Poverty & Unemployment
Poverty & Unemployment
India's MPI poverty declined from 29.17% (2013-14) to 11.28% (2022-23) — 24.82 crore people escaped poverty. PLFS 2022-23 shows unemployment at 3.2% (usual status) with female LFPR at 37%. Exams test poverty line committees (Tendulkar, Rangarajan, Alagh, Lakdawala), types of unemployment (especially disguised), MGNREGA provisions, PLFS data, MPI methodology, demographic dividend, and Labour Code reforms. Know the difference between LFPR and WPR.
Key Dates
First poverty line estimate by Working Group headed by B.N. Ganguli — based on minimum consumption expenditure
Y.K. Alagh Committee — linked poverty line to calorie intake (2400 kcal rural, 2100 kcal urban)
Lakdawala Committee — used state-specific poverty lines with CPI-IW for urban and CPI-AL for rural areas
Tendulkar Committee — shifted from calorie-based to expenditure-based poverty line (Rs 32/day urban, Rs 26/day rural at 2004-05 prices)
Rangarajan Committee — proposed higher poverty line (Rs 47/day urban, Rs 32/day rural at 2011-12 prices)
NITI Aayog's National MPI report — multidimensional poverty declined from 29.17% (2013-14) to 11.28% (2022-23); 24.82 crore people escaped poverty
MGNREGA enacted (February 2) — guarantees 100 days of wage employment per rural household per year; world's largest public works programme
Periodic Labour Force Survey (PLFS) launched by NSO — replaced decennial NSSO employment surveys with annual/quarterly data
Community Development Programme launched — first government programme targeting rural poverty and employment
Food for Work Programme introduced — predecessor of MGNREGA; provided food grains as wages for rural employment
N.C. Saxena Committee estimated BPL families for the 11th Plan — created controversy over poverty enumeration methodology
Socio Economic and Caste Census (SECC) conducted — used for identifying beneficiaries of welfare programmes
PLFS Annual Report 2021-22 showed UR at 4.1% (usual status); Female LFPR improved to 32.8% from 23.3% in 2017-18
Poverty Line in India — Evolution
India has debated poverty measurement for decades. The poverty line is the minimum income/expenditure below which a person is classified as "poor." Evolution: (1) B.N. Ganguli Working Group (1962) — first official line based on minimum consumption. Rs 20/month (rural), Rs 25/month (urban). (2) Dandekar and Rath (1971) — proposed calorie-based line at 2250 calories/person/day. First systematic nutritional link. (3) Y.K. Alagh Committee (1979) — poverty line at 2400 kcal/day rural, 2100 kcal/day urban (rural is higher due to more manual labour). Became the standard for two decades. (4) Lakdawala Committee (1993) — used Alagh calorie norms but updated methodology with CPI-IW for urban and CPI-AL for rural. Computed state-specific poverty lines (Rs 100 buys differently in Bihar vs Kerala). (5) Tendulkar Committee (2009) — major shift from calorie intake to Monthly Per Capita Consumption Expenditure (MPCE). Line: Rs 816/month rural, Rs 1000/month urban (2004-05 prices). Poverty in 2011-12: 21.9% (270 million). Criticism: Rs 32/day urban was called absurdly low. Tendulkar argued the line implicitly accounted for non-food spending. (6) Rangarajan Committee (2014) — higher line: Rs 972/month rural, Rs 1407/month urban (2011-12 prices). Poverty in 2011-12: 29.5% (363 million) — significantly higher than Tendulkar's 21.9%. Incorporated actual calorie, protein, fat requirements plus non-food spending. Currently, no single official poverty line is universally adopted — the government has accepted neither as final methodology.
