How Poverty and Inequality Contribute Towards a Poor Nations Development

 
Definitions, Measures, and Mechanisms of Poverty and Inequality

Poverty exists when resources do not exist, are not accessible to satisfy basic needs, or are unequally distributed In this setting, identifying impoverished individuals necessitates first determining what defines basic requirements. 

These can be described as “those required for survival” or “those representing the predominant level of life in the community.”

Every country has its definition of poverty. On the other hand, the World Bank is a highly respected authority on the subject of "severe poverty." The World Bank maintains a measure known as the International Poverty Line and, as of 2015, defined extreme poverty as living on less than US$1.90 per day. (Those earning between $1.90 and $3.10 per day are considered “moderate poor.”)

Axioms of inequality; a comparison of frequently used inequality measurements

Axioms are desired features of inequality measures in inequality measuring. They specify how inequality measurements should behave. The use of axioms may aid in the selection of inequality indices. It is stated that inequality is selected because it respects some desired features.

An axiomatic method is used in measuring.

There are several descriptive inequality measures. How are we to choose between them?

We can obtain assistance by specifying axioms. For example, suppose we believe that transferring income from wealthy to poorer individuals will reduce income disparity.

People, we need to select an index that has this mathematical characteristic while omitting any indices having numerical characteristics that contradict this emotional sensation.

Inequality is not a self-contained notion; its meaning can be influenced by economic interpretations as well as ideological and philosophical viewpoints. Inequality may be conceived of as arising from the way a cake is split among persons if overall income is compared to a cake. 

In this meaning, inequality is the deviation of actual income distribution from a hypothetical income distribution.

Connections between Inequality and Development

One of the most pressing challenges in development is inequality. Not only is it unfair from most philosophical viewpoints, but data suggests that it is harmful to general well-being, social stability, economic progress, and prosperity. Inequality might be one of them.

During the last two or three decades, most OECD member nations' income disparities have expanded. These patterns have been widely established (see references). 

According to the coefficient, a classic measure of inequality, income inequality increased by 10% from the mid-1980s to the late 2000s, while the top-to-bottom income decile ratio reached its highest level in 30 years.

Poverty Measurement

Poverty is defined as a state in which a person or household lacks the financial means to meet the bare necessities of life. Economists and politicians define “absolute” poverty as the difference between consumer spending and a criterion known as the “poverty line.”

The formal poverty line is the amount of money spent to purchase the commodities in a "poverty line basket" (PLB). Poverty may be quantified by the number of persons living below the poverty line (with the incidence of poverty expressed as the headcount ratio). 

The “depth” of poverty reflects how much below the poverty line the poor are.

Poverty figures are important because central schemes such as Antyodaya Anna Yojana (which provides subsidized food-grains to households living below the poverty line) and Rashtriya Swasthya Bima Yojana (health insurance for BPL households) use the NITI Aayog's or the express Contractual Commission's definition of poverty.

Owing to problems in evaluating the earnings of self-employed individuals, daily wage workers, and others, substantial swings in income due to seasonal variables, and extra side revenues as well, poverty line assessment.

In India, it has been focused on consumer spending rather than income level Considering data collecting challenges in India's primarily rural and informal economy.

While social security programs in India have considerably reduced poverty, they are not without flaws. COVID-19 reversed advances and pushed millions farther into poverty, destabilizing the informal sector and disproportionately affecting migrant laborers. 

Schemes such as MGNREGA are being sought after by the government and needy individuals in order to combat unemployment.

The COVID-19 issue has had a devastating impact on low-skilled migrant laborers and informal employees. According to preliminary information, there has been a tremendous surge in unemployment and an equally significant drop in incomes. 

Almost eight out of ten people are consuming less food than they used to; more than six out of ten people in cities do not have enough money for a week's worth of necessities.

Written By - Arya Sinha