28 November 2022 – The Indian Express

Money Scarcity Issue in India

Money Scarcity Issue in India: What Is It?

• Before the 1990s, when India had a closed economy, all of its residents had access to the resources they needed through the public distribution system. However, because of budgetary limitations and policy changes brought about by India’s entry into the global economy, the government was only able to deliver the resources that were required to the target population—those who were deserving of government aid.
• The government eventually adopted the Targeted Public Distribution System as a result. In other words, individuals who fall below the poverty line received food that was subsidised by the government.
• Given that poverty has a wide range of causes and characteristics, it is challenging to define it precisely. It is distinct from urban-rural, nation-nation, etc. To put it another way, many views are used to define poverty.
• However, the overall notion is that someone is considered to be living in poverty when they have less access to and affordability for necessities like food, clothing, a place to live, healthcare, education, etc.
• Purchasing Power Parity and nominal relative basis are used by the UN and the World Bank to calculate poverty.
• As a result, the judgement of poverty changes depending on perspective.

How was India’s Money Scarcity Issue in India measured?

Analysis of British India’s Money Scarcity Issue in India:

• Dadabhai Naoroji produced the first poverty estimate in India, which was then published in his book “Poverty and Un-British Rule in India” in 1901.
• In 1936, the National Planning Committee calculated the level of poverty in India under colonial control. It calculated poverty by relating housing, food, and clothing. Additionally, Independent India employed this technique. The National Planning Committee’s estimate of poverty painted a dismal picture of British India’s economy.

The Money Scarcity Issue in India level in Independent India is estimated to be:

• In 1962, a working group was formed to determine the nation’s poverty line.
• The minimum number of calories needed to survive and the estimated cost of those calories in rural India served as the basis for this estimation. This indicates that the typical monthly poverty threshold is Rs. 20. based on prices in 1960–1961
• Alagh Committee: Prior to 1979, a citizen’s income was used to determine poverty levels. According to a group led by Y K Alagh’s advice, poverty levels were calculated in 1979 using data on how many calories the general public consumes. The committee claims that the assessment of poverty varies between urban and rural locations. A inhabitant of a rural location is considered BPL if they consume less than 2400 calories per day. A person lives in poverty if they consume less than 2100 calories per day in an urban location. This is a presumption that people in cities need less calories because they don’t engage in as many physical activities as people in rural areas. The poverty line was initially established in India by the Alagh committee.
• Lakdawala Formula: This was put up by the D.T. Lakdawala-led Lakdawala Committee. Additionally, it is based on household spending per capita. The Alagh committee and the Lakdawala committee both employed the same strategy. It did, however, have several requirements that the later did not. The estimation took into account both health and education. The poverty line was established by this committee using the CPI-IL (Consumer Price Index for Industrial Laborers) and CPI-AL (Consumer Price Index for Agricultural Laborers). This approach calculates the average of the bare minimum per capita household spending in order to assess the poor. Anyone who resides in a home with a per capita expenditure that is less than the acquired average belongs to the BPL. The achieved value serves as the foundation for the poverty line. Using this methodology, it was calculated that 22% of the population was below the poverty line in 2011 compared to a BPL rate of 36% in 2004–2005. This approach was used to quantify poverty in India up until 2011.
• The Planning Commission established the Suresh Tendulkar Committee in 2005. The techniques suggested by this group are still in use today. It suggested the abandonment of the calorie-based approach and the addition of monthly spending for utilities, transportation, education, and health. To measure and assess poverty, it coined the new term “Poverty Line Basket.” It demanded that the poverty line basket be the same in urban and rural areas. A person is considered to be in poverty if they lack access to any of the items listed in the poverty basket. This approach bases its determination of poverty on the cost of living. However, the estimate that was produced was incredibly inadequate, which caused a public uproar. As a result, the Rangarajan Committee was established.
• Rangarajan Committee: Rangarajan served as the chairman of this 2012-established committee. This also adopts calorie-based poverty calculations. This has limitations because it only took into account the very minimal requirements. This excluded the requirement for comfortable living conditions.
• Current state of poverty line estimation: The aforementioned situations demonstrate how hard and challenging it is to determine the poverty line. The Indian government is still struggling to come up with a reliable way to determine how poor the nation is. A 14-person task committee led by Aravind Panagaria, vice-chairman of NITI Aayog, was assigned the responsibility. They too have fallen short, and they have suggested forming a fresh, specialised group to discuss the problem.

What factors lead to Money Scarcity Issue in India from an Indian perspective?

