Introduction to Poverty and its Causes

Introduction: Poverty is as old as man. The phenomenon of poverty is not of recent origin. Historically, its origin can be traced to the birth of ‘Feudalism’ in the Middle Ages which institutionalized property and consequent economic inequalities. Poverty has become one of the biggest challenges of the modern world. It exists in one form or the other all over the world in general and in the third world countries in particular. It is constituted as one of the important problems confronting the world at large, especially the developing countries such as India. It has become a perennial problem to the mankind. It is a formidable obstruction to the economic development. In fact, it is becoming a complex problem over years. In view of its long existence and its threat to democratic values, it is attracting the attention of policy makers and administrators in almost all over the world. Although poverty existed all over the world during last several years, it assumed alarming dimensions and conflicting character only in the recent past, partly due to the increase in affluent sections and partly due to the growing consciousness on the part of the poor.Poverty

Poverty may be regarded as a condition in which a person cannot maintain himself in accordance with the living standards of his group and hence is unable to achieve the mental and physical efficiency to function in a useful manner. It exists when one is not able to get sufficient food and other necessities of life. The rich and the poor have always existed in society but historically, the existence of poverty did not constitute an important social problem until a scale of values came into existence. When trade expanded some people began to amass wealth leading to its uneven distribution. They started living a luxurious life depriving others of comforts. The members of society began to compare the distances in economic status and look upon themselves as either poor or rich in accordance with the prevailing living standards. So, poverty is considered to be a problem only when obvious differences in economic status among members of a society are established and comparisons and evaluations of those differences are made. In the absence of these differences, poverty does not exist even though life may be most precarious. Poverty is relative to richness. It is only when people feel resentment at their lot as compared with that of the others that they feel the sting of poverty. In case of extreme deprivation to they may feel this sting without comparing their lot with that of others. They fail to achieve more than what they have and the awareness of this failure causes resentment of poverty among them.

India is one of the countries suffering from a moderate level of poverty. Although there has been an overall marginal reduction in headcount ratio from 45 percent in 1951-52 to 37 percent by 1993-94, but in absolute terms, the number of poor people increased from 200 million in the 1950’s to 320 million 1993-941. In 2002, the percentage of people living below the poverty line was estimated at 286 million. India accounts for nearly 16 percent of the population but in terms of its are in poverty it accounts for more than 28 percent2. One in every three persons in India is a poor and two of them are undernourished or malnourished3.

Despite the reduction in the proportion of people living in poverty, over 50 percent between 1973-74 and 1999-20004, the absolute number of poor continued to be in excess of 260 million in 1999-2000. It aims at achieving poverty ratios of 19.3 percent for the country as a whole by 2007. In absolute terms, the number of poor is projected to decline from 260 million in 1999-2000 to 220 million by 2007, with rural poor declining to 170 million and urban poor to 50 million. Similarly in the urban areas, the absolute number of poor was 60 million in 1973-74 and increased to 76 million in 1993-94 and then declined to a level of 50 million in 2007. Thus, there is a substantial decline in the poverty ratio during the period 1973-74 to 2007.

1.2. Definition of Poverty:

Poverty is a complex phenomenon. It is not easy to conceptualize poverty satisfactorily. In general one can say that poverty is the condition in which a person, either because of inadequate income or otherwise, expenditures do not maintain a scale of living high enough to provide for his physical and mental efficiency and to enable him and his natural dependents to function usefully according to the standards of the society in which she/he is a member. Policy makers made attempts to identify the poor in terms of the ‘poverty line’. At a broad conceptual level, poverty means an inadequate level of consumption.

We find two basic approaches to the concept of poverty in economic literature: absolute and relative. In most of the Indian studies on poverty, the focus has been mainly on measuring the number of people living in absolute poverty. Most of these studies have used caloric norms of food intake as the basis for identifying the income poverty line5.

