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Indian Economic Policy

Notes working and living conditions of the 77 percent of out population who are poor and vulnerable... this
is the other world which can be characterized as the India of the common people, constituting more
than three-fourths of the population (836 million) and consisting of all those whom the growth process
has, by and large, by passed.”
Recent Revised Estimate of Poverty by the World Bank

Martin Ravallion and Shaohua Chen of the World Bank have updated the World Bank Poverty Line
of $ 1.08 per person per day at 1993 Purchasing Power Parity dollars with a new international poverty
line of $1.25 per person per day for 2005 based on the new Purchasing Power Parity prices for 2005,
replacing those for 1993. As a consequence, 41.8 percent of India’s population was below the new
international poverty line in 2005. This implies that 461 million persons were living in poverty as per
the revised estimate - a huge number indeed.
Food Price Inflation and Increase in Poverty

Food price inflation implies a sharper increase in the prices of food articles relative to that of
manufactures and other non-food articles. Recent price trends indicate that while the overall rate of
inflation in the Wholesale Price Index (WPI) has dropped to 8.4 percent in November 2008 from its
peak of 13 percent in August 2008, but rate of inflation of food articles has gone up from 8.84 percent
to 10.43 percent during the same period. However, a poor family in India spends 60-70 percent of its
family income on food-related items. Higher food prices will thus impose a greater burden on the
poor and may also push more persons below the poverty line. Hence, there is a need to control the
increase in prices of food articles such as cereals, fruits and vegetables, eggs etc.
Towards A Solution of The Problem of Poverty

This requires a two-pronged strategy - (i) The expansion of sectors which promise higher labour
absorption and (ii) Empowering the poor with education, skill formation and health so that they can
enter sectors which require higher competence and provide better remuneration which enable the
poor to cross the poverty line, the following strategy can solve the problem of poverty.
1. Adopt a strategy of pro-poor growth instead of emphasizing liberalization and GDP growth
Former Prime Minister Atal Bihari Vajpayee in his Independence Day Message (15 August
th
2001) candidly stated : “The fruits of liberalization have not adequately reached the poor and
the people living in rural areas. Inequalities have increased.” It would be, therefore, futile to
pursue the failed strategy of liberalization which has a focus on only 8 percent of labour force in
the organized sector. The need of the hour is to take care of the 92 percent of labour force
engaged in the unorganized sector. Liberalization has driven more and more people from the
organized sector to the unorganized sector. There is a need to reverse this process and more
and more units in the unorganized sector are enabled to graduate and join the ranks of the
organized sector”. The government should re-appraise them and give priority removal of
unemployment and recognizing the right work’ as a basic human right. For this, a new
development reconciling GDP growth and employment should be developed.
In this model, emphasis should be laid on opment of irrigation and watershed development
people’s participation. Similarly, degraded and lands should be developed through participatory
of panchayats. Agricultural co-operatives should strengthened to undertake food processing
and KVIC should assigned the task of marketing sector should be helped on the lines suggested.
Gupta Study Group. Greater emphasis should be on housing for the poor and Economically
Weaker. Rural infrastructure in the form of roads, prove of power in rural areas should be
strengthened programme of social infrastructure should be taken.
Besides, there is a need for promoting sector which is major source self-employment and sorption
of casual labour.
2. Stimulating Agricultural Growth
Indian Government has been fixing the targent agricultural growth during the Ninth and the
th
Tenth at 4 percent per annum, but in practice realized the 9 Plan and only 1.7% in the Tenth

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