Causes of Poverty in India | Meaning, Types, Trap, Gap

Causes of Poverty in India –

This write-up will talk about poverty. After you read this write-up, you will have a better understanding of the meaning of poverty, the causes of poverty in India, the poverty trap, and the poverty gap.

Poverty is a growing concern in the country and several measures have been taken to tackle the issue.

Explore the causes of poverty and the poverty trend in India and globally. Alongside, know the types, consequences, and solutions to poverty.

Moreover, we have included the meaning of urban poverty and the ways to reduce income inequality in India.

Also, explore some of the facts and figures on poverty in India and the frequently asked questions related to the topic.

Must Read:- Article 30 of Indian Constitution

What is poverty?


Poverty means a condition or state of living where an individual or community does not have adequate financial resources to maintain a minimum standard of living.

The individual living in poverty has not enough material possessions and money to meet the basic needs of living – food, clothing, and shelter.

Poverty can be defined in absolute and relative terms. Absolute poverty means poverty measurement in terms of the amount of money required to meet the basic needs of life. In India, it is below 1.90 dollars per day per person.

Relative poverty means poverty concerning the economic status of the other members of society.

If a person falls below the prevailing standards of living in the social context, s/he is considered to be poor.

The World Bank has defined poverty in absolute terms. According to the World Bank, extreme poverty is when a person is earning and living on less than 1.90 dollars per day. Moderate poverty means earning and living on 3.10 dollars per person per day.

What is a poverty trap?

The situation where people are stuck in the cyclic pattern of poverty is referred to as the poverty trap.

This spiraling mechanism forces the individuals to remain poor and does not allow them to escape the poor way of living.

When an economic system requires a significant amount of capital to earn enough to escape poverty, a poverty trap is created.

The lack of this capital and difficulty in acquiring it creates a self-reinforcing cycle of poverty.

There are plenty of reasons, apart from low wages or lack of money, which cause the poverty trap which is as follows:-

  • Inadequate and poor working opportunities. In areas with dense population, people are not even able to find jobs leaving the aspect of well-paid jobs far behind.
  • Poverty often leads to violence and criminal activities such as fights, thefts etc. which makes it difficult for the people to get out of the poverty trap.
  • Poor people are unable to obtain a better education and learning opportunities due to high fees or pay which makes them fall behind in getting a better job.
  • There is often the lack of medical care and poor sanitation which leads to death, malnutrition, starvation, inability or diseases. They are not able to get adequate medical supplies and needed medical insurance.
  • A large part of the population is unable to afford certain products and services like food, medical care etc.

What is the poverty gap?

The ratio by which the mean income of the poor population falls below the poverty line is called the poverty gap.

The poverty line means half of the median household income of the total population.

The poverty gap serves as an indicator of the level of poverty in the country and helps in refining the poverty rate.

What are the causes of poverty in India?

Poverty is not only caused due to lack of money. There are plenty of reasons that lead to poverty.

We have listed below the major factors which are the leading causes of poverty in India which are as follows:-

High population growth

In India, there is a steep decline in death rate and an increase in the birth rates. The population increase rate has been 2.2% per year which means around 17 million people are added to the population count.

This creates huge population pressure and unequal distribution and availability of wealth and resources. Also, it raises the demand for goods considerably.

Lack of education

Majority of the poor people in the country does not have adequate access to educational facilities. This makes them fall behind and not make their way out of poverty.

Alongside this, a lack of skilled laborers affects the economy.  Also, they are not able to figure out better ways of income and investment.

Underutilization of Resources

There is underemployment spread across the country in several sectors. The agriculture sector experiences most of it.

This leads to underutilization of resources and low agricultural output. This leads to a decline in the standard of living of the population involved.


There are plenty of schemes which the government has proposed to eliminate or tackle the issue of poverty in the country.

However, there is a lack of political will and corruption prevailing in the system. Therefore, all these contribute to poverty.

