Rich and the Poor

Agriculture 2Citizens are tagged as rich or poor with reference to the shared socio economic conditions in the society. Three classes are prevalent namely upper, middle and lower class. That, in India we spread them into seven classes namely billionaires, high, upper middle, middle, lower middle, low and Below Poverty Line (BPL) implies that the rich and poor divide has grown to enormous proportions.

Somewhere in the centre of this dispersion, India has the middle class. The big social story in the 1980s and 1990s was the swelling of this middle class. This segment includes prosperous farming families, and the urban professional, administrative and business elite who benefited from 40 years of government protection and training. This increasingly vocal middle class wants good quality of professional education for their children with guarantee for technical and professional careers.

In the context of rich and poor, the following remarks are relevant

  • Majority of India’s population continues to live in villages that have few public amenities.
  • Wealth distribution in India is uneven. Top 10 percent earns 33 percent of the country’s income. The top one percent includes people assessed as the wealthiest in the world. They are seen at the comfort resorts and shopping malls of the world capitals, present there for business, pleasure or advanced medical care. Their children attend the most exclusive private schools in India and abroad.
  • The middle class, who makes up between 15-25 percent of the population, has a compelling need to depend on lower classes for domestic and general help, so that can pursue their own careers.
  • The Indian society depends so heavily on domestic help that it is futile to imagine anyone working for eliminating this social evil. It is an evil because the workers live in inhuman conditions in slums, and have practically no avenues for improving their life style.
  • A significant minority of the population, about 200 Million, lives below the India defined poverty line. This population somehow manages to survive at subsistence level, unemployed or underemployed. It suffers from a variety of health problems.
  • The overall per capita income of India remains among the lowest in the world. The World Bank estimates that 33 percent of the global poor now reside in India.

Below Poverty Line (BPL)

Poverty is a state where one lacks a certain amount of material possessions or money for personal use. Governments look at poverty from two angles. Absolute poverty or destitution is the situation where basic human needs like drinking water, food, clothing, shelter and health services are not available. Relative poverty refers to comparison of one individual with another. It influences the psyche of the individuals.

From government’s viewpoint, and this is the same in most countries, a monetary threshold is defined to indicate the level of absolute poverty. This number, set in local currency, is the level of earning below which the individual is considered poor. He is said to be living below the poverty line. BPL index was revised from Rs 26 to Rs 32 per person per day, in 2011. [1] BPL does not imply that anyone earning a bit more than Rs 32 per day is rich. It also does not mean that the social welfare schemes are applied only to the individuals below the BPL threshold. Such interpretations appear in forum discussions from time to time but are untrue and diversionary.

World Bank has defined the BPL threshold in USA as USD 1.25 per person per day, which is not much different from the Rs 32 in India. These numbers are to be compared based on purchasing power parity (PPP) and not by straightforward currency conversion. For example if  USD 1.25, can fetch 1 litre of milk in USA and in India the cost of one litre of milk is Rs 40, then the PPP equivalent of USD 1.25 would be Rs 40 and not Rs 70. PPP is a fundamental economic principle used for comparing the purchasing power of individuals belonging to different countries.

The real use of the BPL indicator is to enable head-count of people earning less than this number. If this head-count reduces, the government can be pleased with its performance and even boast about it in international forums. Yet, it would be more gratifying, if this threshold could at least be revised upwards every year, negating the effect of inflation.

Additional Poverty Indicators

Poverty manifests itself not only in the earnings but also in the disposable income of the individual. If citizens are consuming a major chunk of their wages on health care, the definition of BPL must change. Health related factors such as life expectancy, child mortality (not infanticide) and malnutrition indicate the level of poverty. The alarming issue with poverty is the poverty cycle ie some of its effects become the cause of further poverty. For example, deteriorating health in the slums due to shameful sanitary conditions erodes a breadwinner’s earnings and pushes individuals deeper into poverty.

In 2010,

  • The National Crime Records Bureau estimated that about 200 thousand farmers committed suicide since 1997
  • In the global hunger index, India ranked 66th among the 88 countries surveyed
  • The Family Health Survey-III found the prevalence of anaemia as 80 per cent in children, 70 per cent in pregnant women and 24 per cent in adult men

Above Poverty Line (APL)

Given the varying number of dependent children in a poor family, it may be worthwhile assessing poverty at the family level. Welfare benefits, if these are entitled per member basis, there may be tendency to have more children. But if benefits are pegged at the family level, large families may be discouraged. Large families become a burden on the individual as well as on the society.

