unequal distribution of income and assets has also led to the persistence of poverty in India.
  • All this has created two distinct groups in society: those who posses the means of production and earn good incomes and those who have only their labour to trade for survival.
  • Over the years, the gap between the rich and the poor in India has widened.
  • Poverty is a multi-dimensional challenge for India that needs to be addressed on a war footing.

Policies and Programmes towards Poverty Alleviation

  • The Indian Constitution and five year plans state social justice as the primary objective of the developmental strategies of the government.
  • To quote the First Five Year Plan (1951-56), “the urge to bring economic and social change under present conditions comes from the fact of poverty and inequalities in income, wealth and opportunity”.
  • The Second Five Year Plan (1956-61) also pointed out that “the benefits of economic development must accrue more and more to the relatively less privileged classes of society”.
  • Over the years, the government has been following three approaches to reduce poverty in India: growth oriented development, specific poverty alleviation programmes and meeting the minimum needs of the poor.
    • The first one is growth-oriented approach. It is based on the expectation that the effects of economic growth — rapid increase in gross domestic product and per capita income — would spread to all sections of society and will trickle down to the poor sections also. This was the major focus of planning in the 1950s and early 1960s. Economists state that the benefits of economic growth have not trickled down to the poor.
    • The second one is specific poverty alleviation programmes. This second approach has been initiated from the Third Five Year Plan (1961-66) and progressively enlarged since then. One of the noted programmes initiated in the 1970s was Food for Work. Most poverty alleviation programmes implemented are based on the perspective of the Five Year Plans (2002-2007) Expanding self-employment programmes and wage employment programmes are being considered as the major ways of addressing poverty. Examples of self-employment programmes are Rural Employment Generation Programme (REGP), Prime Minister’s Rozgar Yojana (PMRY) and Swarna Jayanti Shahari Rozgar Yojana (SJSRY). The first programme aims at creating self-employment opportunities in rural areas. The Khadi and Village Industries Commission is implementing it. Under this programme, one can get financial assistance in the form of bank loans to set up small industries. The educated unemployed from low-income families in rural and urban areas can get financial help to set up any kind of enterprise that generates employment under PMRY. SJSRY mainly aims at creating employment opportunities —both self-employment and wage employment—in urban areas. Earlier, under self-employment programmes, financial assistance was given to families or individuals. Since the 1990s, this approach has been changed. Now those who wish to benefit from these programmes are encouraged to form self-help groups. Initially they are encouraged to save some money and lend among themselves as small loans. Later, through banks, the government provides partial financial assistance to SHGs which then decide whom the loan is to be given to for self-employment activities. Swarnajayanti Gram Swarozgar Yojana(SGSY) is one such programme. This has now been restructured as National Rural Livelihoods Mission (NRLM). The government has a variety of programmes to generate wage employment for the poor unskilled people living in rural areas. Some of them are National Food for Work Programme (NFWP) and Sampoorna Grameen Rozgar Yojana(SGRY). In August 2005, the Parliament has passed a new Act to provide guaranteed wage employment to every household whose adult volunteer is to do unskilled manual work for a minimum of 100 days in a year. This Act is known as Mahatma Gandhi National Rural Employment Guarantee Act. Under this Act all those among the poor who are ready to work at the minimum wage can report for work in areas where this programme is implemented. In 2011-12, nearly 4 crore households have been provided employment.
India Poverty MNREGA
India Poverty MNREGA
  • The third approach to addressing poverty is to provide minimum basic amenities to the people. One can trace this approach from the Fifth Five Year Plan. Three major programmes that aim at improving the food and nutritional status of the poor are Public Distribution System, Integrated Child Development Scheme and Midday Meal Scheme. Pradhan Mantri Gram Sadak Yojana, Pradhan Mantri Gramodaya Yojana, Valmiki Ambedkar Awas Yojanaare also attempts in the same direction. It may be essential to briefly state that India has achieved satisfactory progress in many aspects.
  • The government also has a variety of other social security programmes to help a few specific groups. National Social Assistance Programme is one such programme initiated by the central government. Under this programme, elderly people who do not have anyone to take care of them are given pension to sustain themselves. Poor women who are destitute and widows are also covered under this scheme.
  • The government has also introduced a few schemes to provide health insurance to poor people.

Poverty Alleviation Programmes – A Critical Assessment?

  • Efforts at poverty alleviation have borne fruit in that for the first time since independence, the percentage of absolute poor in some states is now well below the national average.
  • Despite various strategies lack of basic amenities continue to be a common feature in many parts of India.
  • Though the policy towards poverty alleviation has evolved in a progressive manner, over the last five and a half decades, it has not undergone any radical transformation. None resulted in any radical change in the ownership of assets, process of production and improvement of basic amenities to the needy.
  • Scholars, while assessing these programmes, state three major areas of concern which prevent their successful implementation.
    • Due to unequal distribution of land and other assets, the benefits from direct poverty alleviation programmes have been appropriated by the non-poor. The amount of resources allocated for these programmes is not sufficient.
    • Moreover, these programmes depend mainly on government and bank officials for their implementation. Since such officials are ill motivated, inadequately trained, corruption prone and vulnerable to pressure from a variety of local elites, the resources are inefficiently used and wasted.
    • There is also non-participation of local level institutions in programme implementation. It also reveals that high growth alone is not sufficient to reduce poverty. Without the active participation of the poor, successful implementation of any programme is not possible. Poverty can effectively be eradicated only when the poor start contributing to growth by their active involvement in the growth process. This is possible through a process of social mobilisation, encouraging poor people to participate and get them empowered.
  • Moreover, it is necessary to identify poverty stricken areas and provide infrastructure such as schools, roads, power, telecom, IT services, training institutions etc.


  • Poverty alleviation has always been accepted as one of India’s main challenges by the policy makers, regardless of which gover nment was in power.
  • The absolute number of poor in the country has gone down.
  • There is improvement in terms of per capita income and average standard of living; some progress towards meeting the basic needs has been made. But when compared to the progress made by many other countries, our performance has not been impressive.
  • Moreover, the fruits of development have not reached all sections of the population. Some sections of people, some sectors of the economy, some regions of the country can compete even with developed countries in terms of social and economic development, yet, there are many others who have not been able to come out of the vicious circle of poverty.

PS: You just finished reading Chapter • 4 (11th Economics NCERT Abridged). Great Going. Read other chapters.


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  1. Fabulous!!!!. Helps when u don’t open d book…Plz make it more attractive ….it seems quite boring when I read so many things in only black n white…but still loved it!!!!!!thnk u soo much~

  2. Really good work and thanks for the material. Please let me know how to get remaining summary for NCERT-11 Economic Development chapters( 5 to 10)

  3. Really good work and thanks for the material. Please let me know how to get the remaining summary for NCERT-11 Economic Development chapters( 5 to 10).

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