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Approaches to Measuring Urban Poverty

Approaches to Measuring Urban Poverty

Poverty is multidimensional, thus measuring it presents a number of challenges. Beyond low

income, there is low human, social and financial capital. The most common approach to measuring poverty is quantitative, money-metric measures which use income or consumption to assess whether a household can afford to purchase a basic basket of goods at a given point in time. The basket ideally reflects local tastes, and adjusts for spatial price differentials across regions and urban or rural areas in a given country.

Money-metric methods are widely used because they are objective, can be used as the basis for a range of socio-economic variables, and it is possible to adjust for differences between households, and intrahousehold inequalities.

Despite these advantages, money-metric poverty measures have some shortcomings. Survey

designs vary significantly between countries and over time, making comparability difficult. Some use income based measures, other consumption. Decisions about how to value housing, homegrown food, and how to account for household size and composition all affect poverty estimates. If not properly adjusted, monetary measures can underestimate urban poverty because they do not make allowance for the extra cost of urban living (housing, transport, and lack of opportunity to grow ones own food).

Income or consumption measures also do not capture many of the dimensions of poverty. For

example, in the urban context, the urban poor rely heavily on the cash economy thus making them more vulnerable to fluctuations in income, and there are severe environmental and health hazards due to crowded living conditions in urban slums, and no tenure security. Other aspects of poverty, both rural and urban, which are multidimensional relate to access to basic services such as water, sewage, health and education, and a safety net to mitigate hard times.

Measuring urban poverty can be carried out using a number of approaches summarized below.

Regardless of the methodology chosen, the data should ideally be comparable across cities, and allow for disaggregation at the intra-city level. This will capture vast differences between the poor in small towns and mega cities, or between urban slum areas within a given city.

Income or Consumption Measures: Both are based on data that assess whether an individual or

household can afford a basic basket of goods (typically food, housing water, clothing, transport, etc.). Consumption is generally considered to be a better measure than income because incomes tend to fluctuate over time, there are problems of under-reporting (particularly income derived from the private and informal sectors).5 Money metric measures can be adjusted to account for the higher cost of living in urban areas when measuring poverty.

Unsatisfied Basic Needs Index: This approach defines a minimum threshold for several dimensions of poverty classifying those households who do not have access to these basic needs. They include characteristics such as literacy, school attendance, piped water, sewage, adequate housing, overcrowding, and some kind of caloric and protein requirement. If a household is deficient in one of the categories, they are classified as having unsatisfied basic needs.

Asset Indicators: This has been used increasingly with the Demographic and Health Surveys (DHS), a standardized survey now administered in approximately 50 countries. A range of variables on the ownership of household assets are used to construct an indicator of households socio-economic status. These assets include: a car, refrigerator, television, dwelling characteristics (type of roof, flooring, toilet), and access to basic services including clean water and electricity.

Vulnerability: This approach defines vulnerability as a dynamic concept referring to the risk that a household or individual will experience an episode of income or health poverty over time, and the probability of being exposed to a number of other risks (violence, crime, natural disasters, being pulled out of school). Vulnerability is measured by indicators that make it possible to assess a household’s risk exposure over time through panel data. These indicators include measures of: physical assets, human capital, income diversification, links to networks, participation in the formal safety net, and access to credit markets. This kind of analysis can be quite complex, requiring a specially designed survey.

Participatory methods: This typically relies on qualitative approaches to capture aspects of urban

poverty that may not be identified through pre-coded surveys. Through tools such as focus group

discussions, case studies, and individual open-ended interviews, it is possible to determine the

perceptions of poverty, identify priority needs and concerns, and gain

e. Characteristics, Opportunity, and Constraints

What is the nature of poverty?

While income-based poverty measures provide a fair sense of which part of the

population may have unmet needs and where they are located, these measures fail to capture the

dynamic aspects of poverty, in terms of the cause and extent of deprivation, risk factors, and the

coping strategies employed. This can include analyzing vulnerability, urban-rural linkages, and

perceptions. Qualitative methods are often used for this kind of analysis.

A standard poverty profile for cities

Any profile of urban poverty would be based on a set of core information as described below.

Household surveys/census: In general this would include the following information disaggregated by income group (e.g. quintile): Location (within the city)Household size, structure

Demographics

Education levels

Household expenditure patterns

Housing characteristics (tenure status, physical condition)

Access/quality/affordability to:

infrastructure (water, sewage, energy);

health care;

education;

social services.

Administrative data: This would include data collected by various public agencies, ideally

disaggregated by geographic areas within a city.

Municipal spending by sector, location

Infrastructure (roads, public standpipes, schools, hospitals)

Health and nutritional status

Education outcomes

Crime and violence statistics

Demographic characteristics

Household size

Perception is that poor have a large household size. But this is not true since mean household size of urban poor (5.2 – according to Census of India, 1981) does not differ significantly from that of rest of urban household (5.4).

Household size and income

A research was conducted by National Institute of Urban Affairs. They take a sample of all poor households and BPL household among these poor households. They conclude that, in poorest household the larger households are not significantly poorer than the smaller households whereas in overall sample the larger households are poorer than the smaller households.

Household Consumption

In poor households, the percentage of children (< 15 years) is higher and percentage of labor force (15 -60 years) is lower. Women, children and old people are dominant in poor households.

Incidence of poverty is higher among the scheduled castes and scheduled tribes.

Poverty and Literacy levels

Illiteracy among poor is much higher than rest of urban population. A very high dropout rates from school going children. Illiteracy is particularly higher among females of low income and poor people. Girls are not encouraged to study beyond primary level.

Economic characteristics

Urban labor market is divided in formal and informal sectors and poor people are mostly employed in informal section since they don’t have the skills for employment in formal sector. Informal sectors permits easy entry, needs low skills, sometimes self employment is possible. Unemployment is very high among poor people. Even if they are employed they are paid very less and they can’t depend on their family members for income. Children are often made to work so that livelihood of the household is met. Some children are even made to work in houses such as taking care of home, looking after younger children while the parents are outside for work. Thus children who are not sent to school are used in direct or indirect way for the economic well being of household.

Most of the poor people are in informal sector and a self employed since they don’t have skills and generally they don’t have to wait for long time to get employment as they don’t have any source of income. Thus they take up some menial job which is often low paid so that they can just survive.

Work Sector

Poor people are found to work more in tertiary sector (manufacturing services, construction, transport and commerce) than in primary and secondary sector. They are employed in wide range of occupations. The hours of work, Number of days worked in a month also varies widely among the poor and it is not fixed. Longer they work more income they generate. Thus income levels greatly vary depending on occupation, work sector, number of hours, number of days of work , number of years worked in particular occupation. Underemployment, irregular job pattern and low wages are some of the critical economic problems of urban poor.

Housing and access to basic services characteristics

Housing characteristics can be divided into four types

  1. Squatters
  2. Legal occupants
  3. Tenants
  4. Owners

Squatters are very common among poor people. They usually are migrants and come to big city in search of job and since they don’t have money they occupy certain lands which are near their place of work so as to save on the transportation costs. They continue to occupy these lands despite the fear of eviction because of proximity to their work.

There are also tenants among urban poor as they can’t to build their own houses. Some of the tenants are migrants and as they have come recently into urban areas they would not be able to construct their own house. Most of the poor households live in kutcha or semi kutcha or semi pucca houses and few in pucca.

Sometimes the poor people pay bribes to officials and make their homes legal and thus claim their ownership of their house in slums. Many poor people prefer to build their own houses rather than pay rents.

Poverty estimations in India

INTRODUCTION-

The poverty estimates have not only been used for evaluating development efforts, but over time, have found use in the allocation of funds for poverty alleviation programmes among the States. An acceptable and representative quantitative index of poverty is, therefore, necessary.

The definition of poverty line in the Indian context was attempted for the first time in 1962 by a Working Group of eminent Economists and social thinkers after taking into account the recommendations of the Nutrition Advisory Committee of the Indian Council of Medical Research (ICMR, 1958) regarding balanced diet.

OFFICIAL METHODOLOGY OF POVERTY ESTIMATION-

Following the recommendations of the Task Force on Projections of Minimum Needs and Effective Consumption Demand’ (1979), the Planning Commission has been estimating the proportion and number of poor separately for rural and urban India at national and State levels. These estimates have been released from the year 1972-73 onwards, using the full survey data on household consumption expenditure collected by the National Sample Survey Organisation (NSSO) at an interval of five years.

The methodology behind these estimates, often termed as the official methodology’ has been outlined in the following sections.

The Basis of Official Estimates

  1. Calorie Norm : The official estimates are based on a calorie norm of 2400 calories per capita per day for rural areas and 2100 calories per capita per day for urban areas. The poverty line for the base year 1973-74 has been taken as the per capita expenditure level at which these calorie norms have been met, on an average, for the country as a whole, as per the NSS household consumption expenditure survey for the corresponding year.
  1. Poverty Line in the Base Year : The Task Force (1979) defined the poverty line as the per capita expenditure level at which the calorie norms were met on the basis of the all- India consumption basket for 1973-74. This was equivalent to Rs.49.09 and Rs.56.64 per capita per

month for rural and urban areas respectively at 1973-74 prices.

  1. Deflators : The poverty line so defined needs updating over time to take care of changes in the price levels. Initially the wholesale price index was used to reflect the price changes.

However, private consumption deflator derived from the National Accounts Statistics (NAS) was recommended for this purpose by a Study Group on “The Concept and Estimation of Poverty Line’, (Perspective Planning Division, Planning Commission, November, 1984).

  1. The Adjustment Procedure for Estimating Poverty Population: In order to arrive at the estimates of the number of poor., Planning Commission has been making adjustment in the National Sample Survey (NSS) data on distribution of households by consumption expenditure levels. Such an adjustment has been felt to be necessary because the aggregate private household consumption expenditure as estimated from the NSS data is different from the aggregate private consumption expenditure estimated in the National Accounts Statistics (NAS).
  2. The poverty population is, thus, estimated by applying the updated poverty line to the corresponding adjusted NSS distribution of households by levels of consumption expenditure. To estimate the incidence of poverty at the State level, all-India poverty lines and the adjustment factors have been used on the State specific NSS distribution of households by levels of consumption expenditure uniformly across the States.

ISSUES IN OFFICIAL METHOD AND CRITICISM BY INDEPENDENT RESEARCHERS-

According to the report of The EXPERTGROUP formed byPlanning Commision , the methodology and computation followed in official estimates of poverty at national and at State levels, has been regarded as inappropriate and even inadequate in giving a representative picture of incidence of poverty in India.

The States have become very sensitive about their respective estimates of poverty. Representations have been received from some of the State Governments. Scholars and academicians have also raised conceptual and methodological issues in this regard. The issues are based mostly on the following points-

  1. The Base-Year Consumption Basket

The poverty line has been anchored in a given calorie norm and the corresponding all-India consumption basket for the year 1973-74. The poverty line needs to be updated overtime for changes in price levels relevant to the consumption of the people around the poverty line.

Updating the poverty line over time can be done in two ways:

(a) The poverty line as estimated for the base year (i.e. 1973-74) can be updated for

changes in prices overtime;

(b) A fresh poverty line can be calculated from the latest available consumer expenditure survey data using the procedure suggested by the Task Force.

In the consumption behaviour due to shift in individual preferences, the two methods of updating the poverty line would give different results. In particular, method (b) would not give results comparable overtime. As per the recommendations of the Task Force 1979, the Planning Commission has been

using method (a). but the method (a) again has problem of having a proper price deflator to match the current prices to the base line prices.

  1. Choice of Price Deflators

It has been argued that the deflator for poverty line should be based on the cost of living of the poor. Construction of such an index requires a detailed information on the consumption basket of the poor and the relevant and appropriate prices. While it may not be impossible to construct such an index, there may be practical difficulties in obtaining reliable information in time and in sufficient details to construct such an index for the year for which poverty is to be estimated. It has been further argued that the assumption of identical price vector for the consumption baskets of people in rural and urban areas is highly questionable. It is observed that the relative price movements of the rural and urban sectors are distinct and are also different from CSO’s consumption deflator.