Multidimensional Poverty Index (MPI)
MPI represents a paradigm shift from income-based to deprivation-based poverty measurement. Global MPI: developed by Sabina Alkire and James Foster (Alkire-Foster methodology) at Oxford/OPHI, used by UNDP. Covers three dimensions: Health (nutrition, child mortality), Education (schooling years, attendance), Standard of Living (cooking fuel, sanitation, water, electricity, housing, assets). A person is MPI-poor if deprived in at least one-third of weighted indicators. India's National MPI (NITI Aayog, first 2021, updated 2023): uses 12 indicators across 3 dimensions. Health (1/3 weight): Nutrition (BMI < 18.5), Child & Adolescent Mortality, Maternal Health, Maternal Nutrition. Education (1/3): Years of Schooling (no member completed 6 years), School Attendance. Standard of Living (1/3): Cooking Fuel, Sanitation, Water, Electricity, Housing, Assets. Key findings (2023 report): MPI headcount 11.28% (2022-23), down from 29.17% (2013-14). 24.82 crore people escaped multidimensional poverty in 9 years. Rural MPI fell from 36.6% to 19.28%. Urban from 9.2% to 5.27%. Best: Kerala (0.55%), Goa (3.2%), Tamil Nadu (3.5%). Worst: Bihar (33.7%), Jharkhand (28.8%), UP (22.9%). Fastest decline was in nutrition deprivation (POSHAN Abhiyaan) and sanitation (SBM). MPI is preferred by NITI Aayog and UNDP because it captures multiple deprivation dimensions, enables targeted policy (if deprivation is sanitation, build toilets), and disaggregates by state, district, caste, religion, and gender.
Types of Poverty
Absolute Poverty: based on a fixed minimum standard (poverty line) — unable to meet basic needs. India's approach has been primarily absolute. Relative Poverty: compared to others in society — measures inequality. If the poorest 20% earn less than 50% of median income, they're "relatively poor." Relevant for developed countries. Transient Poverty: temporary — from natural disaster, job loss, health emergency. Many Indians hover just above the line and fall below during shocks ("churning poor"). COVID pushed an estimated 7.5 crore Indians into poverty (World Bank). Chronic/Structural Poverty: persistent across generations — linked to caste discrimination, landlessness, poor education, remote geography. Requires structural interventions (land reform, education) not just income transfers. Urban Poverty: slum dwelling, informal employment, poor services. India's urban poor: approximately 7.7 crore (Tendulkar). Often invisible — excluded from surveys and schemes. Rural Poverty: linked to landlessness (36% of rural households), low agricultural productivity, seasonal unemployment, caste exclusion, geographic isolation. Head Count Ratio (HCR): percentage below the line. India: 21.9% (Tendulkar 2011-12). Limitation: treats all poor equally. Poverty Gap Index: average income shortfall from the line — estimates the cost of elimination. Squared Poverty Gap (P2): gives higher weight to the poorest among the poor. Sen Index: combines HCR, poverty gap, and inequality among the poor — the most comprehensive measure.
Types of Unemployment
Structural: mismatch between worker skills and available jobs. Common during technological change. Example: handloom weavers losing to power looms. India's skill gap: only 2.3% of workforce has formal training (vs 96% Korea, 80% Japan, 68% UK). Cyclical: from economic downturns — demand falls, firms cut production, workers laid off. India saw this during COVID (unemployment hit 23.5% in April 2020 per CMIE). Typically temporary, correctable through stimulus. Frictional: short-term, voluntary — between jobs or searching for better opportunities. Present even in full employment. Seasonal: common in agriculture — workers idle between sowing and harvesting. Indian farm labour works only 5-6 months. MGNREGA was designed to address this during off-season. Disguised: more people employed than necessary — marginal productivity is zero. Very common in Indian agriculture. If a 5-person family farm needs only 3, the other 2 are disguised unemployed — removing them would not reduce output. Estimated 20-30% of agricultural workforce. Lewis's model describes development as transferring this surplus labour to industry. Open: willing and able to work but jobless. India's rate: 3.2% (PLFS 2022-23, Usual Status). Educated: degree holders unable to find appropriate work — a growing crisis. 33% of youth graduates (15-29) are unemployed (PLFS 2021-22). India produces 3+ crore graduates annually but formal sector creates only 10-15 lakh jobs/year. Underemployment: employed below skill level or for fewer hours. An MBA working as a delivery driver is underemployed. Involuntary Part-time: wants full-time but can only find part-time. Gig workers may fall here.