At least one more indicator ie Above Poverty Level (APL) can be proposed. At the present level of consumer price index (CPI), a sum of Rs 5,000 per family of four members per month, may be enough to make both ends meet. APL index could then be pegged at Rs 10,000. Families falling in the band of Rs 5,000 to Rs 10,000 could be considered reasonably self-sustaining. What it means is that all families surveyed as falling below BPL would be entitled to grants and subsidies of all types for food, shelter and health, whereas those in the band Rs 5000-10000 will get only subsidies but not grants. There is an implicit disincentive for families of more than four members in this scheme.

Introduction of APL may appear to be unmanageable, but it is not. Surveys and data collection for APL can be synchronised with that for the BPL. There is yet another fear to be dispensed with. Categorising the population based on BPL and APL, should not be deemed to be polarising the society. In effect this is probably a good method to deliver benefits proportional to the level of poverty, and achieve social equality. The BPL and APL lists must be monitored closely, every five years, to remove those who override the threshold, and bring in others who deteriorate in their financial status.

Empowerment is the Key [2]

People above the designated BPL or even those above the proposed APL cannot be said to be living in comfort. Sustenance and living in a dignified manner, is more than just the food intake, which is the basis of the BPL formula.

The government must empower citizens to become breadwinners. It should regulate the environment in a way that clothing, housing, health care and entertainment are available to an average citizen, without bending over backwards. Simultaneously, it should remove the burden from the citizens, of arranging basic facilities like clean drinking water, electricity, gas for cooking, sewage disposal and mandatory travel for work. According to surveys, almost 50 percent of the Indian population needs augmentation of income to sustain an average life. This is not the only reason yet one of the significant ones, that corruption is seen as a source of income. And how do we ensure that individuals do not keep migrating from one level of poverty to another and vice versa.

One ingenious way of lessening the burden on the poor is by organising recycling of used items, formally. This is done in foreign countries in a variety of ways. While NGOs can continue with their contributions in this area, the government could encourage businesses to establish collection and distribution chains for recyclable items. Used clothes, utensils, containers, furniture items, medicines etc could be redistributed through this chain. The government will have to allow sale of used items without levying taxes, since no value addition is carried out while selling second hand items.

In December 2012, the ruling party ignited a vicious debate by announcing direct bank transfer of cash to the beneficiaries of welfare schemes. While this appears to be a positive step since it obliterates the intervening pilferages, the opposition called it as vote bank politics. They highlighted the inadequacy that in the absence of a stable social security system and the non-existence of bank accounts for villagers, the allocated money would simply land up in suspense accounts, and from there it will vanish.

History is the witness that polarisation of society based on wealth cannot be eliminated, yet we can certainly improve things if we find answers to the following questions

  • Can poverty be eliminated by educating the citizens, without having adequate opportunities for entrepreneurship or employment
  • Should we continue to give subsidies, loans and grants to the poor instead of empowering them
  • Will our inclination towards reservation deliver something that it has not done in 65 years

Wake up Call to Coming Generations

It has become a grim necessity that the modern generation moves towards what we can call informative interaction on the social media. They should indulge in discussions with the others to learn how the advanced countries are tackling the problem of the rich and poor divide, and what exactly the public does in this regard. What psychological and social obligations must be owned by the rich towards the poor, and the miserable poor?

[1] When the second 5-yearly plan was presented, Dr Ram Manohar Lohia asked Nehru a seemingly naive question, ‘who will be the beneficiary of these plans’. It was this question, which prompted the government to define the term BPL. BPL was defined for a basket of items that constitute the required calories of nutrition required by an individual. Two reports define this number, Arjun Sengupta commission on unorganised enterprises (77 percent of Indians live on less than Rs 20 a day) and Suresh Tendulkar report (41.8 percent of rural households live below poverty line)

[2]  On a question by CNN/IBN television, ‘what she would do in India if she was made the prime minister’, Oprah Winfrey during her 2012 visit of India, considered education as the most significant direction for empowerment of the Indian masses. She further added that she was not suggesting that this is what the present government of India should do.


2 thoughts on “Rich and the Poor

  1. Is there anything wrong in quoting Oprah ? She is acclaimed as the best in the west.

    If u would like to add some detail to the cursory ness, please do it. It will help all


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