Urban Poverty in India – Some Issues*

Prof. A K Vasudevachary**

“We were taught to take care of our GNP as this will take care of poverty.
Let us reverse this and take care of poverty as this will take care of the GNP”
—Mahbubul Haq

Prelude:

Urbanization is an inevitable part of the development process and the rate of growth of
urbanization is an important indicator of economic development. Because economic
development and urbanization are closely related to each other as they do have cause and
effect relationship with each other. Further, various studies have revealed that there is a
positive association between the process of urbanization and per capita income.

Urbanization in a demographic sense is an increase in the proportion of the urban

population to the total population over a period of time or redistribution of population and
a change in the demographic balance between rural and urban areas. (Sidhu Ms 2006) 1
According to 2001 census, India’s urban population is 285.4 millions and percentage of
urbanization is 27.78 which is lower than the developed countries where it varies between
51 to 100 percent (G Prakash etal, 2005)2

In the urbanization process, the rapid growth rate of urban population will lead not only
to disparities between urban and rural but also it causes several other problems in cities
such as overcrowded slums, shortage of drinking water, broken drains incapable of
channellising the rain water during the monsoon, sanitation, health, unemployment and
poverty. Literature reveals that about 15 percent of the urbanites today do not have safe
drinking water, 50 percent of the urbanites do not have proper sanitation facilities, and
leading to may vector borne diseases and 30 percent of urbanites live in slums. (V Kumar
2008)3

**Paper Presented at Two day national seminar held on 24-25th Jan 2009 at OU College
for Women, Koti, Osmania University, Hyderabad-AP

*Professor, Department of Economics, OU College for Women, Koti, O.U Hyderabad-

1.Sidhu MS: Urban Poverty-Some Issues, Southern Economist, Vol 44 No 21, 2006
2.G Prakash etal. : Forecasting pace of Urbanization in Madhya Pradesh and Policy
Implications for Sustainable development. Journal of Economic Policy and Research
Vol 1, No 2, 2005
3.VijayaKumar J: Economic Transformation and Urbanization in India, Southern
Economist, Vol 47 No 11, 2008
As stated above, among many a problems, urbanization has become a great challenge in
the context of urban poverty, which is largely an extension of rural poverty in developing
countries like in India. It is generally observed that about 2/3rds of the poor are
disproportionately located in rural areas, and the remaining 1/3rd are located on the
fringes of urban centers. In other words, about 79% of the poverty groups are
concentrated in the rural and the remaining are in urban India. (Taneja & Myer 2008).4

Focus of the Paper:

In view of the above, in this paper, some issues related with urban poverty have been
discussed. The main target of the paper is to analyse the estimates of incidence of poverty
in urban and rural areas and also state wise comparative analysis of poverty ratio between
rural and urban areas in India.

Sources of data: The basic source of data is secondary. We culled the information on
estimates of poverty and State wise poverty data from Economic Survey Report 2001-02.
Also collected from world development reports and five year plan documents of various
years. Data collected for the period from 1973-74 to 1999-00.

Organization of the Paper:

This paper has been organized into two sections. Section one deals with the estimates of
incidence of poverty, Section two presents an in-depth analysis of comparative poverty
ratio among states in India. Section three concerned with summary and conclusions.

Section- I
Empirical analysis:

Growth of Urban population:

Let us have a glance at growth of urban population during 1961 – 2001 both in absolute
and percentage terms. Table 1 depicts that the urban population in the year 1961 was
78.94 million, which is increased to about 285.4 million by 2001, it is accounted for
17.97 percent and 27.78 percent respectively in respective years. It reveals that there is a
four-fold increase in urbanization in India. There is an estimation that more than 70
percent of India will live in urban centers by the middle of 21 st century (Singh 2006).
This increase in urbanization has been mainly due to two factors. They are (a) Push
factors (b) Pull factors. Push factors are fragmentation of agricultural lands, level of
agricultural income, tenant farming etc and Pull factor are industrialization,
improvements in transportation, communication and higher education and increasing

4.Taneja and Myer: Economics of Development of Planning, Vishal publishing co, 2008
Employment opportunities in urban areas. Both the factors had played their role in the
migration of population from the rural to urban on a large scale which result in several
other problems as mentioned above, one among is Urban Poverty.