Poverty is relative to the standard of living in a given group or society. A whole group may be better off relatively than a whole group in another culture and yet may feel poor in comparison with others in the same country or community. Poverty is relative to the conditions of others in the same cultural group.

Poverty, in simplest terms, means a state of deprivation. In broader terms, it is viewed as a failure to meet the basic requirements (which include biological requirements and nutritional norms). But in order to get different dimensions of poverty, delineation of the difference between absolute and relative poverty becomes inescapable, where absolute poverty means living below a socially acceptable minimum level, and relative poverty indicates having less than others in the society. Then absolute poverty is one in which a person is not able to maintain a minimum decent standard of living for himself and his family.

Some scholars classified poverty as collective poverty, cyclic poverty or individual poverty. In a particular region or nation, if the resources available are not sufficient to meet the barest needs of people, then one can call the entire people living in that region or nation as poor. Sometimes due to the failure of crops, industrial unrest, and economic depression or for any other reason, the overall economic activities are at the lowest ebb. The standard of living is sharply falling down with improvement in the situation. This type of poor levels of living for a group is called cyclic poverty. The most acceptable view seems to be that poverty is nothing but “failure to meet the basic requirements of a decent life”. The concept of decent life does, of course, vary from society to society, which comes under individual poverty. The poverty of an individual not caused either by the resources or levels of economic activities may be called individual poverty.

Poverty is measured though the Poverty Line, which varies from country to country from time to time with in the same country. It is measured with a cut of the line when a person lives in absolute human misery and denied of calories, protein, and micronutrients, which are very basic to human existence that denotes the lower line. The other household basic needs such as clothing, shelter, medical care, safe drinking water and sanitation, health, education for productive living from the essential needs and denote the upper line. Thus, the line that is drawn denoting absolute necessity for survival with food and non-food requisite is called poverty line6.

1.3 Characteristics of the Poor:

Poor people constitute a special category in society. They are the most deprived sections of the society both socially and economically. Until recent times, most of the people among social groups such as Scheduled caste, scheduled tribe, and backward communities are in poverty situation. After five and half decades of developmental efforts untouchables, one of the important social evils in the society though eliminated, but still, these groups have not treated as par with other socially forward communities. Thus, social backwardness is one characteristic of the poor. Social backwardness can also be seen in the areas of illiteracy, cultural phenomenon.

Illiteracy, ignorance is more among poverty groups. Social mobility is very less. They have meager landholdings, with large sized families. They are tradition and custom bound people and not exposed to modern life and advanced technology. Their income level is very low and they are in the lowest-paid occupations. They are mostly working in the unorganized/informal sector occupations with and living with unsecured life.

While talking about urban poverty, it is generally argued that urban poverty, as compared to rural poverty, is more complex and baffling due to the prevalence of heterogeneity in it. Urban poor do not make a homogeneous lot and are diversified in socio-economic and other characteristics. A few studies viz. NIUA (1989)7 Thakur, (1991)8, Ramachandran (1991)9, Dattari and Srinivasan (1991)10 tried to project the diverse characteristics of the urban poor but most of these studies confined themselves to the urban poor in slum areas. These studies reveal that the urban poor, typically housed in slums or squatter settlements, often have to live in conditions of appalling overcrowding, bad sanitation, and contaminated water. The sites they are living are illegal proportions and pollution is a constant threat11.

Urban poverty being a multifaceted phenomenon, it manifests itself not only in nutritional deficiency but also in other forms and modes like the growth of slums and informal sector, increasing casualization and marginalization, and poor accessibility of basic services. A major proportion of them lives in slums in brutal, unhygienic and inhuman living conditions. This degradation of human life resulting from the process of urbanization cannot be overlooked, and need immediate action.

