India: wealth and poverty
1. India is a land of contrasts. It currently has
the world's fourth largest economy, based on purchasing power
and continues to expand rapidly.
Gross Domestic Product (GDP) is predicted to increase by 8.5
% in 2010-11. As One
World Action notes 'economic growth has been remarkablethe
past 25 years has seen one of the greatest spurts of GDP per capita
in modern history.'
Nevertheless India's per capita income is 1/20th that
of the UK.
2. Economic growth has had an effect on poverty.
Per capita income is currently $1,170, placing India just inside
the Middle Income Country category of the World Bank.
The percentage of people in the country living below the $1.25
per day international poverty line has declined from 60% in 1981
to 42% in 2005. Health
has improved: for example, under-five mortality rates have fallen
from 74 per 1000 in 2005-06 to 62.6 in 2010.
Maternal mortality rates are estimated at 230 per 100,000 births
in 2008, down from 570 in 1990.
3. Nevertheless India will not meet the Millennium
Development Goals in these areas by 2015. Many Indians remain
very poor. India has one third of all the people in the world
living below the international poverty line, more than all of
The Oxford University and United Nations Development Programme
(UNDP) new Multi-dimensional Poverty Indexwhich uses ten
indicators covering three aspects of poverty (education, health
and living standard)to show household poverty reveals that
55% of the population, approximately 643 million people, suffer
Poor nutrition and sanitation are widespread. Lawrence Haddad,
Director of the Institute for Development Studies, has described
India as an 'Economic powerhouse and nutritional weakling'.
|Box one: selected indicators of poverty in India
- 456 million people live on less than $1.25 per day
- 42% of India's population is classed as living in poverty
- 850 million people live on less than $2 per day
- 28% of children are born with a low birth weight
- 1.83 million children under-five die every year
- India accounts for one-fifth of all child deaths globally
- India accounts for one-fifth of maternal deaths globally
- 638 million people practiced open defecation in 2008
4. Women, children, and socially excluded groups suffer disproportionately.
Despite the decline in rate of under-five deaths, 1.83 million
children under-five die annually in India.
A World Bank Report estimates that approximately 60 million children
are underweight in India.
According to the National Campaign on Dalit Human Rights (NCDHR):
In spite of high economic growth rate the poverty rate among
excluded communities in India has increased, coupled with the
insecurity of livelihoods.
Various government reports admit the increasing inequality and
vulnerability of about 30% of the population in India. Of great
concern is also the persistent child malnutrition and maternal
mortality rates which point to deeper concerns in the marginalised
5. The poorest people are mainly concentrated in the large, populous
northern Indian states.
According to Lawrence Haddad, the poorest Indian states are 'the
size of medium countries with populations in the 50-60 million
range and if ranked as countries, they would have some of the
highest poverty numbers in the world'.
Annual income per person in Bihar is $321, which is little more
than a quarter of the national average of $1170.
Fifty five per cent of children under three in Bihar are underweight,
more than 85% are anaemic, over a million children suffer from
severe malnutrition, 60 million people have no access to toilets,
and two in every three women are illiterate.
6. Save the Children notes that according to current
predictions India is off track on most of its Millennium Development
Goal (MDG) commitments and points out that, because of its large
population, 'If India fails to meet the MDGs so does the world'.
The mid-term appraisal of the MDG targets for India showed slow
progress in poverty reduction, food security, access to education
and health care, climate change mitigation and adaptation and
Based on progress from 1992-93 to 2005-06 the MDG1 target (to
eradicate extreme poverty and hunger) will be attained in 2043
rather than 2015.
The UK Department for International Development (DFID) informed
us that current progress in maternal health suggests that the
MDG target of 145 per 100,000 live births by 2015 will not be
Government of India poverty reduction
7. The Government of India recognises these problems
and is undertaking a wide range of measures and spending very
large sums of money to reduce poverty through a series of national
poverty reduction programmes.
DFID writes that:
The Government of India has created a number
of 'centrally sponsored schemes' to finance development (DFID
has focused on those supporting improvements in education, health,
HIV/AIDS and urban management). These often innovative poverty
schemes are directly supporting the three out of four Indians
who earn less than £500 a year.