Unorganized sector

There are various sectors in India which are unorganized. This paves way for the issue or labour exploitation. Alongside, this leads to job insecurities too due to the rise in demand for work.

Colonial past of India

India has been under colonial rule for over 200 years. During this time, there was forced de-industrialization.

There was an increase in raw material production and a decline in the export of value-added goods. Indigenous manufacturing was discouraged.

There was massive unemployment, diseases, droughts, and other concerns that deteriorated the conditions of the Indians. The condition prevails to this day.

Less agricultural productivity

70% of the Indian population depends on agriculture for livelihood. However, there is low productivity in the sector. This is due to the fragmented and sub-divided landholdings.

Also, lack of capital, modern equipment, machinery, technology, illiteracy, etc. leads to less productivity than it should be.

Unemployment and underemployment

India has a huge population. Due to this, there are not adequate employment opportunities available to everyone.

This leads to chronic unemployment and underemployment. The level of unemployment is reflected through poverty in the economy.


There has been a wave of inflation in every sector over the past few decades. The prices of basic goods and services have also increased drastically.

The steep inflation rate has made it difficult for everyone to afford a sound style and standard of living.

Lack of Infrastructure

In the Indian economy, communication and transportation infrastructure is not properly developed.

Inadequate road and railway networks and ineffective communication systems affect the agricultural sector the most.

This also affects the power supply in industries and raw materials to a certain extent.

Social factors

There are plenty of social factors as well that stands as a major reason for poverty in the country. Several customs, traditions and systems have been prevailing from the past.

The caste system, illiteracy, social norms, unrepresented minorities, inheritance laws, and more are hindering the elimination of poverty in India.                         

Political factors

The British rule over India has caused significant damage to the nature of the Indian economy. India was once a prime or chief producer of plenty of products across the world.

The British rule over India drained plenty of wealth of the country to their homeland.

Also, the rule led certain classes of people like potters, weavers, artisans, and farmers to their current poverty state.

Unequal income distribution

Unemployment, inflation, taxation and other measures have led to the unequal income distribution of income in the economy.

This sustains the poverty levels and does not let them gain a substantial share of income through various means.

Lower growth rate

The rate of economic development is significantly low in the Indian economy. Alongside, there is a gap between the demand and supply of several goods and services.

As compared to the population growth, which is 1.8%, the growth rate of the economy has been 3.7%. This means that the per capita income growth rate, as compared to the population, is very low.

Lack of effective entrepreneurship

There are plenty of activities in India which can be an asset to the economy. The rich art and culture of certain tribes and minority groups of the country can be leveraged and contribute to effective economic growth.

All this requires proper entrepreneurship and leadership to be harnessed and boosted.

Natural calamities

Majority of the people in India below the poverty line belong to Jharkhand, Bihar, Madhya Pradesh, Chhattisgarh, Uttar Pradesh, Odisha and Uttarakhand.

These states are prone to natural disasters and calamities. Also, SCs and STs make the majority of the population in these states. It hampers the progress and economic development in these states.

What are the types of poverty?

Based on different aspects, poverty can be of various types which are as follows:-

Absolute poverty

Absolute poverty is the one which is measured in terms of the amount of money required to meet the basic needs of life.

It is characterized by the deprivation of basic human living needs which are food, shelter and clothes.

The people struggle to live and are unable to safeguard themselves from several preventable diseases.

This is also known as extreme poverty. As per the World Bank, people who earn and live on less than 1.90 dollars per day per person are considered to be in extreme poverty.

Relative poverty

Relative poverty means that when a level of household income is considerably less than the median income of the country, there are considered to be below the poverty line.

This refers to the lack of resources when compared to the other members of society. It is a relative concept and differs from countries.

Primary poverty

It is a condition where the income is not sufficient to meet the mere physical existence even if the individuals wisely spend the money.

For example, an individual earns 1 dollar per day but requires 4 dollars per day to avail the basic needs. This means that s/he can only spend it on one or a few things and not all.

Secondary poverty

This refers to the condition where the income level is sufficient to maintain a physical existence but is not spent wisely.

