Causes of poverty in India

There are at least two main schools of thought regarding the causes of poverty in India.

The Developmentalist View

Colonial Economic Restructuring

Jawaharlal Nehru noted, "A significant fact which stands out is that those parts of India which have been longest under British rule are the poorest today." The Indian economy was purposely and severely deindustrialized (especially in the areas of textiles and metal-working) through colonial privatizations, regulations, tariffs on manufactured or refined Indian goods, taxes, and direct seizures.

In 1830, India accounted for 17.6% of global industrial production against Britain's 9.5%, but by 1900 India's share was down to 1.7% against Britain's 18.5%. (The change in industrial production per capita is even more extreme due to Indian population growth).

Not only was Indian industry losing out, but consumers were forced to rely on expensive (open monopoly produced) British manufactured goods, especially as barter, local crafts and subsistence agriculture was discouraged by law. The agriculutural raw materials exported by Indians were subject to massive price swings and declining terms of trade.

Mass Hunger

British policies in India exacerbated weather conditions to lead to mass famines which, when taken together, lead to between 30 to 60 million deaths from starvation in the Indian colonies. Community grain banks were forcibly disabled, land was converted from food crops for local consumption to cotton, opium, tea, and grain for export, largely for animal feed.

In summary, deindustrialization, declining terms of trade, and the periodic mass misery of man-made famines are the major ways in which colonial government destroyed development in India and held it back for centuries.

The Neoliberal View

• Unemployment and underemployment, arrising in part from protectionist policies pursued till 1991 that prevented high foreign investment. Poverty also decreased from the early 80s to 1990 significantly however
• Lack of property rights. The right to property is not a fundamental right in India.
• 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%. Neoliberals tend to view food security as an unnecessary goal compared to purely financial economic growth.

There are also a variety of more direct technical factors:

• About 60% of the population depends on agriculture whereas the contribution of agriculture to the GDP is about 28%.
• High population growth rate, although demographers generally agree that this is a symptom rather than cause of poverty.

And a few cultural ones have been proposed:

• The caste system, under which hundreds of millions of Indians were kept away from educational, ownership, and employment opportunities, and subjected to violence for "getting out of line." . British rulers encouraged caste privileges and customs were encouraged, at least before the 20th century.

Despite this, India currently adds 40 million people to its middle class every year. Analysts such as the founder of "Forecasting International", Marvin J. Cetron writes that an estimated 300 million Indians now belong to the middle class; one-third of them have emerged from poverty in the last ten years. At the current rate of growth, a majority of Indians will be middle-class by 2025. Literacy rates have risen from 52 percent to 65 percent in the same period.