1.4. Causes of Poverty:

The causes of poverty are many and complex. The economic backwardness, low income, low productivity, poor infrastructure facilities, lack of institutional credit, indebtedness and income inequalities, etc., constitute economic problems causing poverty. It is a vicious circle. Apart from economic factors, social factors, such as illiteracy, ignorance, traditions, and customs low age at marriage, high population growth and immobility of people add to the problem. Poverty and illiteracy are mutually related. Idleness is also a cause of poverty. In hot countries such as India idleness is an important cause for many people remaining poor. Extravagance on the part of individuals also increases their burden and leads them to poverty.

Also spending beyond the means and capacity on festivals, marriages, religious ceremonies, etc., lead to poverty. It reduces the money available for other essential necessities of life, forcing people to lead a life of poverty. Alcohol taking, prostitution, gambling and other demoralizing activities of an individual may also force his dependents to live a life of poverty. Uncontrolled reproduction (production of children to a family), death of earning member, calamities, and a large number of dependents per earning member in a family may also lead to poverty of the family.

Poverty and sickness form a vicious partnership each helping the other to add to the miseries of most unfortunate of mankind. Due to sickness while a man is enabling to work and his income decreases, a major portion of his income (in some cases capital of future income) is also spent on the cure of the disease. Sometimes mental diseases and incapacity also increase poverty. Poverty also produces insanity in a number of cases. The accident makes a person incapable of work by reducing his capacity considerably, resulting in the whole family becoming poor. Poverty and illiteracy are mutually related. Idleness is also a cause of poverty.

Geographical factors like unfavorable climatic conditions, absence of natural resources, natural calamities, and etc. play crucial a part in making communities relatively poor. Further socio-economic factors such as the unequal distribution of wealth, economic, depression, unemployment, unproductive hoarding, unwise economic policy, faulty educational system, inadequate housing, certain evil customs, insufficient medical facilities, etc., also play a part in reducing efficiency and increasing the extent of poverty in any country or region.

Poverty and unemployment are two major social problems causing sickness, personal family and community disorganization. They have been in existence since the dawn of civilization. The causes of poverty and unemployment may be slightly different but the effects of both are almost the same. Similarly, the remedies of both may be different but they are often similar.

Poverty and unemployment lead to:

  • (1) individual or personal disorganization and
  • (2) family disorganization and community disorganization. Both lead to crimes and other social problems such as beggary and prostitution.

An inadequate level of human capital possessed by the breadwinner towards family results in an inadequate standard of living for the entire family, including the children.

According to the observation made by the Fifth Five Year Plan, “The twin causes of poverty are under-development and inequality. It is admissible to ignore or under-play either factor. A large proportion of the population has to go without even the most essential needs of daily life because total national income and hence an aggregate consumption, is too small relative to the enormous size of the population and, secondly the distribution of this income and consumption is very uneven. The problem cannot be overcome within the foreseeable future by efforts in’ the one direction only. No rate of growth that can be realistically envisaged could make a major impact on the problem within the foreseeable future if inequality remains as acute as a present.

The major causes for Indian poverty are summarized as below

  1. occurrence of the culture of poverty
  2. acceptance of the norms of poverty life by children
  3. rapid population growth
  4. rapid growth of class I cities
  5. illiteracy and ignorance
  6. low productivity
  7. vicious circle of poverty
  8. inequality in the distribution of land, income, and wealth
  9. high incidence of unemployment and underemployment
  10. inflation and spread of black income/money
  11. slow agricultural development

Poverty manifests itself in many forms. The short- and long-range effects of poverty both in rural and urban areas are given below

  1. proliferation of urban slums
  2. high rate of educational deprivation
  3. labour lack of shelter, housing, and other facilities like, water, electricity etc.
  4. crushing pressure on civic services
  5. poor health
  6. rapid growth of the informal sector
  7. low work productivity
  8. low levels of savings
  9. Increasing casualization and underdevelopment of labour
  10. high rate of child labour
  11. nutritional deficiency (among children and mother)

1.5 Concern of poverty:

The immediate concern for the developing world was economic growth. Equity did not mean much until the economic base of the developing countries expanded at the cost of redistribution12. But it is necessary to recognize that greater emphasis on the growth of Gross National Product (GNP) gave a fillip to the domination of capitalist structure which in turn paved the way for the creation of “savings” or “capital formation” or one may call this as any kind of surplus depending on one’s ideology13. Consequently, the planners and development economists realized soon that increasing GNP has resulted in increasing the inequalities and the incidence of poverty. So they began working out alternative development strategies to reduce the concentration of wealth in a few hands through restrictive controls and progressive taxation policies.