Employment Data & PLFS
PLFS (Periodic Labour Force Survey) is India's primary employment data source. Conducted by NSO, it replaced quinquennial Employment-Unemployment Surveys. Provides quarterly urban data and annual rural+urban data. Three reference periods: (1) Usual Status (ps+ss) — activity in the reference year (365 days). Gives the LOWEST unemployment rate (captures part-time and seasonal workers). (2) Current Weekly Status (CWS) — worked 1+ hour in the reference week. MEDIUM rate. (3) Current Daily Status (CDS) — employment each day of reference week. HIGHEST rate (most sensitive to daily fluctuation). Key PLFS data (2022-23): UR 3.2% (Usual Status), 4.1% (CWS) — lowest in several years. LFPR 57.9% (working-age population in labour force). WPR 56.0% (actually employed). Female LFPR: 37.0% (up from 23.3% in 2017-18, but much of the increase is self-employment/unpaid family work rather than regular wages). Youth (15-29) unemployment: 12.4% — much higher than overall, reflecting the educated unemployment crisis. Urban: 5.4%. Rural: 2.4%. Sector: Agriculture 42.5%, Manufacturing 11.4%, Construction 12.0%, Trade 10.5%, Other Services 23.6%. Status: Self-employed 57.3%, Regular wage/salaried 21.5%, Casual labour 21.2%. High self-employment includes many who are effectively underemployed. Other data sources: CMIE (private, monthly — typically shows higher unemployment), ASI (formal manufacturing), EPFO (payroll data), E-Shram (30+ crore unorganised workers registered).
MGNREGA — Detailed Analysis
MGNREGA (2006) guarantees 100 days of unskilled manual wage employment per rural household per year — the world's largest public works programme. Key features: (1) Demand-driven — work within 15 days of application or unemployment allowance (25% of minimum wage for first 30 days, 50% thereafter). (2) Decentralised — Gram Sabhas recommend works; Gram Panchayats implement 50%. (3) 60:40 wage-material ratio (at least 60% on wages). (4) At least 1/3 women workers — actual: 56% (FY24). (5) State-specific wages linked to CPI-AL: Rs 234/day (MP) to Rs 366/day (Haryana), average ~Rs 280. (6) Mandatory social audit by Gram Sabha every 6 months. (7) All data on nrega.nic.in — one of India's most transparent databases. Scale: Budget Rs 86,000 crore (FY25). Employment: 289 crore person-days (FY24). Households: 6.2 crore. Average days per household: 47 (below the 100-day entitlement). Total expenditure since 2006: ~Rs 8.5 lakh crore. Impact: (1) Rural wage floor — agricultural wages rose faster in MGNREGA-intensive states. (2) Women's empowerment — 56% participation gives independent income. (3) Asset creation — 4+ crore works (water conservation 30%, roads 20%, land development 15%, irrigation 10%). (4) Counter-cyclical buffer — during COVID, absorbed millions of returning migrants (389 crore person-days in FY21, highest ever). Criticisms: (a) 30-40% leakage in some states (declining with biometric attendance/Aadhaar); (b) low asset quality — works poorly maintained; (c) wage delays of 30-40 days; (d) fiscal burden debate — Rs 86,000 crore/year could alternatively fund skill training.
Government Employment & Anti-Poverty Programmes
Employment Programmes: (1) PMKVY (Pradhan Mantri Kaushal Vikas Yojana) — free short-term skill training (150-300 hours) with certification. PMKVY 3.0 targets 1 crore youth. Skill India Digital Hub for online courses. (2) PMEGP — credit-linked subsidy (25-35% of project cost) for micro enterprises. 7.5 lakh+ units established. (3) Startup India (2016) — tax holiday (3 of 10 years), self-certification, Fund of Funds (Rs 10,000 crore via SIDBI). 1,18,000+ DPIIT-recognised startups; 112 unicorns. (4) DDU-GKY — skill training for rural youth with guaranteed placement. Targets SC/ST, women, minorities, disabled. (5) PM-DAKSH — skill training for SC/OBC/Safai Karamcharis. (6) NCS portal — 1.5+ crore job seekers registered. Anti-Poverty Programmes: (1) PM-KISAN — Rs 6,000/year via DBT to farmer families. 11+ crore beneficiaries. (2) PMAY — Housing for All (Urban 4.21 crore sanctioned, Rural 3.06 crore). (3) NFSA (2013) — subsidised food to 75% rural and 50% urban population. PMGKAY extended free food grains at zero price until 2028. (4) PMJAY — Rs 5 lakh/family/year health insurance for 12 crore families (55 crore beneficiaries). 30,000+ hospitals. 6.8 crore treatments by FY24. (5) NSAP — pension for BPL elderly (Rs 200-500/month from Centre), widows, disabled.