The Government of India's spend through these
schemes has grown. For example, spending on primary education,
as percentage of GDP, increased from 1.6% in 2006 to 3.7% in 2009.
Absolute spending on health has increased from £4.5 billion
in 2003-04 to £8.7 billion in 2007-08 (and in DFID focus
states has increased three to four fold in the last ten years).
Measures recently enacted by the Government of India
include the National Rural Employment Guarantee Act 2007, 'which
is the biggest work scheme in the world and ensures a welfare
safety net so that every rural family has a right to 100 days
of work each year paid at 100 rupees per day,'
and the Right to Free and Compulsory Education Act 2009, which
for the first time in India's history mandated the Government
to ensure that all children aged 6-14 can access schooling.
Although these schemes entitle poor people to certain benefits,
not all those who are entitled actually access services. For example,
of the 579 million people who registered for the national rural
employment guarantee, only 218 million actually accessed the benefits.
8. In the budget of February 2011 the Indian Government
announced a 17% increase in social spending, on projects ranging
from malnutrition to healthcare. "The country has carried
for long enough the burden of hunger and malnutrition," Finance
Minister Pranab Mukherjee said. The budget statement also announced
The Government plans to spend 267.6 billion rupees
(US$5.9 billion) on the health sector alone in the next fiscal
year, a rise of 20 percent, while education spending would also
rise, to 520 billion rupees.
A national food security Bill, which will provide
a legal guarantee of subsidised food for low-income families,
would also be introduced in the current parliamentary session.
DFID's aid programme
9. DFID assists the Government of India in this work
and is providing India with £825 million for the period 2008-11
making it DFID's largest bilateral programme. But it should be
noted that donor assistance is small in relation to India's economy.
Total Official Development Assistance (ODA) from all sources to
India accounts for about 0.3% of India's GNP and the UK's direct
contribution is a tiny proportion of this (0.03% of India's GDP
at PPP rates). This
means that UK aid can only help and add value to the Government
of India's efforts to reduce poverty and achieve the Millennium
Development Goals. DFID writes:
HMG's development strategy has been to support
the Government of India's priorities ensuring that growth is inclusive
to reach the poor. Given that our financial contribution has been
relatively small in the Indian context, our aim has been to catalyse
and add value to the much larger efforts of the Indian Government
(at both national and state levels), multilateral organisations,
private sector and civil society - by provision of resources to
meet critical gaps and promote innovation, and by provision of
10. DFID works at the national level and in focus
states with high levels of poverty.
The bulk of UK aid to India is spent on health and education.
The share of DFID's total India aid framework going to health
increased to an estimated 48% in 2009-10 (up from 27% in 2005-06).
Almost 20% (£57 million) of the total aid framework in 2009-10
was spent on education programmes. Urban and rural development
are also areas of spending. For example DFID is supporting urban
development programmes with the State Governments in West Bengal
(£102 million for 2004-11), Madhya Pradesh (£41 million
for 2006-12) and Bihar (£60 million for 2009-15). DFID is
also providing technical support (£14.5 million) to the national
Ministry of Housing and Urban Poverty Alleviation for its national
urban poverty programmes.
DFID's programme, including detail of its spending is outlined
in more detail in the DFID submission.
THE FUTURE OF DFID'S PROGRAMME IN
11. Whether the UK should continue to provide aid
to India has been a source of heated debate in both the UK and
India. The Prime
Minister's high profile visit to India in July 2010 provided a
focus for this debate. UK criticisms have tended to emphasise
India's wealth (only the United States, China and Russia have
more billionaires), the Government of India's spending on its
own aid programme to other countries and projects such as its
space programme; in addition, allegations of persistent corruption
have led to claims that spending is wasted. These criticisms are
often linked to cuts in the budgets of other Government Departments.
We list below some of these. At the time of the Prime Minister's
visit, an article in the Daily Mail argued:
But what is equally trickyindeed, difficultis
for Cameron to justify why India needs to be given roughly £250
million every year as third world aid. India has a sophisticated
space programme, extensive nuclear power and defence projects.
It is spending colossal amounts of money on luxuries like Google
Earth and other satellite navigation systems. So it would be reasonable
to ask why Britainand indeed, other developed countriesneed
to feel obliged to give anything in the way of financial aid.
