Poverty as an Economic Development Issue Paper Example

Introduction

Developing countries have been facing a lot of challenges which have hampered their development processes. One of such problems is the poverty among the subjects, an aspect that hinders a country from taking economic strides. India is one of the developing countries facing high poverty levels from the statistics availed by the World Bank and the United Nations. This study is essential as poverty is one of the factors which contributes to low economic growth since countries have to address the welfare of the subjects before they embark on serious projects resulting in stunted economic growth. Also, poverty is one of the agendas captured by the United Nations in the millennium development goals showing that it bears a significant effect on economic development. Episodes of poverty should be suppressed as they lead to inequalities which create social immobility resulting in recurring poverty from one generation to another.

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India as a Developing Country

India is one of the developing countries that has recorded higher economic growth compared to other countries in the same category. In broad terms, developing countries are faced with a lot of challenges which hinder their economic progress. One such factor is poverty which entails the lack or scarcity of a specific amount of money or possessions. In most cases, developing countries have a large percentage of individuals living below the poverty level. For a country to achieve economic development, the level of poverty should be at its lowest. Although substantial economic growth has been noted in India, a high level of poverty is still present validating the need for the country to engage in poverty elimination schemes to further accelerate the level of economic growth. Below is the poverty trend in India compared with DR Congo and Nigeria as recorded by Kharas, Hamel, and Hofer (1).

Importance of The Study

One of the importance of carrying research in poverty is that poverty is inversely proportional to economic growth where the increase of one aspect leads to a corresponding decline in the other factor (Skare and Druzeta 158). It should be noted that people living in poverty have minimal money to put into use, an aspect which leads to less demand for the available goods. A country may make efforts and introduce production schemes, increasing the supply of commodities in the market. However, the inability of the people to afford such commodities will affect the supply whereby less capital will be availed for the production and distribution of the commodities. Besides, more products will be in the market, but the buyers will be few leading to low prices due to increased competition caused by lack of demand. This means that poverty limits the production schemes geared towards economic growth in the developing countries as a wider population is not receptive to the commodities put in the market. Such a case shows that poverty is one of the major hindrances to development and bears an inverse proportionality with economic growth where the higher the poverty levels the lower the growth. The graph below shows the regression line of poverty and economic growth as presented by Skare and Druzeta (165).

Another aspect which shows the importance of this topic is that poverty is one of the concepts addressed in the millennium development goals (Fukuda-Parr 83). When dealing with the economic and social development, a summit was held that came up with seventeen global goals that were structured by the United Nations' general assembly. One of the goals identified by the summit is the eradication of poverty, a condition which has been prevalent in developing countries. Many of the developing countries are yet to bridge the gap between the rich and the poor due to the presence of a few people in the middle class. In this case, many of the people in India find themselves living below the poverty line. The accommodation of the poverty issue in the millennium development goals shows that poverty is a global issue whose presence hinders the achievement of economic development. Thus, this topic is imperative in showing how poverty, one of the aspects of the millennium development goals, has been an obstacle in achieving the economic growth in India.

Also, the importance of addressing poverty in India is that the causal factors leading to poverty also affect economic growth according to the World Bank (1). In broader terms, poverty entails lack of essentials such as proper sanitation, healthcare, education, employment opportunities and inadequate shelter among others. For example, a high level of unemployment means that a large number of people will live below the poverty line due to the absence of income generating sources leading to high poverty levels. Besides, minimal access to education translates to low literacy levels which render an individual unsuitable to assume senior positions in the employment radar translating to a low income. Also, low levels of employment minimize the chances of able citizens of engaging in generating income activities lowering the production levels of a country. Most of the self-employment activities require initial capital and attract legal payments, barring people from poor backgrounds from venturing in these opportunities. As a result, the presence of low literacy levels and high unemployment rate interferes with economic development in a country as the population lacks means of initiating projects towards their financial well-being. Addressing poverty will give a clear insight into how poverty has hampered India's economic growth.