Informal Sector & Labour Market Structure
India's labour market is predominantly informal — 90% of the workforce by ILO definitions. Even in the "organised" sector, about 50% are hired on contract/casual basis without social security. Organised sector: enterprises with 10+ workers using power (or 20+ without), registered under Factories Act. Approximately 10% of workforce. Unorganised: all others — 90%, including agriculture (42%), construction (12%), trade (10%), domestic workers, street vendors, home-based workers. Informal employment characteristics: no written contract, no PF/ESI/gratuity/maternity benefit, no paid leave, low wages (median casual worker ~Rs 350/day vs Rs 800-1000 for formal regular), no job security, no career progression. E-Shram Portal (2021): national database of unorganised workers via Aadhaar self-registration. 30.3 crore registered (FY24). Workers get Rs 2 lakh accidental insurance. Data: agriculture 52%, construction 12%, domestic workers 8%, apparel 6%. 94% earn below Rs 10,000/month. Informalisation trend: post-liberalisation, formal sector employment grew slowly while contractual employment surged. Even formal companies use contract labour and gig workers to avoid PF/ESI costs (24-26% of wages). The gig economy (Zomato, Swiggy, Uber, Ola, Urban Company) has created technology-mediated informal workers — 7.7 million in 2020-21, projected 2.35 crore by 2029-30 (NITI Aayog). Code on Social Security 2020 recognises gig and platform workers for the first time in law.
Demographic Dividend — Opportunity & Challenge
India is in its peak demographic window (approximately 2005-2055). Population: 144 crore (2024, world's most populous). Median age: 28 (vs China 39, Japan 49, US 38). Working-age (15-64): approximately 68%. Dependency ratio: 47 per 100. Every year, 1.2 crore enter working age. If productively employed, this bulge can drive growth for decades (as Japan 1960-90, Korea 1970-2010, China 1980-2020 experienced). McKinsey estimates the dividend could add 2% to annual GDP growth. But the dividend is not automatic — it requires: (1) Education — ASER shows only 40% of Class 5 students read Class 2 text. Higher education GER: 28.4% (target 50% by 2035 under NEP 2020). (2) Skill development — only 2.3% of workforce has formal vocational training. (3) Job creation — India needs 9-12 million non-farm jobs/year; actual formal creation is 4-5 million. (4) Health — 35.5% of under-5 children are stunted. An unhealthy workforce cannot be productive. (5) Women's participation — LFPR at 37% is among the lowest globally (world average 47%). Raising it to 50% could increase GDP by 27% (IMF). Regional variation: southern states are already ageing (rising dependency ratios). Northern states (UP, Bihar, Rajasthan, MP) are at peak dividend but have the worst education, health, and employment outcomes. If the dividend is not harnessed, it becomes a "demographic disaster" — a young, frustrated, unemployed population destabilises society.
Labour Reforms — Four Labour Codes
India consolidated 29 central labour laws into 4 Codes (2019-2020, rules notified but implementation pending in most states as of 2025): (1) Code on Wages 2019 — consolidates Minimum Wages, Payment of Wages, Bonus, Equal Remuneration Acts. Universal minimum wage with Centre setting the floor. Covers all workers. Equal pay for men and women. (2) Code on Social Security 2020 — consolidates 9 laws (EPF, ESI, Maternity, Gratuity, BOCW). First-time inclusion of gig and platform workers. Social security fund for unorganised workers. (3) Industrial Relations Code 2020 — consolidates Trade Unions, Industrial Disputes, Industrial Employment Acts. Fixed-term employment formalised. Companies with up to 300 workers can retrench without government permission (up from 100 — the most controversial provision). Right to strike requires 14 days' notice. (4) OSH Code 2020 — consolidates Factories, Mines, Building Workers, and 10 other laws. Covers 10+ worker establishments. Women allowed night shifts with safety/transport. Annual health check-ups for hazardous processes. Implementation: Centre notified draft rules. States must notify their own (Concurrent List). As of March 2025, most states have not fully implemented. Employers want implementation for ease of doing business; unions oppose retrenchment relaxation. The codes aim to balance worker protection with employer flexibility — moving from a compliance-heavy inspector raj to a facilitative framework. Rigid labour laws previously kept manufacturing firms small to avoid regulatory thresholds at 10, 20, and 100 workers.