To understand why India hasn't solved its problems
relating to various aspects of poverty you only have to look at
how aid is distributed.[...]Money that trickles down to the poor
is misappropriated by everyone from government officers to village
'officials' and in the end the corrupt, local politicians will
appease the poor with just a few rupees. Violence is rife when
it comes to politics, law and justice and the poor don't stand
12. Moreover, while many of those who know its work
have praised DFID, some have been critical. Richard Whittell,
an independent researcher, interviewed more than 200 people affected
by a range of DFID-supported projects and programmes in India
between 2008 and 2010. He commented:
it soon became clear that there was a significant
number of people whose experiences of British aid contrasted sharply
with the DFID's publicity and reports. Serious questions were
raised regarding the DFID's attitude and accountability to those
people it claimed to be supporting and the detrimental effects
of its policies and projects on people's public services, their
lands and natural resources and their national and state governance.
Malini Mehra, Chief Executive of the Centre for Social
Markets, argued in favour of giving less aid to governments and
more to innovative civil society organisations saying:
DFID began with [...]budget support at the national
level and then it realised that that is not the best value for
your investments. Now it is seeking to do that in some of the
worst-governed parts of the country. Orissa and Bihar are making
transitions to better government models but still there is pervasive
malgovernment in these states. If you continue that model [...]of
pushing your money through the states that are bureaucratic or
have no interest in innovation or entrepreneurship, it will be
On the other hand, many witnesses were supportive
of DFID's decision to continue its aid programme in India. For
example Christian Aid said:
Keeping in view the magnitude and deeper social
and structural dimensions of poverty in India, DFID has a strong
role to play in working alongside the Government of India and
civil society to tackle poverty. Christian Aid sees a very strong
argument for continued, targeted UK aid to India, focused on the
poorest states and communities, and for robust UK Government engagement
with India's Government about the inequalities that cause and
characterise poverty there.
Save the Children commented on the importance of
continuing UK aid in India because of the large number of poor
With such high rates of poverty, there is a strong
case for the UK to continue an aid programme, at least in the
medium term, that supports the achievement of the Millennium Development
Goals. Without this aid, children's lives will be at risk, and
fragile gains in health, education and other areas will be more
difficult to sustain. Aid is not a stand alone strategy, but it
does play an important complementary role alongside other UK efforts,
for example to boost trade links.
13. The International Development Committee reported
on DFID's programme in India in 2005.
In view of the controversial nature of DFID's assistance to India,
in October 2010 we decided to undertake another inquiry in this
Parliament, indicating we would examine the aid programme, its
contribution to poverty reduction and DFID's role in the wider
relationship between the UK and India. We had originally intended
to go to India at the beginning of 2011 and to complete our inquiry
shortly thereafter, but postponed the visit until March at the
request of the Government of India.
14. In June 2010 DFID announced a review of all its
bilateral programmes. It expressed its intention to focus on fewer
countries and to ensure that aid was targeted where it could do
most good. In July, during Mr Cameron's visit to India, he and
Prime Minister Manmohan Singh held discussions during which the
Prime Minister of India indicated 'very strong support for our
In February 2011 the Secretary of State for International Development,
the Rt Hon Andrew Mitchell MP, indicated that UK aid to India
would continue (although frozen at current levels), but with significant
changes. On 28 March,
the Secretary of State gave evidence to the Committee and told
us of the proposed changes to the programme. The main changes
were to make greater use of the private sector to provide aid
and to focus more on the poorest states, moving funding away from
national programmes. He told us:
We are changing the nature of the programme in
order to zero in on three of the poorest states. Some of our programme
will zero in on the eight poorest states, but, by and large, around
two thirds or 67% will in future be focused on those three of
the poorest states. We think that that is the right balance, bearing
in mind that the programme is also increasingly reflecting the
importance of pro-poor private sector investment. Over the period
of four years, we hope that around half of it will be spent. 
He added that the plans were still being discussed
with the Government of India and that he was keen to take the
views of this Committee into account:
Not all of the final details are nailed down
yet, particularly on how we will do the private sector work. We
are still in discussions about that. The fact that we are going
to focus in the poorest areas going forward was, however, something
I discussed with the Indian Government when I was there last November.