For example, an individual earns 10 dollars a day but only requires 4 dollars to maintain a living.

S/he spent 8 dollars on vacation or unnecessary things and is left with 2 dollars to meet the basic needs. Wisely spent money could have made him/ her meet basic needs.

Situational poverty

As the name suggests, this type of poverty is temporary. It occurs due to some adverse situations.

Poverty comes out of unfortunate events like earthquakes, floods, or other natural disaster or severe health conditions.

Generational poverty

This type of poverty is inherited by the generation of the household. One generation passes it on to the other generation.

They do not have the tools or ways to make their way out of it. It usually happens in families or households where at least two generations have been born in poverty.

Urban poverty

Urban poverty occurs in areas with more than 50000 of the population. The urban poor population has limited access to health and education, inadequate housing, overcrowded and violent environment, no social protection and more. Also, they lack basic needs like housing.

Rural poverty

It occurs in the non-metro areas where the population is not more than 50000. There are fewer job opportunities, lack of educational facilities, less medical support and more such things.

These people maintain a living on farming and other menial labour work available to the surrounding.

What are the consequences of poverty?

Poverty is one of the biggest problems in various countries of the world. The consequences or effects of poverty can be severe from micro to a macro level.

We have listed down some of the consequences of poverty which are as follows:-

Slow economic growth

Poverty stands and indicator of economic growth and development. Also, it indicates the rate of economic growth.

A higher poverty rate indicates the economy is not successfully able to generate adequate job opportunities, better living facilities, and amenities for its people. This drains the economy and also indicates its health.

Lack of skilled labour

Due to poverty, the affected individuals are not able to access better educational facilities. Therefore, they do not gain skills which are required in the economy.

This leads to the lack of skilled labour in the country as a huge part of the population is living below the poverty line.

The high infant mortality rate

In many poor households, children are the most affected with malnutrition and diseases. They do not get adequate nutrition and food.

The high infant mortality rate has been experienced among the poor than the other sections of society. This is due to the lack of basic living facilities.

Child labour

The poverty struck society often indulges in the widespread practice of exploitation and child labour.

In cases of large families, the monetary needs are not easily met. This makes them indulge their children in earning activities to meet their financial needs.


Poverty has one of the most devastating effects on the health of the nation and the people suffering from it. Malnutrition is the most prominent issue which poor people suffer from.

It is widespread in all age-groups of the country especially the children. Families do not have access to sufficient nutritious food.

This leads to malnutrition along with several health concerns like anemia, nutrient deficiencies, impaired visions, and more.


Incidences of crime and violence are coincident with poverty in the majority of cases. The people living below the poverty line sometimes resort to violence, theft and other criminal activities to earn money.

Along with a lack of education and poor moral conscience, the poor are more prone to committing violence.

Diseases and deaths

People living in poverty do not have access to nutritious or even sufficient food. Also, they do not live under proper sanitary conditions which a person should live under.

This leads to diseases due to a lack of food and sanitation and even increased death rates.

Terrorism and genocide

The combination of extreme poverty and lack of education makes the youth a soft target for brainwashing.

Often, the terrorist organizations offer money to poor families in exchange for the participation of a family member in terrorist activities.

This induces a sense of accomplishment among them making them indulge in such activities.

What are the solutions for poverty in India?

The government rules out plenty of schemes to combat the growing concern of poverty in the country.

However, there are certain measures that can be followed to tackle poverty issues. They are as follows:-

  • There should be policies and laws made for birth control. Controlling the population growth will help in decreasing the population pressure and combat the poverty situations arising out of it.
  • Efforts for increasing employment opportunities should be made. The government should encourage self-employment schemes or rule out other measures to accomplish the same.
  • Measures should be taken to bridge the income distribution gap between the wealthy and the poor.
  • In the states with the highest poverty levels, the government should encourage laws, policies, and investments. Also, there should be special tax concessions to tackle the issue.
  • The government should work towards making the primary needs available to poor people. Adequate food, clean drinking water, educational opportunities, and other basic needs should be made available to them.