Global Poverty & India's Position
World Bank International Poverty Line: $2.15/day at 2017 PPP. India's poverty rate: approximately 12% (2021), approximately 170 million people — still the largest count of extreme poor globally. The $3.65/day line (lower-middle-income): approximately 45% of Indians. The $6.85/day line (upper-middle-income): approximately 80%. While extreme poverty has declined, the vast majority remain economically vulnerable. Comparisons: China — extreme poverty near 0%, lifted 800 million in 40 years (history's greatest poverty reduction). Bangladesh — approximately 5%, remarkable progress from 44% (2000); has overtaken India in some social indicators. Vietnam — approximately 1%, sustained manufacturing-led reduction. Sub-Saharan Africa — approximately 35%, only region where absolute poor count has risen. India has reduced poverty faster than Africa but slower than East/Southeast Asia. Acceleration occurred post-2005 (MGNREGA, NFSA, PMJAY, DBT) and during 2014-2023 (housing, toilets, LPG, electricity, bank accounts). UNDP's Global MPI 2023 noted India as the country with the largest absolute MPI decline — 41.5 crore people escaped poverty between 2005-06 and 2019-21. SDG 1 target: "End poverty in all forms by 2030." India is on track for extreme poverty ($2.15) reduction but faces challenges on broader vulnerability.
Inequality — Dimensions & Measurement
Poverty and inequality are distinct — India can reduce poverty while inequality widens (as has happened). Gini Coefficient: ranges from 0 (perfect equality) to 1 (perfect inequality). India's consumption Gini: approximately 0.35 (moderate — Brazil 0.53, South Africa 0.63, US 0.39, Nordics 0.25-0.28). But wealth Gini is approximately 0.82. Oxfam India 2024: top 10% own 77% of wealth; top 1% own 40.5%; bottom 50% own 3%. India added 94 billionaires in a decade (169 total, combined $905 billion — 25% of GDP). Kuznets Curve: inequality first rises during early development (some move to industry faster), then falls as growth becomes inclusive. India may be on the rising part. Inequality dimensions: (1) Income — urban per capita is approximately 3x rural. (2) Regional — Goa's per capita is 10x Bihar's. (3) Caste — SC/ST households earn 30-40% less than upper-caste on average. Occupational segregation persists. (4) Gender — women earn 20-30% less for comparable work; LFPR 37% vs male 78%. (5) Intergenerational — low social mobility; a child born poor has high probability of staying poor. The Great Gatsby Curve shows higher inequality correlates with lower mobility — India fits this. Policy responses: progressive taxation, social security, public health/education spending, land reform, affirmative action (reservations), and direct transfers (PM-KISAN).
Migration — Internal & International
Internal migration: approximately 45 crore migrants (Census 2011, likely higher). Inter-state: approximately 6 crore. Major corridors: UP/Bihar to Maharashtra/Delhi/Gujarat/Punjab; eastern to southern/western states. Rural-to-urban dominates. Push factors: agrarian distress, unemployment, natural disasters, discrimination. Pull: better jobs, higher wages, education. Seasonal/circular migration: millions move for 4-8 months for construction, brick kilns, sugarcane, agriculture. COVID exposed migrant vulnerability — approximately 10 crore reverse-migrated during the 2020 lockdown. ONORC (One Nation One Ration Card): lets PDS beneficiaries access rations at any Fair Price Shop via biometric authentication — addressing migrant food security. Interstate Migrant Workmen Act (now in OSH Code 2020): mandates registration, wages, housing, healthcare. Poorly implemented. International: Indian diaspora of 1.87 crore (2024) — world's largest. Major destinations: UAE, Saudi Arabia, US, UK, Canada, Australia. Remittances: $125 billion (2023) — world's highest, approximately 3% of GDP, exceeding FDI inflows. Kerala, Bihar, UP, Rajasthan are major receiving states. Brain drain vs brain gain: India loses skilled professionals to developed countries but the diaspora creates trade networks, knowledge transfer, and investment flows. Indian Americans are among the highest-income US ethnic groups.
Relevant Exams
Poverty and unemployment are high-priority topics for all competitive exams. UPSC Prelims frequently tests poverty line committees (Tendulkar, Rangarajan, Alagh, Lakdawala), types of unemployment (especially disguised unemployment), MPI methodology, MGNREGA provisions, and PLFS data. UPSC Mains GS Paper 3 asks essay-type questions on demographic dividend, informal sector challenges, labour code reforms, and inequality. SSC and banking exams ask about MGNREGA day guarantee (100 days), PLFS conducting agency (NSO), basic definitions (HCR, poverty gap), and current unemployment rate. Questions on disguised unemployment in agriculture and the difference between LFPR and WPR are perennial favourites. Banking exams test PM-KISAN, PMJAY, and social security scheme details.