In order to accommodate both the points discussed above a suggestion has been made that taking the commodity group indices available from Consumer Price Index of agricultural laborers(CPIAL) for rural areas and the consumption pattern of the people around the rural poverty line at the national level for 1973-74 as weights, a special index may be constructed for updating the Rural poverty line. Similarly, for urban areas a special index of consumer prices may be constructed using the sub-group indices of industrial workers weighted by the consumption pattern of the population group around the urban poverty line. A simple average of this index and the CPI for urban non-manual employees for the urban areas can be used to update the urban poverty line. The Expert Group favors the use of this option in its report.

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  1. Estimation of Poverty at State Level

The Planning Commission’s methodology to estimate State level poverty implicitly makes the following assumptions:

(i) Age-sex and occupation distribution of population in the States follows the all- India pattern. Hence, calorie requirements per capita are the same in different States.

(ii) The price structure of the consumption baskets and price trends across the States are identical.

It has been pointed out that there are important inter- State differences in terms of

Population structures, activity status, climatic and topographical considerations, and so on, which would need to be reflected in calorie requirements. Accordingly, normative calorie requirements would differ from State to State.

The consumption basket of the poor also differs significantly across the States. It is inherent in the poverty line concept that non – food expenditures such as clothing, housing and fuel are not normatively estimated. The food habits will depend on local availabilities as well as on cultural and consumer preferences reflected in differing choices between vegetarian and non- vegetarian food items, between fine and coarse food grains and in the greater or smaller use of milk and

milk products.

Ideally the inter-State differences in population structure, activity composition, climate and topographical price structures and their trends over time should be reflected in the State –specific poverty lines. On practical consideration, the Planning Commission had adopted the all- India calorie norms and used a common deflator for all the States for estimating the incidence of poverty. A number of States were of the view that given the current methodology, Planning

Commission grossly underestimated their poverty status. There is therefore a need to streamline the methodology in this respect. In this context, it has been argued that there should be States specific poverty lines reflecting the State -specific price differentials of the relevant consumption basket and that the national poverty line should be a weighted average of these ‘State-specific poverty lines to ensure consistency.

If the concern is to ensure comparability across states as well as over-time we need to adopt the same consumption basket for all the States. For this the obvious candidate is the all- India basket. In making such inter-State comparisons in any given year, we have to take into account the fact that prices of different commodities in different States are not the same in any given year nor are the changes in prices similar over the years.

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4. Differences in NSS and NAS Estimates of Consumption Expenditure-

The practice in the Planning Commission has been to raise the expenditure levels reported by the NSS across all expenditure classes by a factor equal to the ratio of the total private consumption as obtained from NAS and the total as estimated from NSS. This factor is applied uniformly to all expenditure classes. Poverty is then estimated from this adjusted distribution of population by expenditure classes. Since the NAS estimates of per capita private consumption are generally higher, this procedure gives a lower estimate of the incidence of poverty than the estimate derived without adjusting the NSS data.

5.Special Problems of Hill Areas-people in the hilly areas have to have a higher daily calorific intake even for performing the normal activities related to their work and living. Besides, due to climatic conditions, the average resident has to incur heavier expenditure on clothing, food and energy for cooking and heating needs, compared to his counterparts in the plains.

6.Inequality and poverty are, of course, distinct concepts but there is a close causal relationship between the two. Given the level of development and the level of per capita income/consumption expenditure, a less unequal distribution would result in lower incidence of poverty. A practical way of looking at the inequality issue would be to look at the share of lower deciles in the aggregate income/consumption expenditure. But this method of poverty estimation doesn’t depict anything about the inequality status.

Other cricisms-

S.Guhan , senior fellow at MADRAS INSTITUTE OF DEVELOPMENT STUDIES also agrees that Standardisation of calorie norms and the consumption basket have been found to be necessary to enable aggregation of State-wise estimates and comparisons across States at each point of estimation. However, he simultaneously emphasizes the need of taking in account of State- level normative calorie requirements and State- level differences in consumption baskets.

On this basis, the separate set of State- level estimates could be based on all-India calorie norms , State-level consumption baskets in the base year, and State- level price indices and deflators relatable to the respective base year consumption baskets at the State level.

Utsa Patnaik in the article “neoliberalism and rural poverty in india” in economic and political weekly, criticizes the official methodology heavily pointing out the fact that not only is the level of absolute poverty in

India high, there has also been an adverse impact of neoliberal policies on poverty.

And yet, the poverty estimates by the Planning Commission and many

individual academics, both using a method that renders irrelevant the question of a nutrition norm, show low levels as well as decline in poverty over the 1990s and beyond. According to the article both comparisons over time of the all-India and state-level estimates of poverty as well as any comparison at a point in time of poverty levels across states, obtained by the official method, are invalid.

This measure using a nutrition norm is an absolute measure of poverty as distinct from the relative measures used in many advanced countries – such as considering all those to be poor,who have less than half the average per head income in the economy [Anand 1983, 1997; Subramanian 1997]. With a relative measure of poverty, rise in inequality will imply rise in poverty. The absolute poverty measure adopted in India however requires stronger conditions for poverty to show a rise. Increase in the inequality of income and of expenditure could be quite consistent with poverty so defined, showing a decline. Only an absolute decline in expenditure for substantial sections of the population (not offset by rise for other sections), would lead to average poverty rising.

Using a direct poverty estimation route of inspecting and

calculating from current National Sample Survey data the percentage of persons not able to satisfy the nutrition norm in calories, the author finds that in 1999-2000 nearly half of the rural population who are actually poor have been excluded from the set of the officially poor. For 2004-05, while the official estimate of rural poverty is 28.3 per cent, the author’s direct estimate of persons below the poverty line is 87 per cent. There is clear evidence of a large and growing divergence over time between the direct estimates of poverty and the official indirect estimates.

CONCLUSION-

The official method though being used for long in estimation of poverty in India, has many methodological and computational flaws in it which have been criticized by different scholars ,academicians and independent researchers over the period of time. The major criticism revolve around the adoption of uniform calorie norms and fixed consumption basket, base year price differentials and uniformity of deflators across the States and the practice of adjusting the NSS distribution.

Also the limitations of the poverty line approach like its absolute and reductionist nature, insensitiveness to mobility, effects of geographic, cultural and occupational manners etc have established it as an invalid method.

There is a need to revise the official method to have a closer to real estimate of the poverty so that the allocation of resources to those who are in need and efforts towards equality among different strata could be made more effective.

As suggested by the Expert Group ,three important improvements can be : (a) the abandonment of the NSS-NAS adjustment procedure (b) initial estimation of poverty State-wise and its aggregation for deriving all-India estimates (c) adoption of price indices and deflators that are related to consumption around the poverty line .

Along with this there is a need to take into account taking in account of State- level normative calorie requirements and State- level differences in consumption baskets.

Kudumbashree: A poverty alleviation program in Kerala

In 1987, Government of India and United Nations Children’s Fund (UNICEF) the sponsored the Urban Basic Services (UBS) program for those living in slums. Then this UBS program was expanded to the urban poor who were living in low-income neighborhoods and was named Urban Basic Services for the Poor (UBSP). The fundamental principle of UBSP was community participation and then identifies needs, planning, prioritizing, implementing, monitoring, and feedback of these poor people. A three-tiered community structure was instituted, so as to empower the poor especially the women. Then later on, in the early 1990’s Kerala took up this UBSP so as to empower women. This lead to two models on pilot basics.

  1. Alleppey Urban Model: Alappuzha Community Based Nutrition Program (CBNP)

  2. Malappuram Rural Model

Alleppey Urban Model: Alappuzha Community Based Nutrition Program (CBNP)

UNICEF and the Alleppey Municipal UBSP initiated a community-based nutrition program (CBNP) in Alleppey in 19911. It was done on pilot basics only related to nutrition of poor people are to be addressed by this model. It was targeted to increase the nutritional level of children of age 0- 5 years old where the nutritional level is measured by weight-for-age and also improve the nutritional status of women ages 15- 45 years old where the nutritional level is measured by weight and height. Firstly, the agenda of this program was set and then they did a survey to identify the key causes of malnutrition among children and women. This was done in about 5,728 households living in 7 of 36 wards of Alleppey town and then they decided to shortlist nine risk factors and all those families with four or more of the following risk factors were classified as below the poverty line (BPL). These factors are:

  • kutcha (mud) house

  • no access to safe drinking water

  • family getting only two meals a day or less,

  • presence of children below age 5

  • alcoholic or drug addict

  • scheduled caste or scheduled tribe family

  • no access to sanitary latrine

  • illiterate adult

  • Not more than one earning family member.

Even though it identifies these 9 criteria to identify the BPL families, but there are some issues in these criteria. The meaningful poverty assessment should be based on sound conceptual foundations. We should have comprehensive framework for measuring poverty. We should clearly identify poor from non poor, find the depth of poverty, we should be able to make meaningful aggregation about the magnitude of poverty in any particular region. Any four criteria out of nine in the KDS index means that all criteria are treated as independent and equally important. They however are not independent and equally important (OOMMEN). So there should be some way of giving weights to these criteria. There were few other issues also.

UNICEF’s had a Triple A approach, and this was used to address the above issues and thus a package of interventions were identified such as income-generation schemes for unemployed women, shelter upgrading, enrollment of illiterate adults in the Total Literacy Programs and children in education programs of government of India, integrated child development services (ICDS) etc. As the implementation of this went, different stakeholders identified some deficiency in the existing government structures and thus community-level administrative/delivery system was suggested for better implementation. Thus the system of the Community Development Society (CDS) emerged with a unique set of bylaws.

CDS Structure

Firstly, poor families were identified and then they were organized into neighborhood groups (NHGs) by a community organizer who is an employee of the municipality. Each NHG consisted of 20-45 BPL families. Each NHG member elected a five-member committee called the neighborhood groups committee (NHGC). Then these NHGs were federated at ward level as area development societies (ADS). The ADSs were then federated at the municipal level as CDSs.

CDS Key Strategic Activities

  • Participatory planning and implementation

  • Thrift, credit

  • Micro enterprise

  • Convergence

  • Maternal and Child health

  • Poverty reduction

These are explained in detailed in Kudumbashree section

Malappuram Rural Model

Malappuram district is one of the 90 most underdeveloped districts in India. It has the highest fertility rate, the highest infant mortality rate, lowest per capita income of Rs 1,257, literacy rate is 88.6 %, and unemployment rate is high. By 1994, with UNICEF, the CDS approach was extended to the entire district. Malappuram CDS is the largest women’s NGO in Asia. Swarnajayanthi Grama Swarozgar Yojana (SGSY) program was to be implemented by The Rural Development Department of Kerala and issued guidelines to utilize the CDS system to implement the in the rural areas. In 1995, the CDS approach expanded to all rural areas of Malappuram.

CDS Key Strategic Activities

  • Participatory planning and implementation

  • Thrift, credit, Micro enterprise

  • Convergence

  • Maternal and Child health

  • Poverty reduction

Kudumbashree

The success of the CDS model in urban Alappuzha and in rural Malappuram led the government of Kerala to scale up the strategy to the whole of the state in 1998 under the name Kudumbashree, Kudumbashree means prosperity of the family, is the name of the women oriented and community based4. After 73rd & 74th constitutional amendments which strengthened panchayat and ULBs, Kudumbashree was launched in April 1998 for   poverty eradication and women empowerment within 10 years. Therefore it created the Poverty Eradication Mission under the Department of Local Self-Government. About 19 line departments were associated with Kudumbashree. In 2004, there are about 114,844 NHGs covering urban, rural, and tribal areas of Kerala, with 1,049 CDSs at the LGB level.

Formerly primarily an urban initiative, Kudumbashree CBOs have expanded to all rural areas. The principal goal of Kudumbashree is poverty alleviation through empowerment of women similar to those of previous two models.

Kudumbashree Mission focuses on:

  • Training for Change

  • Education

  • Share and Care

  • Community Health Care

  • Environmental Sanitation

  • The Poor Women’s Bank, and

  • Community Financial Management

The following key approaches of CBNP continue in the scaled-up Kudumbashree:

  • using a transparent nine-point index to identify the poor,

  • development of women’s micro-enterprises, and thrift and credit societies

  • Participatory planning and implementation of antipoverty and social welfare programs

  • Convergence of various government programmes and resources at the community-based organisation level

  • efforts to involve the CDS structure in local level anti-poverty planning;

Indeed, it has been widely hailed and rewarded for its innovativeness and unprecedented reach. While micro-credit is one among the many strategies initiated in the Kudumbashree strategy, it has been gaining in importance and visibility within the programme.