Table 1: Growth of Urban Population in India (Million)

(1961 - 2001)
Year Total Urban %Share of
Population Population Urban
Population
1961 439.2 78.9 17.9
1971 548.2 109.1 19.9
1981 686.2 159.7 23.3
1991 846.3 217.6 25.7
2001 1027.0 285.4 27.8
Source: Statistical Abstracts of Various years

Estimates of Incidence of Urban and Rural Poverty:

Poverty is a huge problem being faced by a large number of population in the developing
countries like India. As we aware, poverty line in India defined based on the expenditure
required for daily calorie intakes. As per the records, at 2002-03 prices, this expenditure
is estimated at Rs. 384/- per capita per month in rural areas and Rs 442/- in urban areas.
Accordingly information furnished in table 2, and it shows that, over a period of time,
both in terms of percentage and absolute figures, the urban poverty is low compare with
rural poverty. In urban areas the percentage of poor population was 49.0 while the same
in rural was 56.4 in 1973-74. But the same figures in 1999-00 are 23.6 and 27.1
respectively. The over all poverty ratios were 54.9 in 1973-74 and 26.1 in 1999-00. It is
clear from the above that there has been steady decline of poverty both in rural and urban
areas. This may be because of the implementation of various welfare and poverty
removal programs by the Government and NGO’s in a phased manner during the span of
planning period. However, as stated earlier, the incidence of poverty is less in urban
compare with rural. It may be due to the better education, health and employment
opportunities in urban areas.

Table: 2 Estimates of Poverty

(1973-4 to 1999-00)

Year India Poverty Rural Rural Urban Urban

(Million) (Million) ratio (%) (Million) Poverty (Million) Poverty
ratio (%) ratio (%)
1973-4 321 54.9 261 56.4 60 49.0
1977-8 329 51.3 264 53.1 65 45.2
1983 323 44.5 252 45.7 71 40.8
1987-8 307 38.9 232 39.1 75 38.2
1993-4 320 36.0 244 37.3 76 32.4
1999-00 260 26.1 193 27.1 67 23.6
Source: Economic Survey of India, 2001-02
 Section –II

State Level analysis of Urban and Rural Poverty:

As disclosed earlier, all India level poverty ratio’s presents that there has been a
continuous decline from about 55 percent in 1973-74 to 26 percent in 1999-00. Whereas
the poverty ratio in urban areas is also declined from 49 to 24 percent during same
period. Similarly, in rural India also, scenario is same, but the percentage decline is less
compare it with the decline in urban poverty. Moreover, all India level poverty ratios are
almost all tallied with the rural figures during the period of study. Therefore, not only
there is an urgent need to probe into the causes for more poverty in rural than in urban but

Table 3: States Listed under different levels of Poverty

In Urban Areas (1973-74 and 1999-2000)

1973-74 1999-2000

>50 % Poverty

Andhra Pradesh, Bihar, Gujarat,

Karnataka, Kerala, Madhya Pradesh NIL
Orissa, Rajasthan, Uttar Pradesh, Delhi
Lakshadweep

30 – 50% Poverty
Arunachal Pradesh Bihar, Madhya Pradesh,
Assam, Goa, Haryana Orissa, Uttar Pradesh
Maharashtra, Manipur
Meghalaya, Mizoram
Nagaland, Sikkim, Tamilnadu,
Andaman & Nicobar Islands
Tripura, Dadra & Nagar Haveli,
Pondicherry, West Bengal

<30% Poverty

Himachal Pradesh
Jammu & Kashmir, Punjab Remaining 28 States
Chandigar.

Source: Economic Survey of India 2001-02, Govt of India.

also to mitigate burden on urban areas, immediate attention is to be focused to thin the
level of rural poverty by establish and expand the non-farm activities, since large number
of people are living for their survival in rural areas.

Table –3 depicts that the state-wise exposition on urban poverty at two points of time
i.e., 1973-74 and 1999-2000. For the sake of clarity, we prepared the list of states fall
under different Poverty levels at two points of time. For this purpose, we arranged them
under three categories. They are (i) States are having more than 50 percent of urban
poverty (ii) States are having urban poverty between 30-50 percent (iii) and States with
less than 30 percent urban poverty. This classification is based on the data on urban
poverty for each state, union territory and all India level for the years mentioned above.