• Exploitation by colonial powers: India’s forced de-industrialization as a result of colonial rule led to a rise in raw material production and a decline in the export of commodities with value added, such as traditional handicrafts and textiles. The natives were prevented from producing locally because they were compelled to purchase British goods. The result was significant unemployment. The Indians’ situation at the time was made worse by diseases, droughts, and other factors.
• Population growth: The high population growth brought on by a decline in the mortality rate and a rise in the birth rate may be advantageous to the Indian economy. However, given the current situation’s extreme unemployment and growing reliance on those working people, this is turning out to be a liability. To aid in the expansion of the economy, the enormous population must be transformed into human capital.
• Natural disasters: In India, the states of Bihar, Jharkhand, Odisha, Madhya Pradesh, Chattisgarh, Uttar Pradesh, and Uttarakhand have the highest percentages of the BPL population. This is due to the fact that these states are vulnerable to natural disasters and that SC/STs make up the majority of the population, leaving them underrepresented. The natural disasters in these states impede their states’ ability to advance economically and in terms of agriculture.
• The expansion of unorganised sectors: The Indian economy includes a large number of unorganised industries. The issue of labour exploitation is now raised. Jobs are more in demand, which contributes to job worries.
• Failing Agriculture: One of the weakest areas of the Indian economy is the agriculture sector. Due to the rising debt and declining output, farmer suicides and protests are on the rise. Long-term poverty as a result of this would affect them. The majority of Indians are employed in this sector, which generates minimal profit.
• Absence of investment: The investment creates more employment possibilities. The Indian economy must be welcoming to foreign investment in order to accomplish this. However, some areas of India continue to be unfavourable because to militancy, corruption, and other factors.
• Societal factors: Caste systems still exist in some parts of India, along with illiteracy, underrepresentation of minorities, and social standards.
• Lack of skilled labour: If the population is used effectively, it can be a strength for the economy. The use of human capital can accomplish this. The pace of population literacy improvement initiatives is quite slow. Some people are rejected from the workforce because they don’t have the necessary abilities. Because of this, there is unemployment and poverty.
• Corruption: The government has taken a lot of steps to end poverty. Political will is still lacking, though. Poverty is also a result of those in positions of authority being corrupt.
• Resource wastage: India is a country with an abundance of natural resources that, if used effectively and without waste, can be transformed into a benefit.
• Lack of entrepreneurship: India has a wide range of economic-boosting activities. For instance, certain tribes have a rich artistic and cultural heritage that can be used for their development and advancement through effective business. However, they are wasted due to a lack of entrepreneurial spirit and leadership. One of the most vulnerable groups in Indian society is still the tribes.
• Lack of infrastructure: Despite its tremendous economic progress, India still has many remote regions. There are many Indian villages that still lack access to necessities like electricity, which lowers their standard of living. Even appropriate roads and railroads are lacking. Due to accessibility issues, they are unable to contribute to the economy.

What is the situation right now?

• According to the UN Development Program’s 2019 Global Multidimensional Poverty Index, multidimensional poverty in India decreased by 27.5 percent between 2005–2006 and 2015–16. Multidimensional poverty refers to the evaluation of the poor that takes into account not only their level of money but also their general state of health and working conditions.
• Nearly 44 Indians are escaping from extreme poverty each minute, according to World Poverty Clock.
• In India, there are 21.9 percent people that live in poverty as of 2011.
• As of April 2021, the unemployment rate is 7.1 percent. This is a major issue because poverty in the nation is directly related to unemployment. For the benefit of the underprivileged, infrastructure projects including new roads and housing constructions have exploded in recent years. This could encourage more investment in the nation, leading to more job possibilities.

Those in need:

• In stark contrast to the January 2020 projection of 4.3 percent, the poverty rate in India is anticipated to rise to 9.7 percent in 2020.
• According to estimates, India’s 340 million underprivileged people fell to 78 million between 2011 and 2019.
• The amount rose by 75 million by the year 2020.
• Poor people are those who make $2 or less per day in income.
• Nearly 60% of the global growth in poverty can be attributed to India.
• As evidence that the impoverished were having difficulty finding employment, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) had a record increase in participants.

The middle class:

• According to estimates, India’s middle class will have decreased by 3.2 crores by 2020.
• People who fall into the middle class have daily incomes of between $10 and $20 or Rs. 700 to Rs.
• It’s possible that the middle-income group has shrunk from about 10 crores to just 6.6 crores.

Group with Low Income:

• The vast majority of people in India are considered to be low-income.
• The number of people in this group decreased daily from 119.7 crores to 116.2 crores, with around 3.5 crores falling below the poverty level.
• People in the low-income group make between Rs. 150 and Rs. 700 each day.