What is urban poverty?

Urban poverty occurs in areas with more than 50000 of the population. The urban poor population has limited access to health and education, inadequate housing, overcrowded and violent environment, no social protection and more.

Also, they lack basic needs like housing. This occurs due to several reasons.

We have listed several reasons which lead to urban poverty which are as follows:-


Urban poverty is considered to occur in areas with a population of over 50000. There can be often a large number of people living in a particular area.

This leads to overcrowding in the urban areas which might often lead to poverty due to lack of resources.

Lack of resources

Due to high population, there can be a lack of available resources to cater to the complete population.

An overcrowded area might not have access to sufficient resources to meet the needs of every individual living there.

Inadequate housing

The urban poor often suffer from the issue of unaffordable housing concerns. They do not have adequate living space and often conditions.

The people have to spend more or find alternate ways of housing which might cost them more.


The slums grew with the cities. The rural people settling in urban areas led to an increase in urban poverty.

There is not enough housing available for everyone to settle down. They settle wherever they can. They do not have an address on paper so the government cannot serve them.


The rural people migrating to the urban areas do not have enough financial funds and support to afford the inflated living standards in urban areas. They settle down mostly in slums with no basic services.

Some poverty in India facts

We have compiled certain facts and figures related to poverty in India.

Explore the facts and statistical figures about poverty which are as follows:-

  • Around two-thirds of the Indian population lives below the poverty line out of which 30% are extremely poor and 68.8% live on less than 2 dollars a day.
  • The majority of the people below the poverty line do not have access to adequate healthcare facilities. Moreover, India holds 145th rank out of 195 in quality and accessible healthcare.
  • In the rural parts of the country, 25.7% of the total population is living below the poverty line.
  • In the urban settlement areas, around 13.7% of the total population is living below the poverty line.
  • According to the World Bank’s India’s Poverty Profile, 1 out of every 5 persons in India is poor.
  • Around 80% of the poor people in India live in rural areas.
  • 28% of the total Indian population belongs to SC and ST. 43% of the total poor people in the country belong to these castes.
  • The main source of income for poor people is casual labour.

Some frequently asked questions on poverty in India

We have listed down some of the frequently asked questions related to poverty in India.

Explore the questions and develop a better understanding of the topics.

What is the poverty level in India?

As per the statement issued by the government of India, around 22% of the population of India is living below the poverty line.

The people living below the poverty line are determined based on their income. The people earning less than 1.90 dollars per person per day are below the poverty line.

How is poverty in India as compared to the United States?

Around 456 million people in India are living below the poverty line as compared to 46 million people in the United States.

This compares to the 781 million populations in India and 267 million populations in the United States

The daily poverty line in the USA is 29.85 dollars while it is 1.25 dollars in India.

Where is the most poverty found in India?

The top 10 states with the highest poverty rates in India in descending order are Chhattisgarh, Jharkhand, Manipur, Arunachal Pradesh, Bihar, Odisha, Madhya Pradesh, Uttar Pradesh and Karnataka.

How does poverty affect the economy?

The population trapped in poverty does not substantially contribute to the country and its economy. It leads to several issues like malnutrition, illiteracy and more.

All these, in turn, lead to having unskilled and unqualified personnel for the country.

It will negatively affect the current as well as the future generations of a household and the country alongside.

Which has greater poverty levels – Urban or rural?

In India, the poverty rates in rural areas are higher than in urban areas. This owes to a large part of the population living in rural areas.

This makes the concentration of poverty more in rural areas than in urban.

What is the government doing to tackle poverty issues?

From time to time, the government takes several measures and rules out policies to tackle the poverty issues of the country.

Various programs and policies related to employment, food, education, welfare, and more are formulated for the population living below the poverty line.

What can an individual do to eliminate poverty?

Individual contribution to eradicating poverty issues could be helping and educating poor people about better money management.

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