Union Budget 2019: People in poverty trap must be given adequate aid to get rid of the vicious cycle

The poverty trap is a situation in which people stuck in a recurring pattern of poverty. A poverty trap is created when an economic system requires a huge amount of capital to earn enough to get rid of poverty. When individuals lack this capital, they may also find it difficult to acquire it, creating a self-reinforcing cycle of poverty.

Factors responsible for poverty trap

Many factors are responsible for creating the poverty trap, including, limited access to credit and capital markets, extreme environmental degradation, corrupt governance, capital flight, inequality, poor education systems, disease ecology, lack of public health care, war and poor infrastructure.

Representational image. AFP.

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In order to escape the poverty trap, it is argued that individuals in poverty must be given sufficient aid so that they can acquire the critical mass of capital necessary to raise themselves out of poverty.

India's poverty situation

The Suresh Tendulkar Committee set up to look into the people living under the poverty line in India submitted its report in November 2009. It provided a new method of calculating the poverty line based on per capita consumption expenditure per month or day. For rural areas, it was Rs 816 per month or Rs 27 per day. For urban areas, it was Rs 1000 per month or Rs 33 per day. Using this methodology, the population below the poverty line in 2009-2010 was 354 million (29.6 percent of the population) and that in 2011-2012 was 269 million (21.9 percent of the population).

In its annual report of 2012, the Reserve Bank of India (RBI) named Goa having the least poverty rate of 5.09 percent while the national average stood at 21.92 percent.

The Rangarajan Committee set up to look into the poverty line estimation in India submitted its report in June 2014. It amended the calculation of the poverty line based on per capita consumption expenditure per month or day given by the Tendulkar Committee. The new poverty threshold for rural areas was fixed at Rs 972 per month or Rs 32 per day. For urban areas, it was fixed at Rs 1,407 per month or Rs 47 per day. Under this methodology, the population below the poverty line in 2009-2010 was 454 million (38.2 percent of the population) and that in 2011-2012 was 363 million (29.5 percent of the population).

India's poverty alleviation programmes 

Most of the poverty alleviation programmes are designed to target the rural populace as the prevalence of poverty is high in rural areas as compared to the urban sector. The programmes can be mainly grouped into 1) wage employment programmes 2) self-employment programmes 3) food security programmes 4) social security programmes 5) urban poverty alleviation programmes.

The Five Year Plans launched immediately after the Independence tried to focus on poverty alleviation through sectoral programmes.

Jawahar Gram Samridhi Yojana (JGSY), National Old Age Pension Scheme (NOAPS), National Family Benefit Scheme (NFBS), National Maternity Benefit Scheme, Pradhan Mantri Gramin Awaas Yojana,
Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) are some of the poverty alleviation programmes implemented in the country.