Increasing leadership and cooperation of LGBs and an emphasis on women’s active participation in grama sabhas meetings in rural areas and block meetings in urban areas are some important activities of Kudumbashree. The vision of nurturing an innovative environment within CDS/ADS/NHG levels has continued from previously stated pilot projects to Kudumbashree.

The following are the community structures suggested for the rural side:

  • Kudumbashree Ayalkoottam (NHG)

  • Kudumbashree Ward Samithy (ADS)

  • Kudumbashree Panchayat Samithy (CDS)

Organization structure

NHG – neighborhood group

NHG committee of 5 elected members

20-45 BPL families

ADS -Area Development Society general body

Elected ADS governing body

Ward-level advisory committee presided over by municipal ward councilors

CDS (community development societies) general body

Elected CDS governing body

CDS advisory committee presided over by municipal chairman with municipal commissioner as a co-convener

Government, district

Administration

Supporting organizations such as NABARD Donors such as UNICEF

Scaling Up Process

In 1995, the Alleppey and Malappuram Model, which are previously described are scaled up to all urban areas under the leadership of Urban Poverty Alleviation cell( UPA). In 1997, people’s campaign for decentralization for planning was demanded. In 1997, there was fiscal decentralization with 30% to 40% of state funds disbursed to local governments.

Dimensions of scaling up

Kudumbashree adopted a replication stratergy to scale to entire state using the three tier CDS as adopted by Alleppey and Malappuram Model and thus it was replicated in 14 districts initially.

Qualitative scaling up

  1. Replication:- A successful program of Alleppey and Malappuram Model were replicated in all district in kerala.

  2. Nurture:- A well-staffed and well-funded agency of Kudumbashree is CDS system

  3. Integration:- into the existing government structures and systems after it was illustrated that Alleppey and Malappuram Models had potential. It was CBO that was integrated into LGB, but CBS structures are not integrated into LBG as they are not envisioned as government structures.

Functional scaling up

  1. There was no horizontal scaling i.e. unrelated new activities or programs were not added , but rather there was a vertical scale up i.e. activities related to same chain of activities as original are added to existing ones such as emphasis in chronic diseases, destitution identification etc.

  2. Political Scaling up:- NHS/ADS/CDS are recognized by Government of Kerala and they can influence policy reform to better the existing system. They can also have capacity to organize social movements such as women fighting against domestic violence. Since this is politicized it is easy for the members in NHG to bring up there issues at panchayat, district or state level can they can reach out to parties in power at these various levels. There are empirical evidences to show that many women are participating in elections and few have won at panchayat level.

Organisation scale up

  1. Financial viability: CDS are funded by various means such as government,, self financing by NHG members, through sub contracting etc thereby increasing financial viability.

  2. Institutional diversification: basically government is the main partner, but there are other who are also supporting. They are banks, universities, different organizations, other departments in government, different individual actors etc

Decentralization

People’s Plan campaign was launched by left Democratic Front in 1996 and thus in 1997 state government devoted 35%- 40% i.e. about 1 billion rupees of states annual outlay funds to LGB. Many functions related to basic needs such as employment, income generating activities in agriculture and so on were also devolved. The main objective was to avoid the already existing cumbersome bureaucratic system, but rather to create a new participatory model of local self governance. Therefore policy makers felt the need to integrate LGB activities with Kudumbashree CDS system and thus NHG was looked upon as potential mechanism for ensuring sustained participation. Since grama sabha were too large and had many limitations, the decision to link CDS structures to LGB accelerated the pace of scaling up process.

Key achievements of Kudumbashree

1. Thrift and Credit Societies (TCS) – at the NHG Kudumbashree promotes Thrift and Credit Societies to facilitate the poor to save and improve their access to credit. A member can borrow up to four times her savings. It was done in almost all of the NHG’s. Since women got credit more women participated in NHG’s. But still there are some problems with effective linkages with the banks since credit is only equal to or slightly higher than the thrift amounts. CDSs are experiencing problems in linking with commercial banks. But in many places there are rapid strides that are being made in linking more NHGs to the commercial banks through NABARD.

The amount of each loan and the priority of disbursement are decided by the NHG members. The interest income from thrift is generally used for relending. In Kudumbashree, the interest rate is high (about 2% per month). This discourages credit for consumption and ensures that the loans are for productive income-generation activities. In Alleppey, 88 percent of the TCS loans extended were for income-generating activities (Oommen 1999).

2. Microenterprise

One of the highlighting features of Kudumbashree is that, Kudumbashree staff working with many other government departments such as NABARD actively identifies financially viable opportunities for the poor and promotes them aggressively. In 2004, there were about 14,125 viable microenterprises in urban areas and 47,000 microenterprises in rural areas.

Since the women were given credit and training lead to empowerment of women and as a result there were some innovative microenterprise activities such as catering services, courier services, coconut delicacies, ethnic delicacies, lease-land farming, and computer data entry services which were historically never done by women in Kerala. Kerashree is a well-known coconut oil brand in Kerala, produced by Kudumbashree CBOs.

3. Convergence

K

CDS under LGB

Sanitation,

Water supply

Integrated Child Development Program

Healthcare

Antipoverty programs

Housing

Literacy programs

udumbashree has been effective in collaboration and co-ordination with other departments and agencies which are working for poverty alleviation and many other schemes. Some of them were Spices Board, the Khadi and Village Industries Commission, the Khadi and Village Industries Board, Schedule Tribe department, the Social Welfare Department, and the Industries Department.

4. Participatory planning and implementation

Kudumbashree involves grassroots, bottom-up planning, and implementation of various programs. This component is strengthened by efforts to increase the leadership of LGBs without compromising the autonomy and decision making power of the CDS.

5. Lease Land Farming

When paddy cultivation became a non-lucrative affair, farmers of the state deserted paddy fields. Kudumbashree found this as an opportunity. Neighbourhood Groups of the mission were given encouragement to start paddy cultivation. Many groups have identified the immense potential of lease land farming. Lease land farming is beneficial both to the landless poor women of Kudumbashree Neighborhood

6 . Human Resource Development

To achieve human development, Kudumbashree provides a variety of training for capacity building of CBOs functionaries. This includes general training for CBO functionaries, training for newly elected CBO members, skill development and entrepreneurial training for enterprise development etc

7. Balasabha

Balasabhas are grass roots level groups of the children of BPL families. This program organises the children of the poor families of the State into Balasabhas as a part of its holistic approach to wipe out poverty. It main objectives are to provide a healthy growth and development of children and to provide an atmosphere for informal learning.

8. Arogya Swayam Sahaya Sangham

Kudumbashree is encouraging the NHG’s to manage minor ailments as well as chronic diseases such as diabetes mellitus and to promote health by changing risky behaviors. Kudumbashree is training NHG health volunteers.

Other programs are

  • Micro Housing/ Bhavanashree

  • Destitute Identification , Rehabilitation and Monitoring Programme/Ashraya

  • The S3 programme

  • Solid Waste Management /Clean Keral Business

  • Special Employment Programme for the Educated Youth

  • Special School for the Disabled Children/Buds

  • Self Employment Programme under SJSRY

  • GRQ Project.

Kudumbashree’s Impact

An antipoverty survey that was conducted in 1998 by the state government could perhaps serve as a baseline for evaluation of Kudumbashree. Impact evaluation can be done at three levels, consistent with the overall objectives of Kudumbashree.

  1. poverty alleviation in terms of income, assets, and human development

  2. participation (and its quality)

  3. empowerment of women

  • NHG have given women a social security safety net and this they have greater bonding among the women. In times of crisis, these women don’t feel left out and thus this has resulted in reduction of feeling of vulnerability, e.g., women contribute to the treatment of sick members of NHG households.

  • In many active NHGs, women are willing to put forth their demands and they are now confident and capable of articulating their demands. Therefore women choices, concerns are heard at NHG level and then they are taken forward in ADG and municipal level plans.

  • There has been an increase in the awareness of various programs of the government and thus more women are participating in these programs and thus have resulted in improved access to these programs

  • Considerable savings are being generated due to TCS, which provide credit both for both consumption and productive purposes.

  • Due to linkages with banks such as NABARD, these people are now able to get credit and thus they are able to start micro enterprises and thus they are able to generate revenue and by savings they are able to improve their economic strengths. NHG members are undertaking both group and individual microenterprises.

  • In many instances the women have led social movements say against domestic violence, illicit liquor and due to politicisation of these groups they are been heard al district and also at state level.

Impact of Micro-enterprises

There are four pathways through which women experience change through micro-enterprises, as follows:

  • Material change in access to and control over material resources, in level of income, and in satisfaction of basic needs

  • Changes in level of knowledge, skills, and awareness of wider environment

  • Perceptual change in individual’s perception of own individuality, interests, and value and in the perceptions by others of individual’s contributions and worth

  • Relational changes in contractual agreements, in bargaining power, and in ability to resist exploitation.

Lessons offered / Critical factors in scaling up/ replicability in other parts of India

  • Positive experiences of the pilots– The Alleppey and Malappuram experiences are the most important factor in the conception and scaling-up of Kudumbashree. The replication of CDS followed the models implemented in Alleppey and Malappuram.

  • Replicability in both urban and rural settings – Though it was initially targeted to be urban project but later it was replicated in underdeveloped districts such as Malappuram which was a rural setting. Therefore this model can be applied in both rural and urban settings.

Government ownership

Kudumbashree actively involved both state and local governing bodies in its formulation of policies related to Kudumbashree. Government recognized the potential of the two pilot models and then it was scaled up to entire Kerala. The district collectors in Alleppey and Malappuram were involved in the policy formulation and drafting for Kudumbashree. Kudumbashree is an interdepartmental initiative, which makes it conducive for a multi sectoral response to poverty alleviation. Therefore the state government role was very essential for interdepartmental level co-ordination. Other institutional arrangements such as partnerships with the central government and the National Bank for Agriculture and Rural Development (NABARD), continue to play a role in an expanded response to poverty alleviation through CDS.

Some unique features of Kerala – Kerala stands apart from other states of India in the following ways.

    • Politicians in Kerala generally do not fear empowered groups.

    • Though Kerala is highly politicized, to get progressive ideas on top of the agenda of political leaders is relatively easy, due to the history of social and labor movements.

    • Kerala generally has an absence of extreme inequalities.

    • The caste system is practically nonexistent, removing one barrier to collective action.

    • Higher literacy rates make communication and training easier.

    • The status of women is better than in other states. Resistance to formation of women’s groups was small, even in Malappuram, a predominantly Islamic district.

    • The unique sociopolitical context of Kerala, coupled with leadership of a few motivated and innovative officials, was key in both the decentralization and scaling-up processes.

Constraining Factors

Two factors initially constrained the scaling-up process.

  • Whether to include all women in the or only women who are below poverty line?

  • More focus was given on micro enterprises and other economic well being of women and maternal and child health and nutrition issues

The government initially wanted to include all women. But there were some issues of including all women because then government would need more resources to handle this entire Kudumbashree project. Negotiations between various stakeholders delayed scaling up by over a year. Many LGBs resisted strengthening of the CBOs, which were perceived as a threat to authority. This still continues to be a problem in some locations.

There are also some debates and discussions on shrinking focus on maternal and child health and nutrition issues and an increasing preoccupation with microenterprise initiatives. Mandatory group formation coupled with rapid expansion compromised the quality of training, posing a threat to sustainability of collective action. The current community development and action plans lack a wider, long-term development perspective. As CDS structures are affiliated to LGBs, they may be as weak or as strong as the LGB itself and the CDS structures are vulnerable to political interference. The NHG volunteers perceive themselves as working for the government, expecting remuneration. Due to institutionalization of CDS, it has started acting like a bureaucracy and it is evident in some places, but not all. Proper training at LGB, CDS, ADS and NHG level should be given so that they are aware of the de-facto power i.e. the positional power so that they act according to the structure defined in the Kudumbshree program. LGB members feel threatened and feel that CDS structures have occupied their space and authority. Therefore high quality and periodic training is necessary. Training and mobilizing women, capacity building and sustained collective action is very necessary. Gopalan, Bhupathy, and Raja (1995) and Oommen(2004) observed that when CBNP was expanded from seven to all 36 wards of Alleppey municipality, the quality of training was compromised and this may repeat in KBS.