[....]We are delaying the publication of our operational plan
on India until we have a chance to see and take into account the
views of the Committee.
15. In addition to taking evidence from the Secretary
of State the Committee held three other evidence sessions with
academics, researchers and non-governmental organisations. We
also received written submissions from a number of organisations
and individuals. Our visit to India took place from 8 to 17 March.
We visited Delhi, Bihar and Madhya Pradesh. In Delhi we had meetings
with a wide range of senior political figures, officials, NGOs,
private sector organisations and multilaterals. In Bihar and Madhya
Pradesh we met senior figures in the state Governments, officials,
technical experts paid for by DFID and many others, including
most importantly, many recipients of DFID aid. The World Bank
receives large sums from the UK taxpayer, so we looked at one
of their projects as well as examining many DFID-supported projects.
We would like to thank all those who have helped us in our inquiry.
16. In this report we look at whether the Government
was right to continue the UK aid programme to India up until 2015,
then in chapter three at policy planning for the 2011-15 programme
and our assessment of the Government proposals for this period.
The UK Government has stressed that the UK and India should have
an enhanced partnership, covering many matters of mutual interest.
We consider a number of those which are relevant for development
and reducing poverty, namely climate change, trade and education
in chapter four. In his evidence to us the Secretary of State
for International Development spoke of walking the 'final mile'
with India. Our final chapter is concerned with what should happen
1 By purchasing power parity, on the same basis, the
UK has the sixth largest economy. As of 1 January 2009 (Central
Intelligence Agency, World Factbook). Back
Ev 86 [DFID] Back
Ev w13 [One World Action] Back
Ev 87 [DFID] Back
UNICEF 2009, quoting the World Bank Back
The World Bank: India Back
V K Paul et al, Reproductive health, and child health, and nutrition
in India: meeting the challenge, The Lancet, Vol 377 January
22, 2011 Back
Ev 89 [DFID], quoting WHO 2008 Back
Ev 87 [DFID] Back
Ev w1 [Christian Aid] Back
Ev 114 Back
Ev 88-9 [DFID]; UNICEF statisitics; Ev 81 [Robert Chambers] Back
Ev 74 Back
According to Health, Nutrition, and Population Family (HNP) of
the World Bank's Human Development Network, August 2005. The Lancet
figurefor underweight under-fives is 43% Back
Ev w12 Back
Excluded communities are explicitly recognized by the Constitution
of India, which refers to "Scheduled Tribes" ((STs)
specific indigenous peoples) and Scheduled Castes ("SC"s,
also known as untouchable," "exterior caste," "depressed
class,") (these groups were previously called the "depressed
classes" by the British. SCs/STs together comprise over 24%
of India's population, with SC at over 16% and ST over 7.50%.).
SCs/STs are commonly referred to as dalits.But for Dalits meaning
of this word is qualitatively different. The Dalit Panther Movement,
defined this word in itsr 1972 manifesto as: "A member of
Scheduled Castes and Tribes, neo-Buddhist, the working-people,
the land-less and poor peasants, women, and all those who are
being exploited politically, economically, and in the name of
Ev 87 [DFID]. There are 28 states in the Indian Federal System. Back
Ev 113 Back
Information supplied by DFID. Back
Ev 120 Back
Ev w37 [VSO] Back
Ev 118 [Lawrence Haddad] Back
Ev 89 Back
Available at: www.planningcommission.nic.in/plans/planrel/fiveyr/welcome.html Back
Ev 87. This figure refers to expenditure by all state Governments
and the central Government. Back
Ev 121 [Save the Children] Back
DFID, Briefing, May 2011 Back
The total spending on public health, family welfare and education
is proposed to increase over 30% from £7.4 billion in 2009-10
to £9.7 billion in 2011-12. The proposed plan outlay on health
and education was 17% higher for 2011-12 compared to 2010-11.
The figure for spending in the health sector refers to expenditure
by the central government only for the financial year 2011-12.
Ev 91 [DFID] Back
Ev 87 Back
Ev 94-5 Back
For some Indian views see http://www.bbc.co.uk/news/world-south-asia-11318342 Back
Ev w41 Back
Ev w2 Back
Ev 122 Back
International Development Committee, Third report of Session 2004-05,
DFID's bilateral programme of assistance to India, HC 124. Back