Unemployment & Poverty of India of Indian Economy PDF

 

UNEMPLOYMENT & POVERTY IN INDIA

Poverty and unemployment are two major socio-economic problems in most of the developing countries. As both have mutual cause and effect relationship, they are presented in the same chapter.

This chapter covers types of poverty, estimation of poverty in India, employment and unemployment estimates and types of unemployment.

Poverty can be defined as social phenomenon in which a section of the society is unable to fulfil even its basic necessities of life. There are two types of poverty.

1. Absolute Poverty

2. Relative Poverty

1. Absolute Poverty

In this poverty, minimum physical quantities like cereals. pulses milk, butter, etc are determined for a subsistence level of living and then the price quotations of these commodities are obtained from market to convert these commodity requirements into monetary terms.

By aggregating all the quantities included and its money value, a figure expressing per capita consumer expenditure is determined. The population whose level of income (or expenditure) is below this figure as considered to be Below the Poverty Line (BPL). It is expressed as number of poor people as a proportion of total population, say 10%. This measure is also called as head count ratio.

The reason to determine poverty on the basis of consumption expenditure instead of income is that dependent people like children and senior citizen also consume even though they are not earning. One more reason is even though income is less people may consume more with the backup of asset or by borrowing. It shows their ability to consume and have a descent standard of living. From this it is clear the consumption based measure is better than income based measure.

2. Relative Poverty

In this case, the income/consumption distribution of the population in different percentile groups is estimated and a comparison of the levels of living of the top 5 to 10% with the bottom 5 to 10 % of the population reflects the relative standards of poverty. Here a person's income/consumption may be above the poverty line out he happens to be poor in comparison with the person whose income/consumption is above his/her. This measure is to calculate inequality in the society.

ESTIMATION OF POVERTY IN INDIA

1. Dr. V.M. Dandekar and Nilkantha Rath

• After independence poverty estimation was carried out by Dr. V.M. Dandekar and Nilkantha Rath
• They fixed desired minimum level of per capital nutrition needed for subsistence level of living as 2,250 calories
• To purchase commodities that 2250 calories for Rural Rs. 180 Per capital Per annum and for Uraban Rs. 270 Per capital Per annum has been fixed at 1960-61 prices .
• Using this cut-off, they stated that about 177 million were poor in 1960-61 and 216 million in 1968-69

2. Planning Commission Expert Group Report

• The Planning Commission appointed an expert group named Task Force on Minimum needs and effective consumption demand
• It has been constituted in the year 1989
• Its Chairman was D.T. Lakdawala
• The expert group submitted its report in 1993
• Per capital daily intake requirement fixed at 2400 calories for Rural and for Urban at 2100 calories. The per capital requirement for rural area fixed has been high because of the hard physical labour they undergo
• A person who fails to have money to obtain this minimum level of calories is treated as being below the poverty line
• Different poverty line has been fixed for different states by taking into account, the variation in prices and consumption composition of commodities across various states

3. 61st Round of National Sample Survey Organisation (NSSO) Survey and Poverty Estimation

This round of survey carried out during the period 2004-2005. It is a consumer expenditure survey. In this survey, people have been asked to recall and tell their expenditure of selected commodities for past 30 days and 365 days. From this data NSSO arnd planning commission used different methodology to estimate the incidence of poverty. This survey has fixed Rs. 356.30 and Rs. 538.60 as per capital monthly consumption expenditure as poverty line for Rural and Urban respectively.

4. NSSO's Mixed Recall Period (MRP)

It involves estimation of poverty using consumer expenditure data of 365 days recall period for five infrequently purchased non-food items such as

i. Clothing

ii. Foot wear

ii. Durable goods

iv. Education

v. Institutional,medical expenses, and a 30 day recall period for the remaining items.

5. Tendulkar Committee on Poverty

A committee named The Expert Group to Review the Methodology for Estimation of Poverty' headed by Suresh D. Tendulkar was formed by Planning commission in 2009. This committee adopted a new method. It moved from calorie based poverty estimation to nutrition, health and other expenditures like clothing, footwear based estimation. It calls the basket of goods selected to determine poverty as Poverty Line Basket (PLB)

It also relies on the NSSO data of Mixed Recall Period Method. It calls to adopt urban poverty line for rural area also, after adjusting for price differential. It means the quantity of consumption fixed for both urban and rural is same, only the price differs. This committee fixed poverty ratio for all India total at 37.2 %, rural India at 41.8% and urban India at 25.7 in the year 2004 05. The poverty line fixed for rural India is Rs. 446.68 and urban India is Rs. 578.80.

6. Rangarajan Committee on Poverty

There was lot of criticism about Tendulkar committee methodology. So government formed an Expert Technical Group to revisit the methodology for estimation of the poverty and identification of the poor under the chairmanship of Rangarajan. It adopted the method of calorie based methodology as in the past. In addition it accounted for nutrition, fat and other essential non food items to arrive at poverty line. It fixed Rs. 972 per capital per month as poverty line for rural area and Rs. 1181 for urban area.

UNEMPLOYMENT

Unemployment simply means a situation when able and wiling people are not getting jobs as per their own capabilities.

Types of Unemployment

1. Structural Unemployment

It is the unemployment caused by structure changes like rapidly growing population fallin the rate of capital formation technological change etc., in the economy It is of long run nature.

2. Frictional Unemployment

It occurs when people change from one to another and remain unemployed during this interval period. This can happen even in a situation of full employment. In order to avoid this usually people resign the current job only after getting employment elsewhere.

3. Cyclical Unemployment

t refers to a situation where people are thrown out from job due to a recession in the economy. This is also known as demand deficiency unemployment. The root cause for this type of unemployment is lack of aggregate demand. The loss of jobs in the after math of US sub-prime crisis world over, comes under comes under this category.

4. Disguised Unemployment 

It is a kind of special case. Here people are apparently employed but their marginal product is zero (contribution to production is nil). Marginal product means the produce added to the existing production due to addition of a new employee/ worker. For example, if 4 person are employed in a factory and they produce 17 units and fifth person is added and the produce increased to 19 units, the additional 2 units (19 minus 17) is marginal product Here, we can consider the fifth person as employed. Suppose, if there is no increase in production, the marginal product is zero and he is disguisedly unemployed. Even if she/he is removed from the activity, there will be no decline in production. This type of unemployment is a feature of Indian agriculture.

5. Educated Unemployment

Even a person who is educated/ trained and skilled, fails to obtain a suitable job suited to his qualification, he is said to be educated unemployed

6. Open Unemployment

The labourers when live without any work and don't find any work to do come under the category of open unemployment. Educated unemployment and skilled labourers' unemployment are included in open unemployment. The migration from rural to urban areas in search of work is very often found in India is an example of open unemployment.

7. Under Employment

It refers to the under-utilization of manpower available both in term of time and skill. If a post graduate of engineering works as a clerk or an office assistant in an office, he is underutilized in term of manpower. Consider a situation of a person with right qualification in a right job but not engaged in that work the whole time for which he is available then that person is under utilized in terms of time.

8. Voluntary Unemployment

Though jobs are available some person may want to remain idle come under the category of this kind. The people who consider themselves rich enough and think that they are not in the need to work' people who do not have the mind set to work regardless of their economy position and lazy people are included in this category. These people are not in the labour force.

9. Natural Unemployment

Unemployment ranging between 2 to 3% in the country is considered natural and inevitable. This minimal percentage of unemployment cannot be eliminated at all. It is called natural unemployment.

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