Other Key constraints

  1. There are no explicit exit strategies. There is an implicit assumption that once Kudumbashree facilitates the capacity building of CDS structures, the CDSs will be ready to take over. It should analyze the feasibility of such a handover and started making explicit plans for such transformation.

  2. Since KBS, have a 10 year mission, dismantling it in 2008 would have caused problems for getting additional funds for CBO’s. But in 2008-09, the SJSRY Action Plans were integrated with the development plans of the ULB. SJSRY is an ongoing centrally sponsored anti-poverty programme. It is shared 75:25 basis by both Central and State Government of Kerala. The Special Livelihood Projects of Kudumbashree have been implemented under the aegis of SJSRY. Under the SJSRY, so far we have developed 27661 micro enterprises of which 1818 units are group enterprises (each group with minimum 10 women) and 25843 are individual enterprises. (kudumbashree.org: Website).

  3. Conflict with NGO’s – There are many NGO’s who have organized people into SHG and they were mostly formed before KBS and similarly many other political parties, Rural Development department formed SHG as the concept of SHG is very old in Kerala. Now all the SHGs have to be integrated with KBS to avoid duplication and ensure universal coverage of all BPL women. Therefore now if there was an understanding that no new groups would be formed and existing groups would be integrated in KBS, then scaling up process would be smooth else it would be difficult. But NGOs feel that KBS poses an unfair competition and feel that government is taking control and have restricted their growth. However, federating NGO to LGB is allowed, but still there are some tensions (Suneetha Kadiyala: 2004).

  4. Formation of groups (NHG) was compulsory and in some cases KBS and state planning board wanted to scale up at great pace. In 1998, in Thiruvananthapuram district, where community mobilization for collective action was especially challenging, some officials offered incentive of Rs 5,000 per NHG formed. In a few days, many groups were formed. But after the money was disbursed among the members, they abandoned the NHGs.

  5. LGB consider CDS system as sub-ordinate system and some issues are there in smooth co-ordination.

  6. Gram Sabha’s have their meeting in morning hours and usually women are busy in household activities and its cause problems to women.

  7. Men may resist women’s participation

  8. Women may lack long term vision due to illiteracy, inadequate awareness etc and this may lead to ineffective leadership at NHG and thus training is very essential. Therefore women should be trained to identify problems of all women in NHG and thus they have to be trained to identify problems of all women in NHG and thus it should be reflected in genuine planning at ADS and then at CDS level so that their concerns and immediate critical problems of poverty are addressed and thus they are reflected in poverty alleviation program.

  9. Child health and nutrition- The other activities such as pulse and polio programs, but it is a one day activity and doesn’t require much planning, decision making and use of NHG resources. KBS strategy document mentions much on thrift and credit operations and it is reflected in annual reports. Therefore the essence of previous two models described and CBNP programs have taken a back seat. The focus on these activities is perhaps due to the high unemployment rate among educated women, particular to Kerala. Also, these activities yield visible return in a relatively short period, so it is easy to organize women around this issue and to please those looking for impact. However, microenterprise/credit by itself will not necessarily lead to poverty alleviation, improvement in human development indicators, and the empowerment of women. That would require a consciously multipronged approach.

  10. A declining spirit of volunteerism is already evident. As the program expanded to the entire state, the Kudumbashree CBOs see this a government program and, therefore, feel entitled to remuneration. Many volunteers in Alleppey and Kollam complained about the work and lack of monetary compensation. Interestingly, they were not willing to give up their position after a two-year term.

  11. Political parties and their leaders are aware of the vast potential of the NHGs to mobilize people and they try to take political mileage from NHG

Overcoming Institutional Barriers

  1. Poverty Eradication Mission gave more freedom to Kudumbashree (KBS) board in staff recruitment. KBS thus recruited professionals who were highly motivated and those willing to work in a team in multi sectors.

  2. The leadership of KBS was highly motivated such as T.K. Jose, I.A.S., Executive Director-Kudumbashree and many others. T.K Jose was instrumental in team building, empowering and motivating the staff.

  3. Officers encourage staff to be innovative, flexible, learn from practical experiences of people. And then to adopt policies accordingly to their needs. The performance based reviews and monitoring in many places were done. There was adequate staff interaction, sharing of information, good practices from various places so that it can be adopted in other places. Therefore both formal and informal training were critical in strengthening KBS.

  4. Kerala has a coalition government for last 3 decades and some portfolios are distributed along party lines and also these results in departmentalism in bureaucracy who wants the bureaucrats of their preferred choice. But KBS unique features of vertical scaling up and initially 19 departments were linked and officers were integrated to co-ordinate with different departments and thus enabled multi sectoral work. KBS discourages bureaucratic attitudes.

  5. KBS, CBO’s are embedded in a permanent institutional framework-LGB’s, which have substantial funds due to tax collection at state level and also allocation of money from the center in some programs. 10% of local plan outlay of local plans is set apart for projects that benefit women. Thrift and credit operations and microenterprises activities make NHG’s self-reliant as evident in many places ( Oommen)

Graduation of BPL to APL

The traditional 9-point criteria have been modified and no longer serve as a bench mark for any measure of poverty. The wide and somewhat open ended modification of the 9-point criteria in recent years to include women-headed households, presence of widow, divorcee, abandoned and challenged person, chronically ill member in the family and so on are also imprecise ascriptions which open wide the gate to non-poor categories. No NHG admitted to having an APL woman among its members, perhaps because moving to APL means losing their benefits as NHG members.

  1. Suneetha Kadiyala’, “SCALING UP KUDUMBASHREE.COLLECTIVE ACTION FOR POVERTY ALLEVIATION AND WOMEN’S EMPOWERMENT” last accessed on 28-.9-1010 at www.iiav.nl/epublications//2004/Scaling_up_Kudumbashree.pdf.

  2. M. A. OOMMEN’ “MICRO FINANCE AND POVERTY ALLEVIATION: THE CASE OF KERALA’S KUDUMBASHREE”, ” last accessed on 28-.9-1010 at www.csesindia.org/admin/modules/cms/docs/publication/17.pdf

  3. http://en.wikipedia.org/wiki/Kudumbashree_Mission_(Kerala)

  4. Mission statement : http://www.kudumbashree.org/?q=memorandum.

  5. Suneetha Kadiyala’ “ Scaling Up Kudumbashree.Collective Action for Poverty Alleviation and Women.s Empowerment”,

  6. last accessed on 28-.9-1010 at http://www.ifpri.org/publication/scaling-kudumbashree-collective-action-poverty-alleviation-and-womens-empowerment-0.

  7. Dr V P RAGHAVAN’ SOCIAL ACTION, GENDER EQUITY AND EMPOWERMENT: THE CASE OF KUDUMBASHREE PROJECTS IN KERALA last accessed on 28-.9-1010 at http://www.igidr.ac.in/~money/mfc_10/V%20P%20Raghavan_submission_48.pdf

  8. http://www.kudumbashree.org/?q=sj

Poverty and its dimensions

Poverty in general represents the inability of the person to meet their basic needs for physical survival and well being. Poverty is a condition of life so characterised by mal nutrition, illiteracy, disease, high infant mortality and low life expectancy which are below any reasonable definition of human decency.1

Poverty is both relative and absolute. Relative poverty refers to a state where some people have more goods and services than others. A poor person has income below a certain level called poverty level. Thus it does not necessarily mean that those who are below such an income level suffer from deprivation of basic needs. On other hand, absolute suffer from insufficiency of basic needs of life2. Poverty is multidimensional, and has various characteristics and thus it presents a number of challenges to measure it.

A poor kid was a school drop put after the primary school since her family did not have money. There are no jobs in the village and people often migrate to city in search of jobs. They usually come to city where their relatives live. Initially they have temporary houses made up of wood, twigs etc which have no water, no toilets and other services. Children grow up in such a pathetic condition. Initially they built nothing permanent since government could pull it down. As years pass by and as and when they get money they build such that each wall is turned separately into concrete walls from mud. While doing these they don’t have to pay interests therefore no overhead and accounting. It is a story of despair, desperation .Nothing is easy going for the urban poor as it seems to be from outside. Business for street vendors is tough and income is not constant. They live in dangerous, hazardous places such as hills, water pipelines, nallas, etc, dumping grounds etc. Squatter community was busier than legal community which was right next to it. It had more life. Buildings looked haphazard from outside with loose concrete, bricks. Squatter community was a beehive of human habitations, concrete prison cells. One room is all rooms, living, dining, bedroom etc, People started investing in homes after they were sure that demolition would not occur and they built their homes with materials that were available locally in slums and nearby places. This is how squatter community develops and thus city grows organically. People in squatters believe that problems of squatters can be solved by squatters themselves and not by any third party.

The squatter communities used to steal electricity, water from government, but instead if the government recognised them as potential customers who are in millions and thus government could make profits and also improve the squatter livelihood in the process. Similarly television, cable, internet business and other such business can boom in these places and thus can create employment in slums itself. Banks could have encouraged them to do some savings, provide loans and credit cards etc. The poor people prefer to have all amenities near or inside the slums instead of going to city and they can also afford it as they earn and also they don’t pay taxes.

Composition and characteristics of urban poor

Four basic questions are

  • Who are poor?

  • How did they become poor?

  • What do they do?

  • How they live?

To answers these questions let us look at the different characteristics of poor.

The different dimensions of poverty are

  • Economic

  • Socio-psychological

  • Cultural

  • Access to basic services

  • Socio-economic i.e. demographic (housing )

  • Political

  • Physical and ecological conditions of living in a particular area and Spatial


Poverty

Economic characteristics

Urban labour market is divided in formal and informal sectors and poor people are mostly employed in informal section since they don’t have the skills and educational qualifications for employment in formal sector. Informal sectors permits easy entry, needs low skills, sometimes self employment is possible. Unemployment is very high among poor people. Even if they are employed they are paid very less and they can’t depend on their family members for income. Children are often made to work so that livelihood of the household is met. Some children are even made to work in houses such as taking care of home ( security), looking after younger children while the parents are outside for work. Thus children who are not sent to school are used in direct or indirect way for the economic well being of household.

Most of the poor people are in informal sector and a self employed since they don’t have skills and generally they don’t have to wait for long time to get employment as they don’t have any source of income. Thus they take up some menial job which is often low paid so that they can just survive.

Work Sector

Poor people are found to work more in tertiary sector (manufacturing services, construction, transport and commerce) than in primary and secondary sector3. They are employed in wide range of occupations. The hours of work, Number of days worked in a month also varies widely among the poor and it is not fixed. Longer they work more income they generate. Thus income levels greatly vary depending on occupation, work sector, number of hours, number of days of work, number of years worked in particular occupation. Underemployment, irregular job pattern and low wages are some of the critical economic problems of urban poor.

Socio-psychological

Deprivation of basic needs produce ill effects on the development and functioning of humans. If the individual suffers from deprivation of basic needs of food, shelter, clothing, housing, water, sanitation and security, that person becomes the target of psychological imbalances which may remain dormant and create deep-rooted feeling of powerlessness. This powerlessness leads to hopelessness, fatalism or apathy and in extreme cases results in psycho pathetic condition 4. They are bound to stress full situation and shocks and the ability to absorb shocks varies and thus they become emotionally unstable. Anxiety, aggression, depression are common among poor people.

Culture

Culture also shapes poverty. Family structure, interpersonal relations, time orientation, value system and spending patter as a part of culture of the poor people define poverty. As most of the slums in city are located in the fringes of elite people and they often subdue themselves that they cannot achieve the status of larger society. Thus this leads to creation of their own perception, a different kind of life style which helps them to cope up with their fellow slum mates and thus to a situation of hopelessness. This leads to low level of aspiration which further degrades their situation and thus leads to more poverty 5. Because of high unemployment, low wages for labourers also lead to low aspiration among the poor. This thus leads to sub culture of the poor5.

When this sub culture of poverty comes into existence, it perpetuates itself from generation to generation because of its effect on the children. This leads to change in the attitudes of nature of individual, then the family, nature of slum community and also nature of larger society.

Lack of effective participation and integration of poor in major institutions of larger society can cause alienation leading to the development of sub culture of poverty. It is thus much more difficult to eliminate this sub culture of poverty than poverty itself.

