Corruption
This is the main cause of poverty in India.
[citation needed] According to Wikileaks, crime money (corruption money) held by Indians in Swiss banks (and other banks with secrecy laws) is more than that of rest of the world put together
[citation needed] amounting to several trillion dollars. Widespread and huge levels of corruption in most of the India ensures weak governance and basic facilities like health and education being denied to poor.
[citation needed] This makes it impossible for poor to get out of the trap. Even though India is a democracy, the media and election process have been corrupted which makes it hard for people to throw away the corrupt politicians.
[original research?][citation needed] Since Independence, a single party has ruled for 60 out of 65 years.
[opinion]
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Caste system
According to S. M. Michael,
Dalits constitute the bulk of poor and unemployed.
According to William A. Haviland,
casteism is widespread in rural areas, and continues to segregate Dalits. Others, however, have noted the steady rise and empowerment of the Dalits through
social reforms and the implementation of
reservations in employment and benefits.
Caste explanations of poverty fail to account for the urban/rural divide. Using the
UN definition of poverty, 65% of rural
forward castes are below the poverty line.
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India's economic policies
In 1947, the average annual income in India was
US$439, compared with
US$619 for China,
US$770 for South Korea, and
US$936 for Taiwan. By 1999, the numbers were
US$1,818;
US$3,259;
US$13,317; and
US$15,720, respectively. (numbers are in 1990 international Maddison dollars) In other words, the average income in India was not much different from South Korea in 1947, but South Korea became a developed country by 2000s. At the same time, India was left as one of the world's poorer countries.
License Raj refers to the elaborate licenses, regulations and the accompanying
red tape that were required to set up and run business in
India between 1947 and 1990.The License Raj was a result of India's decision to have a
planned economy, where all aspects of the economy are controlled by the state and licenses were given to a select few. Corruption flourished under this system.
The labyrinthine bureaucracy often led to absurd restrictions - up to 80 agencies had to be satisfied before a firm could be granted a licence to produce and the state would decide what was produced, how much, at what price and what sources of capital were used.
—BBC
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India had started out in the 1950s with: high growth rates, openness to trade and investment, a promotional state, social expenditure awareness and macro stability but ended the 1980s with: low growth rates, closure to trade and investment, a license-obsessed, restrictive state (
License Raj), inability to sustain social expenditures and macro instability, indeed
crisis.
Poverty has decreased significantly since reforms were started in the 1980s.
Also:
- Over-reliance on agriculture. There is a surplus of labour in agriculture. Farmers are a large vote bank and use their votes to resist reallocation of land for higher-income industrial projects. While services and industry have grown at double digit figures, agriculture growth rate has dropped from 4.8% to 2%. About 60% of the population depends on agriculture whereas the contribution of agriculture to the GDP is about 18%.
- High population growth rate, although demographers generally agree that this is a symptom rather than cause of poverty.
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Liberalization policies and their effects
Other points of view hold that the economic reforms
[clarification needed] initiated in the early 1990s are responsible for the collapse of rural economies and the agrarian crisis currently underway. As journalist and the Rural Affairs editor for
The Hindu,
P Sainath describes in his reports on the rural economy in
India, the level of
inequality has risen to extraordinary levels, when at the same time, hunger in India has reached its highest level in decades. He also points out that rural economies across India have collapsed, or on the verge of collapse due to the
neo-liberal policies of the government of India since the 1990s. The human cost of the "liberalisation" has been very high.
[clarification needed] The huge wave of farm suicides in Indian rural population from 1997 to 2007 totaled close to 200,000, according to official statistics. That number remains disputed, with some saying the true number is much higher. Commentators have faulted the policies pursued by the government which, according to Sainath, resulted in a very high portion of rural households getting into the debt cycle, resulting in a very high number of farm suicides. As professor Utsa Patnaik, India’s top economist on agriculture, has pointed out, the average poor family in 2007 has about 100 kg less food per year than it did in 1997.
Government policies encouraging farmers to switch to
cash crops, in place of traditional food crops, has resulted in an extraordinary increase in farm input costs, while market forces determined the price of the cash crop. Sainath points out that a disproportionately large number of affected farm suicides have occurred with cash crops, because with food crops such as rice, even if the price falls, there is food left to survive on. He also points out that inequality has reached one of the highest rates India has ever seen. In a report by
Chetan Ahya, Executive Director at
Morgan Stanley, it is pointed out that there has been a wealth increase of close to
US$1 Trillion in the time frame of 2003-2007 in the
Indian stock market, while only 4-7% of the Indian population hold any
equity. During the time when Public investment in agriculture shrank to 2% of the GDP, the nation suffered the worst agrarian crisis in decades, the same time as India became the nation of second highest number of dollar billionaires. Sainath argues that
Farm incomes have collapsed. Hunger has grown very fast. Public investment in agriculture shrank to nothing a long time ago. Employment has collapsed. Non-farm employment has stagnated. (Only the National Rural Employment Guarantee Act has brought some limited relief in recent times.) Millions move towards towns and cities where, too, there are few jobs to be found.
In one estimate, over 85 per cent of rural households are either landless, sub-marginal, marginal or small farmers. Nothing has happened in 15 years that has changed that situation for the better. Much has happened to make it a lot worse.
Those who have taken their lives were deep in debt – peasant households in debt doubled in the first decade of the neoliberal “economic reforms,” from 26 per cent of farm households to 48.6 per cent. Meanwhile, all along, India kept reducing investment in agriculture (standard neoliberal procedure). Life was being made more and more impossible for small farmers.
As of 2006, the government spends less than 0.2% of GDP on agriculture and less than 3% of GDP on education. However, some government schemes such as the mid-day meal scheme, and the NREGA have been partially successful in providing a lifeline for the rural economy and curbing the further rise of poverty.
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Rich Indians not generous
There are 115,000 individuals in India with high net-worth. Since 2000, this elite group has grown an average of 11 per cent annually. Between 2006 and 2007, the number of wealthy individuals in India surged by 23 per cent, which is the highest growth rate in the world.
However, the wealthiest have the lowest level of giving at 1.6% of their household income for charitable purposes.
"While the 'high class', which is ranked one level below the 'upper class' on the income and education scale, donates 2.1% to charity, the middle class gives 1.9% of household income to philanthropy," says Arpan Sheth, partner, Bain & Company.
The percentage of India's GDP that is spent for charitable purposes is only 0.6 where the percentage is 2.2 in the United States
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21.6 a day in urban areas and 