The debate concerning growth versus development has led to the recognition of the importance of looking at development more in terms of the distribution of income, the composition of output and economic conditions of the weaker sections of the population14. It is obvious that such recognition on the ingredients of development has led to the evolution of policies to ameliorate the sufferings of the poor in the society The scope of these policies ranges from the redistribution of income to steps to enhance the nutritional levels of the poor. While studies on nutritional aspects of development emphasize the need to increase the food supplies to the deprived classes, the studies concerning redistribution of income recommend increasing the ability of the poor to augment their income through better employment opportunities15. If the main objectives of all those concerned with the development in the third world are to reduce poverty, then it will be necessary to find out different ways and means which have been attempted and adopted to achieve this. Most of the studies on Indian poverty try to emphasize the need to eliminate the absolute nature of poverty by increasing the available opportunities to enable the poor to make their living worthwhile. Some recommend that employment opportunities should be increased in such a way as to enable the weaker sections/segments of the society to buy at least the minimum consumption needs and thus, push them above the poverty line16.

Hence, there is a persistent plea for the creation of large-scale employment opportunities to absorb the surplus labour belonging to weaker sections as there is a continuous increase in the incidence of poverty in the developing world. In other words, “The most fundamental factor responsible for the new orientation towards the problems of poverty has no doubt been accumulating evidence that a large percentage of the population in developing countries has been by-passed by the economic growth that has been achieved. This, in turn, has led to the increased awareness, that poverty remains a wide-spread and distressingly persistent problem and that growth in average GNP is not a reliable indicator of improvements in economic well-being.”17 This deemphasizes the importance of growth in GNP terms. It seems to be quite justified because of its failure to effect proper redistribution in trickle-down terms. There seems to be general agreement that the option grow first and redistribute later, is not a realistic one.”18

1.6. Self Help Groups and Poverty Alleviation:

Poverty alleviation has been one of the major topics of discussion among the researchers and policymakers of the developing countries for the past few decades. Governments of various countries have adopted measures from time to time to tackle the issue of poverty but it remains to be unresolved even today. Lack of access to credit by the poor is considered as a major impediment for the effective realization of poverty alleviation programmes. The micro-finance programmes introduced and established in many parts of the world address this problem of credit availability of the poor, and emphasizes that the poor are bankable and they have the capacity to make savings.

Meanwhile, the successful implementation of the micro-finance programmes in different developing countries provides an impetus to the government and NGOs to establish similar micro-finance groups in India. These are small groups of poor women engaged in activities of savings and lending operations and they are called Self-Help Groups (SHGs) in India. It is assumed that the groups of poor women members with similar socio-economic circumstances access information about the creditworthiness of the borrowers whereby it reduces the transaction costs of selection, monitoring, and repayment.

There is a link between Income-Generating Activities hereafter referred to as (IGAs) and poverty alleviation. Generally, the micro-finance groups have a wider loan portfolio. Even though the consumption needs of the members dominate in the initial stages of their loan portfolio, IGAs need to be undertaken by the members. This is because IGAs provide income to repay their borrowed amount, and also they meet their consumption needs. Herein comes the significance of the utilization of loan for IGAs.