Physical and ecological conditions of living in a particular area

As the population is growing, the pressure on natural resources is increasing and also the environment. Uncontrolled exploitation of natural resources and population growth disturb the environment equilibrium and create conditions in which human basic needs can’t be satisfied and thus leading to poverty. The cultivable land per person decreases as the population grows. With vast number of people migrating and the need for better survival conditions demands, the pressure of population growth on the resources has lead to enormous levels of poverty.

Demographic Characteristics

Poor people have large household size that non- poor. However, there are large variations in their mean household size which depend upon the socio-cultural and economic factors in each region. Urban Poor are mostly migrants from rural areas. But recent studies have shown that migrants are often better off than non migrants6.

Household size

Perception is that poor have a large household size. But this is not true since mean household size of urban poor (5.2 – according to Census of India, 1981) does not differ significantly from that of rest of urban household (5.4) 6.

Household size and income

A research was conducted by National Institute of Urban Affairs. They take a sample of all poor households and BPL household among these poor households. They conclude that, in poorest household the larger households are not significantly poorer than the smaller households whereas in overall sample the larger households are poorer than the smaller households.

Household Composition

In poor households, the percentage of children (< 15 years) is higher and percentage of labour force (15 -60 years) is lower. Women, children and old people are dominant in poor households. Incidence of poverty is higher among the scheduled castes and scheduled tribes 6.

6. “Profile of Urban Poor: An Investigation into their Demographic, Economic and Shelter Characteristics”, 1989, National Institute of Urban Affairs.

Poverty and Literacy levels

Illiteracy among poor is much higher than rest of urban population. A very high dropout rates from school going children. Illiteracy is particularly higher among females of low income and poor people. Girls are not encouraged to study beyond primary level.

Housing and access to basic services characteristics

Housing characteristics can be divided into four types7

  1. Squatters

  2. Legal occupants

  3. Tenants

  4. Owners

Squatters are very common among poor people. They usually are migrants and come to big city in search of job and since they don’t have money they occupy certain lands which are near their place of work so as to save on the transportation costs. They continue to occupy these lands despite the fear of eviction because of proximity to their work. There are also tenants among urban poor as they can’t to build their own houses. Some of the tenants are migrants and as they have come recently into urban areas they would not be able to construct their own house. Most of the poor households live in kutcha or semi kutcha or semi pucca houses and few in pucca. Sometimes the poor people pay bribes to officials and make their homes legal and thus claim their ownership of their house in slums. Many poor people prefer to build their own houses rather than pay rents.

Household Assets

Assets such as land, house, gold, stocks, bonds, vehicles, household items are the indicators of standard of living. They act as a backup in times of dire conditions. Assets sometimes give future returns and make life convenient. Assets are formed when excess of income over consumption is converted into these assets for some future gains.

Spatial Dimension of Urban poverty

The incidence of urban poverty varies from state to state and also among different size classes of cities. Even within a city, the percentage of people living below the poverty line and in slums varies depending upon whether the slums or squatter settlements are recent origin or very old of about 25 to 30 years or whether slums are on public lands or private lands or whether any improvement work has been carried out in slum areas by public agencies.

Measurement of Poverty: Frameworks for measuring poverty

Poverty is multidimensional, and has various characteristics and thus it presents a number of challenges to measure it. Right now poverty measuring is quantitative and expenditure on consumption per capita is used by Planning Commission to measure poverty in India.

There are various approaches to study of poverty

Economic: This provides for useful explanation of poverty. The level of poverty and its magnitude can be clearly measured in economic terms. In this type of analysis, poor are those who do not have a defined level of income which is required for the fulfilling of basic requirements. The criterion to draw this poverty line is the expenditure on consumption. Therefore minimum nutrition intake for normal health is necessary.

The definition of poverty line in the Indian context was attempted for the first time in 1962 by a Working Group of eminent Economists and social thinkers after taking into account the recommendations of the Nutrition Advisory Committee of the Indian Council of Medical Research (ICMR, 1958) regarding balanced diet. It suggested a model of calorie intake of 2100 or 2400 calories per capita in urban and rural respectively.

The major criticism revolve around the adoption of uniform calorie norms and fixed consumption basket, base year price differentials and uniformity of deflators across the States and the practice of adjusting the NSS distribution. Also the limitations of the poverty line approach like its absolute and reductionist nature, insensitiveness to mobility, effects of geographic, cultural and occupational manners etc have established it as an invalid method. Income levels generally fluctuate and there are problems of under-reporting and people who are in informal sector usually don’t report correct numbers.

Income or consumption measures also do not capture multiple dimensions of poverty which are stated previously. Urban poor are dependent on cash economy thus making them more vulnerable to fluctuations in income and there are severe environmental issues and health hazards due to crowded living conditions in urban slums and no tenure security and access to basic services such as water, sewage, health and education, and a safety net to mitigate hard times and vulnerability to withstand shocks.

Unsatisfied Basic Needs Index 8: This approach defines minimum criteria for various dimensions of poverty and thus classifying those households who don’t have access to basic set of needs and services. These include characteristics such as drinking water which is piped to their homes, caloric and protein requirement of their food consumption, toilets, sewage, toilets, adequate housing, overcrowding, literacy, school attendance. If a household is deficient in one of the categories, they are classified as having unsatisfied basic needs.

Asset Indicators8: This is used to measure the demographic characteristics. Assets can be classified as tangible (stores, resources) and intangible claims for material, moral or practical support, opportunity to access resources)

The ownership of assets such as land, house and dwelling characteristics (type of roof, flooring, and walls), gold, stocks, bonds, vehicles, refrigerator, television, household items is used to construct an indicator of household’s socio-economic status. Presence of services and access to basic services including clean water and electricity is also used as an indicator and thus these assets need not be owned by them but rather they have control over them. Thus, these resources include a broad range of financial, human, social, physical, natural and political capital.

Vulnerability 9: It is basically the insecurity of individual in face of changing social, ecological, economic and political environments accompanied by shocks, other risks such as violence, crime, natural disasters, being pulled out of school etc. The extent of vulnerability relates both to the level of external threats to a household’s, individual’s or community’s welfare and to their resilience resisting and recovering from these external threats (UNDP, 1997). Vulnerability is measured by indicators such that we will have concrete data of assess a household’s risk exposure over time. These indicators include measures of participation in the formal safety net, income diversification, physical assets, human capital, links to networks, and access to credit markets. It also examines the sensitivity of their livelihoods to these factors. This kind of analysis can be quite complex and impossible to measure using simple quantitative tools and thus requires a specially designed survey. Therefore we can classify vulnerability into tangible and intangible assets: labor, human capital, productive assets, household relations and social capital. The measurement of tangible assets can be got. Thus over the years this kind of framework can be modified to get good measure of poverty levels among the people.

Policies, Institutions, Processes and Participatory methods9

The Policies, Institutions, Processes cover a broad range of social, political, economic and environmental factors that determine peoples choices and so help to shape livelihoods and institutions will are involved in shaping the polices related to poor

Policies, Institutions, Processes and Participatory methods- laws, policies,

Trends Shocks Security

Vulnerability Context

Capital Assets Livelihood assets Financial, social human, Physical, natural assets

What are the implications of this framework for redressal of poverty?

Vulnerability:

Different livelihood strategies have to be employed in the context of

Social context of cities

Urban neighborhoods contain a diversity of household types and people of varying social background. Social diversity is likely to create tensions and the need for different livelihood strategies. They rely on strong networks of solidarity between groups and individuals. In urban cities a lot of segregation happens and people often look for communities of similar kind based on say caste, language, region etc and thus trust and collaboration between people is enhanced. Therefore strong social networks based on trust, collaboration and solidarity amongst communities and households is developed and this forms a social capital which acts as a bulwark against shocks and stresses 10. But some households suffer from high levels of social fragmentation but in most cases a there is a strong solidarity between communities and thus the vulnerability has to be measured differently in different social context.

The urban economy

Due to globalization most of the urban market is based on global markets and therefore goods are relatively higher costs unlike their rural counterparts who may rely more heavily on agriculture or have access to free or common property resources. Most of the urban poor are employed in informal sector and they are low paid and have insecure job conditions. Those in informal employment don’t have labor rights. They are therefore susceptible to sudden changes such as unemployment, dangers working conditions, long hours of work, poor pay and insanitary or unsafe conditions.

Another source of vulnerability is the linkages between the cities to the global economy. Urban economies depend on the wider global economic system and are affected by national and international macro policy. Thus urban poor are vulnerable to urban economy.

Environment and health

Urban poor are mostly concentrated in high densities areas. These areas are frequently located on polluted land close to some industries or waste dumps sites, water pipes and water courses are contaminated, or on hillsides and river plains which are susceptible to landslides and flooding. Most of the urban poor working in informal sectors are vulnerable to accidents in the workplace and the health hazards associated with unsafe working environments such as lack of clean water and sanitation and water, air and noise pollution. Many urban poor people particularly women spend lots of hours in securing drinking water and other activities.

Legal dimension

The relationship of the urban poor to systems of city governance usually depends on their legal status. Most of the settlements of urban poor are termed as illegal and they are vulnerable to demolition of their homes by the government as they occupy public property owned by state or on lands where there is dispute between two parties.

Poor try to find extra legal option to find housing near their occupation. Housing illegality leads to all other illegality such as water, electricity, sanitation, toilets, health care etc.

Some groups, defined along lines such as gender, occupation, caste or ethnicity, may be particularly vulnerable to specific shocks and stresses.

Gender dimension

Women form a majority among the poor and are over-represented amongst the poorest. Gender differences within the incidence of poverty in urban areas are more intense than those in the rural areas.

Tools for assessing vulnerability11

  1. Events and trends that cause stress or sudden changes in trends. Method used can be key informants and external agents who are in constant touch with the urban poor such as NGO’s , activist etc

  2. Major occurrence of shocks such as industry closure, earthquakes, major economic reforms, group conflicts. Method used can be exact timeless of occurrence.

  3. Access to livelihood activities throughout the year (seasonal production activities such as construction, processing of rural produce or migration for agricultural work). Methods used can be Seasonal diagrams, sample surveys

  4. Trends such as population density, rainfall, temperatures, producer and consumer etc. Methods used can be demographic information, meteorological, price levels.

Policies, Institutions, Processes and Participatory methods

All the activities that are followed in this framework in micro level have to be supported in macro level i.e. at policy and implementation level so that urban poor is not denied the access to basic services. One area of policy that has the potential for building the security of poor households’ livelihoods is that of pro-poor policy and India has introduced many pro-poor programs and many are in implementation phase. Due to structural adjustments, the incidence of poverty is most probably likely to increase. Few examples are factors such as the loss of public sector employment and subsidized public goods and services.

Participatory methods are indicators of Cultural institutions such as rigid caste system, which has strongly influenced access to employment opportunity, education, access to tap water and other services.

Some of the innovative techniques that can be used for this framework are12

  • wealth ranking – assigning households to well-being categories

  • Venn diagrams – diagrammatic representation of key institutional interactions.

  • social maps – maps locating key social features

  • resource maps – maps identifying resources

  • transect walks – land-use maps based on walking through particular areas

  • seasonal calendars – graphical depiction of seasonal events or trends

Capability approach

The simplest ways to approach multi dimensional view of poverty is to define poverty as non- fulfillment of any kind of human right. But anything and everything can’t be used to measure poverty by this approach. E.g. Say if any political opponent has denied a person to speak freely, that it would not qualify it as lack of human right even though the deprivation of human right has happened and thus makes it impractical to measure in this broader sense . The reason for implausible is that when viewed as a social problem and in the context of policy making, the concept of poverty has been closely linked to command over economic resources 13.

In our day to day life we use the word “poor” in a very loose sense. One who comes in car is rich and one who comes in auto rickshaw as poor or a “poor chap” who just missed a lottery by narrow margin. However when poor is discussed as a social problem, the concept has to restricted to well established link with deprivation by economic constraints. Therefore the Amartya Sen’s Capability approach14 provides a concept of poverty that satisfies both these requirements and thus replaces a uni-dimensional approach to measure poverty by only income or economic dimension. Therefore this approach includes most human right that are concerned with humans person’s right to certain fundamental freedom such as freedom from hunger, disease, malnutrition, adequate housing, clothing, illiteracy etc and thus goodness of the social structures be measured in terms of flourishing of human freedoms. Thus this freedom leads to well being of human being.