Expounding on the poverty issue is vital as governments tend to focus more on raising the living conditions for its subjects instead of embarking on development projects. In most cases, economic growth revolves around high production rates from the available goods and is presented as gross domestic growth (Harris & Roach, 17). One of the determinants of growth in GDP is productivity levels determined by the ratio of output to input from the labor used. For higher levels of production, a large portion of the population must be in good frames of health and mind, a condition which cannot be achieved in extreme poverty. It is evident that countries with poor health conditions record more cases of ill-health among the citizens. In this regard, the government will give more attention to the health issues by channeling most of the funds to the health sector. These circumstances slow down the economic growth of a country as the diverted attention could have been directed to other production schemes fostering economic growth. Therefore, expounding on the poverty issue shows how most of the government's effort and funds are channeled to projects geared towards raising the conditions of the citizens, a matter which makes India lag on economic growth.

Evidence to show the importance of Addressing Poverty

The study of the poverty in India is per the UN's mission presented in the millennium development goals. It was noted that economic growth could not be achieved in developing countries as the countries were facing challenges which blurred their future as far as economic growth was concerned. Such concerns lead to the development of the millennium development goals which were seen as a way of addressing the issues which led to slow economic growth. For example, the goal number one is to root out extreme hunger and poverty formulated after the realization that most of the world's population was living on monetary value below $1.25 per day (Viswanathan 132). Incorporating poverty among the millennium goals shows its adverse effects on economic development and the need to minimize it for progressive growth. As one of the developing countries with the fastest growing economy, the presence of higher levels of poverty is an obstacle to India's economic growth and requires more sophisticated measures for its counteraction. Since poverty has been termed as one of the factors leading to global economic retardation, India should strive to ensure a large number of individuals living on a monetary value above the global standard value.

Research carried out on the relationship between poverty, and economic growth validates that the factors which contribute to poverty are the same factors which affect economic growth. In his research, Vijaykumar (70) notes that most of the countries in Asia, India included, are faced with a dependency ratio which leads to both low GDP growth and poverty. He further notes that a high dependency ratio has led to few people embarking on an income generating activity which leads to poverty as the income gained is distributed to a large number of individuals. Besides, the recurring episodes of low wages and low literacy levels have led to the transmission of poverty from one generation to another creating poor and unstable economic growth. From this survey, it can be seen that the same factors which contribute to poverty hurt economic growth. Even without considering economic growth, embarking on poverty reduction mechanisms will directly have a positive effect on India's economic growth.

The study of poverty in India is important as it seeks to address the inequalities present that are attributed to a high poverty level in India. From a survey, 10% of India's top earners are entitled to fifty-five percent of the national income per annum, which is an increase from thirty percent recorded in 1980 (Prasad 1). On the other hand, shares of the bottom fifty have reduced from twenty-three percent to fifteen percent while the poorest take the minimal shares. A greater inequality results in a reduction of the opportunities available to the disadvantaged individuals in the society. For example, the existence of distinct social classes reduces social mobility and limits economic growth. If a person is born poor, the chances are that he/she will continue in the same state and the condition may also be replicated in the future generations. Such restrictions limit the investment opportunities as individuals from the low social class cannot start investments due to lack of capital.

Justification of the Research

Addressing poverty levels is imperative as it will help in evading the high dependency levels that have contributed to the low production schemes. Dowling and Chin-Fang (369) established that the dependency level is one of the factors contributing to the levels of poverty whereby individuals in employment are highly depended by the non-working group. Failure to resolve this will lead to a scenario where only a minimal number of Indian populations are engaged in the production process resulting in minimal economic growth. It should be noted that economic growth depends on the production of goods and services which increases the real GDP. When a large number of individuals engage themselves in the production process, more products and services are rendered increasing the GDP. Therefore, the government should commit itself to reduce the dependency level to improve the production processes and service delivery schemes.

Also, failure to address the poverty issue can lead to low income from taxes collected from the population. Taxation is the primary scheme utilized by the government to fund its projects where tax is imposed on products, earnings, and organizations which produce goods and offer services (Chen 170). If a large portion of the population lives below the poverty line, the government will only obtain minimum tax to avoid burdening it subjects. From the levels of poverty exhibited by India's population, the government cannot subject the people to higher taxation schemes as it will interfere with their minimal incomes. Howe...