During 1973-74 Andhra Pradesh, Bihar, Gujarat, Karnataka, Kerala, Madhya Pradesh,
Orissa, Rajasthan, Uttar Pradesh, Delhi and Lakshadweep are fall under first category i.e.,
States are having more than 50 percent of urban poverty or 50 percent of their urban
population are below poverty line. States under second category are during 1973-74
Arunachal Pradesh, Assam, Goa, Haryana, Maharashtra, Manipur Meghalaya, Mizoram
Nag land, Sikkim, Tamilnadu, Andaman & Nicobar Islands, Tripura, Dadra & Nagar
Haveli, Pondicherry, West Bengal where 30-50 percent of their urban population are
below poverty line. In the remaining states like Himachal Pradesh, Jammu & Kashmir,
Punjab and Chandigar had less than 30 percent urban poverty.

During the 1999-2000 the maximum rural poverty observed in Orissa (48.01%) followed
by Bihar (44.30%) similarly urban poverty also maximum in Orissa (42.83%) followed
by Madhya Pradesh (38.44%). But the all India figures in rural areas accounted for 27.09
percent and for urban area it is 26.10 percent. The ratio rural poverty is least in Delhi
(0.40%) followed by Goa and Daman & Diu with 1.35 % while the ratio in urban poverty
is least in Jammu & Kashmir (1.98%) followed by Himachal pradesh and Punjab with
4.63 and 5.75 percentages respectively.

During 1999-2000 no single state is represented in first category while states like in
Bihar, Madhya Pradesh, Orissa, Uttar Pradesh 30-50 percent of their urban population are
below poverty line. Surprisingly, except these four states in the remaining 28 states their
urban population living below poverty line is only 20 percent. It implies that as many as
states are in a better position during 1999-2000 compare with that of the year 1973-74.
However, twenty percentage of population is still living below poverty line is not a
healthy feature, therefore action on war foot has to be initiated to reduce maximum extent
with the public participation but not merely by announcing welfare programs and pass the
acts. At the out set, over a period of about thirty years, population living below poverty
line in urban areas has declined. In contrary to it, though there is also a decline in rural
areas but percentage of decline in urban is more than in rural areas.
Summary & Conclusions:

Urbanization has become a great challenge in the context of urban poverty, which is
largely an extension of rural poverty in developing countries like in India. It is generally
observed that about 2/3rds of the poor are disproportionately located in rural areas, and the
remaining 1/3rd are located on the fringes of urban centers. In 1973-74 percentage of poor
population in urban and rural areas was 49.0 and 56.4 respectively. In fact by 1999-00
drastic change in poverty ratio’s i.e., 23.6 and 27.1 in urban and rural areas respectively.
The over all poverty ratios were 54.9 in 1973-74 and 26.1 in 1999-00. It is obvious from
the above that there has been steady decline of poverty both in rural and urban areas.
Overall poverty ratios at all India level are almost all tallied with the rural figures during
the period of study. Therefore, there is an urgent need to probe into the causes for more
poverty in rural than in urban and more attention has to be focused on establish and
expansion of non-farm activities in rural areas to lessen the burden on urban areas. State
level analysis shows that in twenty-eight states, their urban population living below
poverty line is only 20 percent. It implies that as many as states are in a better position
during 1999-2000 compare with that of 1973-74. At the out set, over a period of about
thirty years, population living below poverty line in urban areas has declined. In contrary
to it, though there is also a decline in rural areas but percentage of decline in urban is
more than in rural areas.

However, twenty percentage of population is still living below poverty line in urban is
not a good sign, therefore action on war foot basis has to be initiated to reduce the
number of people living below poverty level to the maximum extent in urban areas. To
fulfill above aim, mere launching and allocating the funds for welfare programs is not at
all sufficient because these should be implemented by spending the allocated funds in
toto with the public participation, without diverting for other activities which are not
related to Urban poverty.

References:

1. Sidhu MS: Urban Poverty-Some Issues, Southern Economist, Vol 44 No 21, 2006
2. G Prakash etal. : Forecasting pace of Urbanization in Madhya Pradesh and Policy
implications for Sustainable development. Journal of Economic Policy and
Research Vol 1, No 2, 2005
3. Vijay Kumar J: Economic Transformation and Urbanization in India, Southern
Economist, Vol 47 No 11, 2008
4. Taneja and Myer: Economics of Development of Planning, Vishal publishing co,
2008
5. Bose, Ashish (1978): India’s Urbanization 1901-2001, Second Revised Edition,
Tata McGraw Hill Publishing Co., Ltd., New-Delhi
6. Srinivasan V and Peter SMJ: “Urbanization impact in Environment”
Kannabiran”Globalisation and Governance” Third Concept” Nov 2006