In a very crude sense, well-being can be thought of as the quality of a person’s being or living, and living itself can be seen as consisting of a set of interrelated “functioning’s”– the activities that a person can do or be. The level of well-being thus depends on the level of those functioning’s, i.e. how well a person can do or be the things that the person has reasons to value. Functionings are what individuals may value doing or being. This includes basic functionings such as literacy and avoiding preventable diseases, as well as more developed activities such as taking part in community life and enjoying social self-respect. A person’s ‘capability set’ refers to the bundle of all the functionings from which a person has the freedom to choose.

Therefore it represents a person’s freedom or opportunities to achieve well being. Poor persons have very less opportunities to pursue their well- being. Poverty seen from this dimension can be seen as low levels of capability or Sen put it as “the failure of basic capabilities to reach certain minimally acceptable levels”.

First, not all kinds of failure of capability would count as poverty. Since poverty denotes an extreme form of deprivation, only those capability failures would count as poverty that is deemed to be basic in some order of priority. Since many different communities have different type of social order , so therefore they will have different order of priority and a different basket of things that would qualify as “basic capabilities” and thus is relative. But there will be certain capabilities that would be common to all such as having adequate housing, nutrition, clothing etc.

Second, now when poverty is defined as a failure to meet a range of basic capabilities, it becomes a multidimensional concept and therefore lack of adequate income as the only dimension becomes redundant, but rather is one of the dimension of measuring poverty and also an important one because it plays an important role in measuring the command over economic resources. Income dimension distinguishes the phenomenon of poverty from a low level to high level of well-being in general. This distinction is important because while poverty implies a low level of well-being, not every case of a low level of well-being can be regarded as poverty. For example, while the absence of the capability to live a healthy life is certainly a case of a low level of well-being, but in case of ill-health caused by a genetic disorder which is hereditary, will not in itself be recognized as poverty. But ill-health caused by lack of access to basic health-care resources will be. Therefore the command over economic resources plays an important role in determining the low level of well-being.

Therefore inadequate command over access to communally owned and managed resources and also over resources that are made available through formal and informal networks of mutual support can be deemed as poverty14.

The recognition that poverty has an irreducible economic dimension does not necessarily imply the primacy of economic factors that are responsible for the cause of poverty. E.g. when a person is discriminated based on caste, class, gender and if the society denies that person access to basic services such as health care and thus it is clearly a case of capability failure that should count as poverty. Here the primary cause if the socio-cultural, political-legal frameworks that may an important role and lack of command over resources plays merely a mediating role. However, the existence of this mediating role is crucial factor in distinguishing poverty from a low level of well-being in general.

Another important factor is capacity of any individual. Everyone does not have the same capacity to convert resources into capabilities. For instance, people with different biological characteristics may require different intake of food and health care services in order to acquire the same degree of freedom to live a healthy life. Similarly, people living in different cultural environments have different style of clothing to achieve certain minimal acceptable level in society. Therefore fundamental concern of person’s capabilities is an important factor to measure poverty.

Education

The objective of education for all must be intended to enhance the capabilities and enlarging choices and thus by building self-image and self worth, which in turn help individuals to be less vulnerable to the variations within a given context. For disadvantaged groups, education is a means of fighting poverty and also reducing the vulnerability in long run16.

Thus enhancing the capability of an individual requires increasing the “ability” needed to escape poverty and also to prevent them from falling into poverty. Poor people have not given jobs in formal sector since they don’t have any educational qualifications or degree certificates from any formal education system. This dimension of education adds to the vulnerability of poor because for employment many employers ask for formal degree certificates and not the person’s ability to do a particular job. This thus even further deprives poor people from getting a basic income for survival and thus forces them into menial work.

But the capability approach stresses on the “life skills” needed for a person, which stresses not only for psychomotor or practical skills, but also on psychosocial abilities such as life skills, that will enable a person to learn and use knowledge, to develop reasoning and analytical strengths, to manage emotions and to live with and relate to others. Therefore life skills is used to bridge the gap between the practical knowhow and the ability to do things regularly and thus break the cycle of poverty with the development of critical reasoning, building potential through social capital, understanding the consequences of behavior, feel responsible and have the ability to solve problems and taking decision that don’t compromise future generations.17

With the help of questionnaire and other quantitative and qualitative methods with closed questions or multiple choice questions or open ended questions regarding specific knowledge/facts about Decision-making and Problem Solving, Critical thinking, Self awareness, self esteem and self confidence , Negotiating/ refusing, Communicating, Cooperating, working together as a team we can measure the Life skills by this capability approach.

This is a story about a girl Kalaivani; who was working in a small shop “Giri Trading” outside a temple. An NRI who is well educated, rich underestimates a Genius Kalaivani, who was poor and had studied until 9th class. NRI accepted his ignorance about the wisdom about spirituality. She was devotion to duty and was totally involvement in her work. She had great ethics. She had done self learning about all the books (just to tool for marketing in the shop) so that she could give her customers the information and details of all the books in shop. Finally NRI was dumbstruck by her knowledge and wisdom about spirituality about human life. The story raises critical questions as to who is poor. My dimension to poverty is that of spiritual .My understanding on poverty is that, one who is morally, ethically, culturally; spiritually poor is the real poor person18.

Habitat Professional should understand the grass root problems of people. They should know how to tackle a particular situation of squatter community in such a way that the squatter view point is taken into consideration. The solution of poor people can be given by a poor person who has experienced poverty. Habitat Professionals are greatly criticized that they are good only at discussing theory, models, discussion papers etc, but they lack in practicalities. They should involve urban poor in policy making.

References

1, 2 “Dimensions of Urban Poverty: A Situational Analysis”, 1988, National Institute of Urban Affairs

3. “Profile of Urban Poor: An Investigation into their Demographic, Economic and Shelter Characteristics”, 1989, National Institute of Urban Affairs.

4, 5 “Dimensions of Urban Poverty: A Situational Analysis”, 1988, National Institute of Urban Affairs

7. “Profile of Urban Poor: An Investigation into their Demographic, Economic and Shelter Characteristics”, 1989, National Institute of Urban Affairs.

8 .Analyzing Urban Poverty” by J Baker and N Schuler last accessed on 07- 09-2010 on http://siteresources.worldbank.org/INTURBANPOVERTY/Resources/analyzingurbanpoverty.pdf

9.” Sustainable Livelihood approaches in urban Area: General lesions and illustration from Indian Cities”

J Farrington – 2002, last accessed on 07- 09-2010 on www.odi.org.uk/resources/download/2009.pdf

10.” Sustainable Livelihood approaches in urban Area: General lesions and illustration from Indian Cities”

J Farrington – 2002, last accessed on 07- 09-2010 on www.odi.org.uk/resources/download/2009.pdf

11. 12. ” Sustainable Livelihood approaches in urban Area: General lesions and illustration from Indian Cities”

J Farrington – 2002, last accessed on 07- 09-2010 on www.odi.org.uk/resources/download/2009.pdf

14.Human Rights and Poverty Reduction, A Conceptual Framework” last accessed on 09-09-2010 on “www.ohchr.org/Documents/Publications/PovertyReductionen.

16 EDUCATION AND THE CAPABILITIES APPROACH: Life skills education as a bridge to human Capabilties “Katia Radja, A M Hoffman and P Bakhshi, last accessed on 10-09-2010 “http://ethique.perso.neuf.fr/Hoffmann_Radja_Bakhshi.pdf

17” EDUCATION AND THE CAPABILITIES APPROACH: Life skills education as a bridge to human Capabilities”, Katia Radja, A M Hoffman and P Bakhshi, last accessed on 10-09-2010 “http://ethique.perso.neuf.fr/Hoffmann_Radja_Bakhshi.pdf

18 Last accessed on 10 -09-2010 http://www.thegoldenage.org/index.php?option=com_content&view=article&id=65:gems-of-india-an-inspirational-story&catid=36:articles-from-web&Itemid=27

Other references

Dimensions of Urban Poverty: A Situational Analysis”, 1988, National Institute of Urban Affairs

  1. Profile of Urban Poor: An Investigation into their Demographic, Economic and Shelter Characteristics”, 1989, National Institute of Urban Affairs.

  2. Human Rights and Poverty Reduction, A Conceptual Framework

www.ohchr.org/Documents/Publications/PovertyReductionen.

  1. EDUCATION AND THE CAPABILITIES APPROACH: Life skills education as a bridge to human Capabilties “ Katia Radja, A M Hoffman and P Bakhshi

http://ethique.perso.neuf.fr/Hoffmann_Radja_Bakhshi.pdf

  1. Kalaivani story http://www.thegoldenage.org/index.php?option=com_content&view=article&id=65:gems-of-india-an-inspirational-story&catid=36:articles-from-web&Itemid=27

The different dimensions of poverty

Poverty in general represents the inability of the person to meet their basic needs for physical survival and well being.

A condition of life so characterised by mal nutrition, illiteracy, disease , high infant mortality and low life expectancy are below any reasonable definition of human decency.

Poverty is both relative and absolute. Relative poverty refers to a state where some people have more goods and services than others. A poor person has income below a certain level called povert level. Thus it does not necessarily mean that those who are below such an income level suffer from deprivation of basic needs.

On other hand, absolute suffer from insufficiency of basic needs of life.

Poverty major causes

The different dimension sof poverty are

  • minimum consumption or income level is defined
  • Socio-psychological
  • Cultural
  • Political
  • Socio-economic i.e. housing , urban services
  • Physical and ecological conditions of living in a particular area

Physical and ecological conditions of living in a particular area

As the population is growing, the pressure on natural resources is increasing and also the environment. Uncontrolled exploitation of natural resources and population growth disturb the environment equilibrium and create conditions in which human basic needs cant be satisfied and thus leading to poverty. The cultivable land per person decreases as the population grows. With vast number of people migrating and the need for better survival conditions demands , the pressure of population growth on the resources , rendered poor through years of colonial exploitation has lead to enormous levels of poverty.

Socio-psychological

Deprivation of basic needs produce multifarious effecrs on the development and functioning of humans. If the individual suffers from deprivation of basic needs of food, shelter , clothing , housing, water , sanitation and security, that person becomes the target of psychological imbalances which may remain dormant and create deep-rooted feeling of powerlessness. This powerlessness leads to hopelessness , fatalism or apathy and in extreme cases results in psycho pathetic condition. They are bound to to stress full situation and shocks and the ability to absorb shocks varies and thus they become emotionally unstable. Anxiety, aggression, depression are common among poor people.

Culture

Culture also shapes poverty. family structure, interpersonal relations , time orientation , value system and spending patter as a part of culture of the poor people define poverty. As most of the slums in city are located in the fringes of elite people and they often subdue themselves that they cannot achieve the status of larger society. Thus this leads to creation of their own perception , a different kinf of life style which helps them to cope up with their fellow slum mates and thus to a situation of hopelessness. This leads to low level of aspiration which further degrades their situation and thus leads to more poverty. Because of high unemployment , low wages for labourers also lead to low aspiration among the poor. This thus leads to sub culture of the poor. When this sub culture of poverty comes into existence , it perpetuates itself from generation to generation because of its effect on the children. This leads to change in the attitudes of nature of individual, then the family, nature of slum community and also nature of larger society

Lack of effective participation and integration of poor in major institutions of larger society can cause alienation leading to the development of sub culture of poverty. It is thus much more difficult to eliminate this sub culture of poverty than poverty itself.

Measurement of Poverty

There are various approaches to study of poverty

Economic: This provides for useful explanation of poverty. The level of poverty and its magnitude can be clearly measured in economic terms. In this type of analysis, poor are those who do not have a defined level of income which is required for the fulfilling of basic requirements. The criterion to draw this poverty line is the expenditure on consumption. Therefore minimum nutrition intake for normal health . the critics have contended that this is a measure of absolute poverty. It ignores very vital and significant indicators of quality of life. If we consider the minimum nutritional requirements in terms of balanced diet and also other basic needs, such as clothing , shelter , urban services, the minimum income required to meet these needs is much higher than suggested by this model of calorie intake of 2100 or 24oo calories per capita in urban and rural respectively.

Spatial Dimension of Urban poverty

The incidence of urban poverty varies from state to state and also among different size classes of cities. Even within a city, the percentage of people living below the poverty line and in slums varies depending upon whether the slums or squatter settlements are recent origin or very old of about 25 to 30 years or whether slums are on public lands or private lands or whether any improvement work has been carried out in slum areas by public agencies.