A wealthy populace:

• The wealthier population decreased by roughly 30% to 1.8 crore persons.
• The term “rich” refers to those who make more than Rs. 1,500 a day.

Reasons:

• The pandemic-induced lockdown led to closed businesses, lost jobs, and declining revenues, sending the Indian economy into a severe slump.

 What steps has the government done to combat Money Scarcity Issue in India?

Swarozgar Swarnajayanti Gram Yojana:

• The debut date was April 1st, 1999.
• This initiative combined the Million Wells Scheme (MWS), Supply of Improved Toolkits to Rural Artisans (SITRA), Ganga Kalyan Yojana, Training of Rural Youth for Self Employment (TRYSEM), and Development of Women and Children in Rural Areas (DWCRA).
• Its goal is to raise beneficiaries out of BPL.
• It supports the underprivileged in rural areas who are self-employed.
• The ratio of the funds shared by the State and the Center is 75:25.
• This programme intends to give inclusive and efficient relief to the rural poor by operating in clusters.
• In order to give training, build capacity, and supply assets to produce revenue, the rural poor are organised into SHGs.
• In 2011, the National Rural Livelihood Mission became the new name for this programme.
• This was eventually combined with the Deen Dayal Upadhyaya Antyodyaya Yojana to offer skill development to the underprivileged. Additionally, this plan offers homeless people subsidies and shelters. The development of vendor marketplaces aims to boost employment in rural areas.

Grassroots Development Initiative:

• This programme took the place of the previous Jawahar Rozgar Program.
• It was started in April 1999 with the goal of developing infrastructure to create jobs in rural areas.

The Pradhan Mantri Awas Yojana:

• Pradhan Mantri Awaas Yojana (Grameen) and Pradhan Mantri Awaas Yojana are its two main components (Urban)
• It first began in 2015.
• It brings together programmes like Saubhagya Yojana, Ujjwala Yojana (which supplies LPG to BPL), and access to restrooms, water, and drinking water facilities (electricity).

National Rural Employment Guarantee Act of Mahatma Gandhi, 2005:

• It offers rural households 100 days of guaranteed employment.
• If the applicants’ desired jobs are not available and they were unemployed for more than 15 days, they will receive unemployment benefits.
• This ensures that the government is accountable and that the rural populace has access to employment possibilities.
• The National Food for Work programme offered further resources and help that Sampoorna Grameen Rozgar Yojana does not. The Planning Commission designated 150 districts under this initiative as being behind. They benefited from this initiative. Employment and food security based on societal, social, and economic necessity

Mantri Pradhan Mantri Kaushal Vikas Yojana:

• It is a programme designed to improve abilities in accordance with market demands.
• Through the Nation Skill Development Corporation, this programme is carried out (NSBC).
• Government funds are used to cover training and evaluation costs.
• The National Skill Qualification Framework and industry-level criteria serve as the foundation for the training made available under this programme.
• College graduates and school/college dropouts are among the benefactors.
• The Rythu Bandhu Scheme was put into place in Telangana to give all landowners who were farmers financial support of Rs. 4000 per acre per season.
• Mantri Kisan Pradhan Nidhi Samman: The goal of this programme is to give all landholding farmers financial support for working capital. This introduces the concept of a universal basic income for Indian farmers. Learn more.

Post-pandemic programmes:

• Production-related reward programme
• Abhiyaan Garib Kalyan Rojgar

Steps to Take:

• Various agencies tasked with carrying out the Welfare Schemes must be held accountable and transparent by the government.
• Making talent and infrastructure development a high focus is necessary.
• More government spending on nutrition, education, and health.
• To assist the target group, the issue of not being able to define the poverty line must be fixed.
• A quick fix is to give the needy direct income transfers. Additionally, universal basic income should be taken into account.
• To reduce rural poverty, the government must invest in agriculture. Only transient problems are addressed by subsidies. Additionally, technology that enable farmers to practise all-weather agriculture must be developed.
• Growth that is focused on employment: Encourage labor-intensive industries and create jobs in the modern economy.
• To ensure effective service delivery, reduce corruption.
• Through holistic, multifaceted interventions created to help people lift themselves out of extreme poverty by giving them the tools, skills, and resources required to deal with the challenges that keep them imprisoned in a state of destitution, poor households can become resilient enough to withstand significant shocks. Along with providing resources like livestock, the government should also offer training in livelihood and financial skills, one-on-one coaching to build confidence and hope, fundamental health care for families, and other things to make these resources fruitful.