Micro-finance programmes can be considered as a poverty – reduction strategy adopted by developing countries all over the world. It is assumed that the investment in consumption and productive purposes improves the living standards and leads to poverty reduction. Consumption can also be considered productive, as it makes an investment in human capital, which will be productive in the long run. Micro-finance groups lend small amounts in the initial stages and members generally use them for consumption. But the consumption loans are not directly remunerative and studies in this field have revealed that the continued use of loan for consumption purposes results in an increased dependence of the members on outside sources or SHGs at the time of repayment19. IGAs undertaken by the members have the potential to achieve the objectives of income generation, provision of employment opportunities for the members, improvements in the living standards of the members, and hence poverty reduction. Thus, a permanent alleviation from poverty is possible only if the borrowed money is used for economically productive activities. Otherwise, the programme cannot ensure that the poverty reduction is self-sustainable and members become independent.

This Article Collected From:

  • Rao, M. M. (2009). Alleviating urban poverty – With special reference to self-help groups in Guntur city Andhra Pradesh. University.

  1. Hague, T., (1998): “New Strategies for Mitigating Rural Poverty”, Choudhary, RC., Rajakutty, ‘Fifty Years of Rural Development in India: Retrospect and Prospect A Report of the NIRD Foundation Day Seminar —1997, Vol”.
  2. Singh, R.P., (1998), “Poverty Alleviation Strategies in India: An Overview,” Choudhary, R.C., Rajakutty. S., (Eds.) op cit.
  3. Planning Commission (2003), India Development Report 2001, Oxford University Press, New Delhi.
  4. Planning Commission (2005), “Millennium Developmental Goals, India Country Report”, 2005, pp.23-25,
  5. K.R. Pichholiya, (1991), Poverty Eradication in India: A Summary, Poverty Eradication Foundation, Bulletin, Vol. 1 No.1, July-Sept.
  6. Rau, S.K. (2003): “Basic Needs and Poverty Amelioration”, Journal of Rural Development, NIRD, Hyderabad, Vol.22, pp.91-110.
  7. NIUA (1989), Profile of the Urban Poor: An Investigation into their Demographic, Economic and Shelter Characteristics Research Study Report 40.
  8. Thakur, R.N. (1991), “Introduction to Urban Poverty the Concept of Slums”, Urban India, Jan-March, Vol I .
  9. Ibid.,
  10. Dattari, G. & Srinivasan, P.S.(1991), Urban Poor in Tamil Nadu: Status and Strategy, Urban India, Jan-March.”
  11. World Bank (1990), Poverty-world Development Indicators, World Development Report.
  12. ” John C H Fie, Gustav Ranis and Shirley Wy. Kuo (1979): Growth with Equity, The Taiwan Case, World Bank Study, Oxford University Press, pp.
  13. Mahboob ulhaq(1978): The Poverty Certain, Choices for Third World, Oxford University Press, Delhi, PP.3-5. “
  14. Dudly Seers (1972), What Are We Trying to Measure? Institute of Development Studies, Sussex .
  15. (a). Shlomo Reutlinger and Marcelo Selowsky: Malnutrition and Poverty(1976), Magnitude and Policy Options, World Bank staff occasional papers, No.95 Johns Hopkins University Press, Baltimore, PP.39-52. (b) Rao V.M, (1982) Food, Second India Series, Macmillan.
  16. (a) Dandekar VM and Rath N: Poverty in India (1978), This study emphasized the need to increase employment opportunities for the poor, PP.112-136. (b). Paul Streeten (1978), “Introduction”, World Development, Vol.6, No.3, P.243.
  17. Bruce F Johnston and Anthony J Meyer (1978): “Nutrition Health and Population Strategies for Rural Development” Background paper (Mimeo) for workshop on Population Planning and Area Development, organized by UNAPDI and ISEC, Bangalore.
  18. Paul Streeten, Op cit„ P 243
  19. Chavan Pallavi and R.Ramakumar (2001), “Microcredit and Rural Poverty”, Economic and Political Weekly, 37(10): 955-65.

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