Composition and characteristics of urban poor

Three basic questions are

  • Who are poor?
  • What do they do?
  • How they live?

Demographic Characteristics

Poor people have large household size that non- poor. However, there are large variations in their mean household size which depend upon the socio-cultural and economic factors in each region.

Urban Poor are mostly are mostly migrants from rural areas. But recent studies have shown that migrants are often better off than non migrants.

Difference between Green Box subsidies and Blue Box subsidies

Difference between Green Box subsidies and Blue Box subsidies

In WTO terminology, subsidies in general are identified by “Boxes”with different colours:

  • green (permitted subsidies)

  • amber (slow down — i.e. subsidies to be reduced),

  • red (forbidden subsidies)

But the Agreement on Agriculture AoA is an international treaty of WTO and has the following boxes:

  • Amber (de-minimis)

  • Green

  • Blue (for subsidies that are tied to programs that limit production)

  • S&D (exemptions for developing countries)

There are three categories of support measures that are not subject to reduction under the Agreement, and support within specified de-minimis level is allowed.

  1. Measures which have a minimum impact on trade i.e. Green Box criteria

Ex: Government of India assistance on general services like

  1. research, pest and disease control, training, extension, and advisory services;

  2. public stock holding for food security purposes;

  3. domestic food aid; and

  4. direct payment to producers like governmental financial participation in income insurance and safety nets, relief from natural disasters, and payments under environmental assistance programmes.

  1. Developing country measures otherwise subject to reduction i.e. S&D Box criteria Examples

  1. investment subsidies which are generally available to agriculture in developing countries; and

  2. agricultural input services generally available to low income and resource poor producers in developing countries.

  1. Direct payments under production limiting programme i.e. Blue Box criteria

These are relevant from the developed countries point of view only.

  1. Green Box

  1. Green subsidy is allowed in terms of support example: MSP or Subsidies

  2. Measures with minimal impact on trade can be used freely

  3. They include government services such as research, disease control, infrastructure and food security.

  4. They also include payments made directly to farmers that do not stimulate production, such as certain forms of direct income support, assistance to help farmers restructure agriculture, and direct payments under environmental and regional assistance programmes.

  1. Blue Box

  • Subsidy is also permitted

  • Cover certain direct payments to farmers where the farmers are required to limit production called “blue box” measures.

  • Covers certain government assistance programmes to encourage agricultural and rural development in developing countries

  • Also covers other support on a small scale (“de minimis”) when compared with the total value of the product or products supported (5% or less=developed countries &10% or less=developing countries).

Sources:

GST : An overview

Introduction

The proposed GST is expected to streamline the indirect tax regime. It contains all indirect taxes levied on goods, including central and state-level taxes. Billed as an improvement on the VAT system, a uniform GST is expected to create a seamless national market.

Through a tax credit mechanism, this tax is collected on value-added goods and services at each stage of sale or purchase in the supply chain.

Not only it will replace Central Indirect taxes but will replace state levied indirect taxes too. Experts say that GST is likely to improve tax collections and boost India’s economic development by breaking tax barriers between States and integrating India through a uniform tax rate.

France was the first country to introduce it. In India, a dual GST is being proposed wherein a central goods and services tax (CGST) and a state goods and services tax (SGST) will be levied on the taxable value of a transaction.

Features of GST:

  • It will be collected on VAT method ie tax at every stage of value addition.
  • It will be imposed at an uniform rate @ 20% (Centre state share = 12 and 8 percent respectively)

TIMELINE of GST

2000 NDA setup empowered committee under Asim Das Gupta to design GST model.
2006-07 Then, Union Finance Minister Mr Chidambaram announced GST would be implemented from Apr 1 , 2010 and asked the empowered committee with state finance ministers to submit their views.
2009 1.Committee of Principle Secretaries of the states setup

2.Detailed Discussion Papers prepared

3. Tax Rate Proposal : World over mostly the GST rates are between 15-20% and the same is expected for India too

2011 Constitution 115th Amendment Bill introduced to enable state legislatures to frame laws for levying GST

1.     It seeks to enable The President of India to setup within 60 days of passage of the bill a GST COUNCIL with Union Finance Minister as Chairperson & MoS for Revenue + Finance Ministers of all the states as members. GST Council will thus work on GST rates , exemption lists etc.

2.    Setup a GST DISPUTES SETTLEMENT AUTHORITY : with a chairperson and 2 members.

3.    It was referred to the Parliamentary Committee on Finance for examinations.

·       It recommended that sections proposing a Dispute Settlement Authority to decide disputes arising among states and take action against the states should be removed from the Bill, and that the GST Council itself should evolve a mechanism to resolve the disputes.

·       The committee also recommended that decisions in the GST Council be taken by voting and not by consensus. It said one-third weightage for central representatives and two-third weightage for state representatives may be provided, with the decision taken by the Council being passed with more than three-fourth votes of the representatives present. The quorum for holding meetings of the Council is proposed to be raised to half from one-third.

2011 GST NETWORK : IT strategy of GST led by the AADHAR team.

Objective : Common portal for centre and states to enable electronic processing of registrations, returns , payments etc.

NSDL (National Securities Depository ltd.) : technology partner to operate as IT backbone of GST.

2012 Finance ministry formed a committee of seven members under the chairmanship of Yogendra Garg, commissioner export, Mumbai, to frame a model legislation of GST for the Centre.
2013 The Goods and Services Tax Bill is likely to be taken up in the Parliament

Rational or Apprehensions behind the proposal:

  1. The States feel that when 246A is there, then the Centre should not have to incorporate GST into the Union List. Clause 246A proposes additional powers to the Centre to tax sale of goods and for the States (to tax services).
  2. At present, the Centre can tax services but not sale and distribution of goods. The States can now tax sale and distribution of goods but not services.
  3. Including GST in the Union List will imply that in case of any disagreement between the Centre and the States, Parliament’s decisions will be overriding and binding on the States.
  4. Administrative mechanism: In India, a merger between two government agencies is next to impossible, as long as appraisals and promotions are linked to seniority and regretfully, not performance. And integrating the revenue collection services of all states and an extremely powerful Central Service into one GST collection agent.
  5. Federal structure of the Indian constitution. Taking away the power of the states to tax items under the state list is tantamount to infringing upon the basic structure of the Constitution.

Why are some States against GST; will they lose money?

  • The governments of Madhya Pradesh, Chhattisgarh and Tamil Nadu say that the “information technology systems and the administrative infrastructure will not be ready by April 2010 to implement GST”.
  • States have sought assurances that their existing revenues will be protected.
  • The central government has offered to compensate States in case of a loss in revenues.
  • Some States fear that if the uniform tax rate is lower than their existing rates, it will hit their tax kitty. The government believes that dual GST will lead to better revenue collection for States.
  • However, backward and less-developed States could see a fall in tax collections. GST could see better revenue collection for some States as the consumption of goods and services will rise.

PROBLEMS IN THE CURRENT TAXATION SYSTEM GST PLANS TO IMPROVE

  1. Ambiguous definitions- Taxation at Manufacturing Level is levied on goods manufactured or produced in India which gives rise to definitional issues as to what constitutes manufacturing.
  2. Less Complexity-A strong single taxation system wherein various Central and State statutes will be subsumed into one comprehensive enactment. Process of judicial decisions would be speedy too with one statute covering all aspects of indirect taxes.
  3. Exclusion of Services from state taxation- Services remain outside the scope of state taxation powers and GST would include tax on all such services where states cannot legislate.

What are the benefits of GST?

  • Under GST, the taxation burden will be divided equitably between manufacturing and services, through a lower tax rate by increasing the tax base and minimizing exemptions.
  • GST will be is levied only at the destination point, and not at various points (from manufacturing to retail outlets).
  • Currently, a manufacturer needs to pay tax when a finished product moves out from a factory, and it is again taxed at the retail outlet when sold.
  • It is expected to help build a transparent and corruption-free tax administration.

How will it benefit the Centre and the States?

  • It is estimated that India will gain $15 billion a year by implementing the Goods and Services Tax as it would promote exports, raise employment and boost growth.
  • It will divide the tax burden equitably between manufacturing and services.

What are the benefits of GST for individuals and companies?

  • In the GST system, both Central and State taxes will be collected at the point of sale.
  • Both components (the Central and State GST) will be charged on the manufacturing cost. This will benefit individuals as prices are likely to come down. Lower prices will lead to more consumption, thereby helping companies.
  • Thus, the prices of commodities are expected to come down in the long run as dealers will be allowed to avail the CENVAT credit of Excise duty paid by Manufacturers and more over he will be allowed to avail the CENVAT credit of tax paid on services also. This passing of the benefits of reduced tax incidence to consumers by slashing the prices of goods will definitely reduce the prices.

Implications of GST on imports and exports

  • Imports would be subject to GST.
  • Exports, however, will be zero-rated, meaning exporters of goods and services need not pay GST on their exports. GST paid by them on the procurement of goods and services will be refunded as similar to the present scenario.

References

  1. http://gstindia.com/
  2. http://articles.economictimes.indiatimes.com/2013-08-13/news/41374977_1_services-tax-state-gst-goods-and-services
  3. http://www.dnaindia.com/money/report-all-you-ever-wanted-to-know-about-gst-1265576
  4. http://en.wikipedia.org/wiki/Goods_and_Services_Tax_(India)
  5. http://centreright.in/2013/02/why-gst-is-not-a-good-idea/#.UmEVm9KBnPI
  6. http://www.dnaindia.com/money/1265576/report-all-you-ever-wanted-to-know-about-gst

Africa – Land of opportunity for India- Part II

India’s Economic relations with Africa

  • India has acquired observer status in a number of regional organisations in Africa such as the Common Market for Eastern and Southern Africa, the Southern African Development Community and the Economic Community of West African States
  • In 2002, launched the Focus Africa Programmeinitially focused on sub-Saharan Africa, with emphasis on seven major trading partners in the region and was broadened in 2003 to accommodate North Africa.
  • The Confederation of Indian Industry, in partnership with the Indian government, Export–Import Bank of India (EXIM) and the African Development Bank initiated the India–Africa project partnership conclaves. Since 2005, four conclaves have taken place in New Delhi, along with mini-conclaves in Africa. These conclaves serve as a meeting ground between decision makers and industrialists from African countries and heads of Indian companies involved in various projects in Africa. The latest conclave was 10th CII EXIM bank conclave held in New Delhi in 2014.
  • India launched an initiative in 2004 called Techno-Economic Approach for Africa–India Movement (TEAM–9), together with eightenergy and resource-rich West African countries viz. Burkina Faso, Chad, Cote D’Ivoire, Equatorial Guinea, Ghana, Guinea Bissau, Mali, Senegal, and India.
  • In 2008, the India–Africa Forum Summit: which involves co-operation in capacity building, agricultural infrastructure development, health and food security, energy security and technological co-operation
  • China’s deepening engagements in Africa has eclipsed India’s growing relationship with the continent.
  • ONGC has invested in oil production & refinery in Nigeria and Sudan through OVL
  • The Southern African Development Community (SADC) is an inter-governmental organization with a goal to further socio-economic cooperation and integration as well as political and security cooperation among 15 Southern African states, The Government of India signed the Memorandum of Understanding on economic cooperation with SADC on 14th Oct, 1997.
  • Indian Technical and Economic Cooperation (ITEC) programme, which launched in 1964 provides training, deputation of experts and implementation of projects in African countries
  • Pan African e-Network Project (PAENP), India has set up a fibre-optic network to provide satellite connectivity, tele-medicine and tele-education to countries of Africa. M/s. TCIL, a Government of India undertaking, is implementing the project on behalf of Government of India. (The project cost is approximately Rs. 542 crores.)

Initiatives taken by Government of India for Africa:

  • India-Africa Forum Summit.
  • 2nd India-Japan dialogue on Africa was held in New Delhi in 2011. It is an institutionalised event held biannually.
  • IGNOU to establish Indo-Africa Virtual University.
  • Team -9 (Techno-Economic Approach for Africa India Movement) framework to enhance commercial cooperation with West Africa (Burkina Faso, Chad, Cote d’Ivoire, Equatorial Guinea, Ghana, Guinea-Bissau, Mali, Senegal).
  • Putting in place US$500 mn Lines of Credit (LOC) and identifying priority sectors in the 8 countries which would be financed out of the LOC.
  • The Ministry of Commerce and Industry, GOI, Ministry of External Affairs, Export-Import Bank of India and Africa Development Bank initiated the India- Africa Project partnership Conclave, in New Delhi. The Conclave created platforms for decision maker from Africa countries to meet heads of India companies involved in engineering, consultancy, construction and supply of project goods, etc.
  • The India-Brazil-South Africa (IBSA), Trilateral Commission of the foreign ministers of India, Brazil and South Africa (2004) would meet in regular intervals.
  • In Uganda, Indian technology led to nearly three times more electricity to be generated, from 300 MW to 1000 MW than had been planned at Karuma project.
  • New Delhi is also planning to set up over 100 training institutes that seek to foster the rise of a middle class in Africa and provide the African youth opportunities for self-advancement.
  • India is the third largest contributor UN Peace-Keeping Operations in Africa with more than 9300 peacekeepers deployed in various UNPKO in fragile and conflict ridden states in Africa.

A comparison of China vs. India in Africa:

China’s role in Africa: before becoming the economic power, China successfully implemented the massive Tanzam rail project between Tanzania and Zambia.

Forum on China-Africa Cooperation- started in 2000 with 5 summits being held till now.

  • China’s $200bn trade with Africa is way ahead of India’s $46 bn.
  • Unlike China’s venture in Africa, that has focussed on extractive resources, oil and infrastructural projects, India chose to focus on capacity building as the defining template of its engagement with Africa.
  • Chinese companies are active across the continent with big infrastructure projects, including ports, railways and sports stadiums. By contrast, Indian initiatives are led by individual companies looking to expand in sectors such as telecom, agriculture, the automotive industry and education.
  • India’s all-round cooperation with Africa through People2people, govt2govt, & business2business, is different from China’s, largely, top-down Govt2Govt approach.
  • Like China, India organises summits to engage Africa. Deals worth millions have been discussed, but implementation is poor.
  • However, the Chinese companies go with their own people to do the work in Africa, leaving the locals in the lurch, unlike India, which employs locals.
  • China excels in large infrastructural projects while the Indians have an edge in ICT, capacity building and training, and emerging areas like floriculture.
  • The Indian ability to relate to Africans is also much greater, which is why non-Indian MNCs prefer to use Indians as managers for projects involving interactions with local officials and populations.
  • India’s democratic culture and consultative approach make it an attractive partner for African nations looking to enhance their own skills.

Form Africa’s perspective, both India and china have core competencies which may complement each other. Thus, Africa is looking forward to do business with both the countries at the same time and there seems to be enough room for the two. But India should not become complacent as African economy will start to emerge in the world set-up, competition from the world will be stiff. India should also avoid the path of exploitation which other big powers have taken. India’s participative model will slowly but steadily build a strong bond between India and African nations on the foundation of mutual trust and benefit rather than the acquisitive approach of China.

Challenges to African growth story

Africa should be treated as the “Child to be nurtured” rather than as the “orphan that should be taken care of” mentality. This shows a paradigm shift in treating it as a respectable member of the world Fora and giving it’s due space to ask and do for things.

Relying on the success stories of the East might be counter-productive, sometimes, because certain part of that came as the patronage that was offered to the Eastern countries, owing to their geographical advantage, international dynamics and political interests.

How to bring in solidarity amongst the African countries? Most of them are torn with internal serious skirmish that are only pushing their vision hundred years back from now on. A common currency like that of Europe is definitely not a good option. What could be the other ways ? Coming to projection of democracy as a viable option for development, Eastern Asia is already split. Leadership, does it need guidance from external frontiers, or how to elevate strong leaders in these countries?

The main issue that’s troubling its reconstruction is, the eventual failure if the super structure is built on the present premises. Or starting everything from the scratch for a perfect future, will deny the till date work. It is in these dangerous junctures that Africa is facing doldrums.

Africa being a land of wonders has always been on the receiving end of ideas or strategies. Somewhere, the world has failed to trap their techniques and concepts on a bigger picture. That lack of balance is another reason for the lack of deserved limelight. Ex: The crop Insurance Agricultural Insurance Initiative, Kilimo Salama, Kenya

Also, HDI indicator as per the latest Human development report also suggests that, no African country has very high human development index and an analysis is given below, Africa has following Distributions.

Category Number of Countries Growth Strategy
Very high human development 0
High human development 5 Already Heavily urbanised. Big consumer markets.
Medium human development 12 Myrdal’s growth strategy – increase the backwash and spread effects, by improving linkages
Low human development 35 Breaking Vicious Circles – low savings, small and inefficient makets, poverty trap.

Another important concern is about rapid capital inflows relative to size of some of the African countries. Recent events indicate that liberalizing capital flows can pose particularly severe risks and costs. This could lead to situation similar to East Asian economic crisis. Therefore, the key lesson for Africa illustrated by the crisis is that, the importance of developing a robust financial systems and exchange rate regimes in the light of liberalisation and opening up of economy. A stable political setup can lead to macroeconomic stability and prudent financial regulations are needed to sustain the growth rates in Africa.

Another issue is Africa’s inattention to the violence—often tinged with religious extremism—that grips many regions, is causing serious damage to its economy. Same was the case, when Ebola pandemic spread across many countries. Then, people hesitated to even step out of their house, for day to day activities. All Economic activities came to stand still, as people to people contact was avoided, at least in the core regions.

Also, there is lack of rapid Industrialization in many African countries to tap in rich natural resources. Therefore, African governments need to shift the economic growth trajectory from simply focusing on commodities to a more diversified economic base that adds value to these products. Achieving this will necessitate an efficient and robust infrastructure which is yet another challenge that African leaders must face up to and address them quickly. Countries such as China and India have been providing investment such as Pan African e-Network Project (PAENP) by Government of India which has set up a fibre-optic network to provide satellite connectivity, tele-medicine and tele-education to countries of Africa.

Conclusion

Many other factors will continue to influence development in Africa – not least how successfully these lessons are actually adapted and applied. Africa should not be risk-averse, inward-looking and fearful of change.

But the bottom line is that Afro-optimism, an optimism that sees sustained economic growth as the future of Africa is not merely sentimental.

Africa – Land of opportunity for India- Part I

Introduction

Africa – “cradle of human civilization”, has close to 10 of the 20 fast growing economies are from Africa. Africa resource rich and this has helped in its growth and globalization is the most important aspect which is shaping the current environment for economic development which is reflected in sectors such as wholesale and retail commerce, transportation, telecommunications and manufacturing. By pursuing outward-oriented strategies such as those followed by East Asian countries such as South Korea, Malaysia and Thailand have doubled their national incomes in just over twenty years and this kind of development can have immense growth potential for African countries also. Thus it can be argued that Africa is next East Asia of the world.

But at the same time, Some African countries are still regarded among the poorest countries in the world today. Within Africa, Nigeria, Egypt and South Africa are the economic power houses, three of them appearing within top 30 economies of globe. Of these three, only Nigeria is consistently delivering real growth rates above 6 %, the other two producing a low growth rate of 2 %. But seen in per capita terms (PPP), there are only two African countries, within top 50 countries of the globe, implying that on an average Africa is yet to catch up in per capita terms.

Growth potential of Africa

Analysing economic giants of Asia, one can correlate present scenario of high development and sophistication, with the year of take-off in the economy.

Country Year of Take-off of Economy
Japan 1961
South Korea 1961
China 1978
India 1991
Nigeria 2001

Nigerian economy took off only in the 21st century. With close to decade and half past, Nigeria is ambitiously positioning itself in top 20 economies of globe, by 2020. As more and more economies of Africa are transforming, their growth is accelerating from below 5 % levels to double digit growth levels.

Many African countries, including Ghana have posted real growth rates beyond 12 % , leaving behind their failed policies of 80’s and 90’s. Successful Integration of South Africa’s economy into ‘BRICS’ gave a ray of hope to the entire continent.

Within Africa, Nigeria, Egypt and South Africa are the economic power houses, three of them appearing within top 30 economies of globe. Of these three, Nigeria is consistently delivering real growth rates above 6 %. If seen in per capita terms (PPP), there are only two African countries, within top 50 countries of the globe, implying that on an average Africa is yet to catch up in per capita terms.

Africa’s population is set to double by 2050, and will be able to reap demographic dividend that India and China are enjoying right now. Moving Africa into the next stage of growth, developing human capital is of prime importance.

Ghana, a country hailed as a model by American officials for its recent record of democracy. “We are 20 years behind China,” said an Ethiopian bureaucrat, “and we’re trying to do what they did to get where they are.” Rwandan President Paul Kagame, also has said that “he hopes to eventually transform his country’s economy into the “Singapore of Central Africa.”

Kenya’s Vision 2030 long-term development plan and Ethiopia’s growth and transformation plan draw a great deal on analogous concepts from Malaysia, Singapore and elsewhere in the region.

Africa has fascinating opportunities lying ahead, at its door step to “leapfrog certain technologies”, like India and Singapore which bypassed peaking in secondary sector and directly jumped to revolution of services sector. The emphasis on outward-oriented economic outlook over an inward-looking such as those of East Asian countries has been increasingly accepted as a key component of a growth-enhancing development strategy.

With globalisation has leads to rapid advances in communication, Information technology and transportation and thus resulted in reduced costs of moving goods, money, people and information. Like, farmers in Africa can use smart phones to boost profits as the information related to the weather, market reports, even new seed technologies are shared to them to avoid adverse risks. All these can further lead to enhanced markets for goods, services, and African countries can effectively integrate cross national borders to achieve its growth potential and Africa should benefit from its support for free trade.

However, the fact that the East Asian model is so attractive to many African countries is bound to have profound implications. But, achieving the enviable growth patterns of some Asian economies will require the strengthening of intra-regional trade. Africa’s recent economic gains have been mainly driven by external trade, especially with emerging economies such as China, India, Brazil and South Korea. Majority of imports are merchandise and machinery. Trade of Africa with world should improve, both in merchandise and services, not just in agricultural exports and gems and gold exports. A recent report by the McKinsey Global Institute puts intra-African trade at a lowly 12 percent, about half that achieved in Latin America. There are about a billion consumers residing in the African continent and thus the intra-African trade should be seen as a potential path toward market consolidation and leverage for African markets in the global economy. The first step is to work towards more open trade and liberalization in economy between neighbouring countries in order to tap in the potential through better integration of economies within Africa.

For comparison with East Asia, to become major global economy, entire Africa, as an union, must focus on (1) Sustained increase in real National Income over coming decades, and (2) accelerated progress in Per Capita Income over long run by reaping the slowdown of population growth rate, in contrast to increase in growth rates.

East Asian growth excluding China happened with limited natural resources, in Industrial sector. Africa, with plenty of natural resources, barely harnessed, has potential to be a formidable economic block.

As in the case of majority African countries, primary sector’s contribution is unusually high and as it employs much more fraction of people. Therefore, first, labour force must be shifted to secondary and tertiary sectors for enhancing productivity per worker. Second, commercialisation of Agriculture should be systematically and sustainably promoted. Third, there should be value addition of raw products such as agricultural produce. Fourth, food processing Industries must be given high priority.

Many fast growing countries are experiencing high inflation too. But, for those African nations, which experience low growth, inflation must be checked. Supply constraints, and structural constraints if unblocked, can unlock multiple growth engines for Africa.

As per African development Bank (AfDB), Africa is the world’s fastest-growing continent at 6% a year. Hence, African economy is set to outpace Asian counterpart, in the decades to come. Strong institutions like AfDB have to play significant role, to develop Africa brick by brick. Only when Strong institutions and strong policies are synergised by dynamic leadership, the benefits of compounding can be reaped.

Another key to African success will be following best practice in success stories like Singapore, where the merit based system of bureaucracy replaced the cronyism and elitism where genuine talent is rewarded whether it is state-led or laissez-faire economy. Table below summaries the lessons that Africa can learn from East Asian Countries.

Sl No East Asian Country What Africa can learn
1 Singapore merit based system of bureaucracy
2 China Manufacturing lead growth
3 Japan stress on education, equality, and land reform
4 Malaysia greater share of public expenditure to the health and education sector , rule of law and property rights
5 Vietnam Quality of budgetary and financial management and public administration and freedom of press
6 Phillippines overall reliance on official development assistance (ODA) and foreign direct investment (FDI)

 

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