Poverty and income distribution in Asian countries Almost half of the world, that is, three billion people lives on less than $2. 50 a day and at least half of the humanity lives in countries where income disparities are present. [Knap Shah, Poverty facts and stats] If we perceive things in a materialistic manner, then poverty is the lack of basic necessities such as food, clothing and shelter. However, in economic terms, many social scientists believe that poverty can be measured in terms of income and standard of living. A low level of income and standard of living indicates poverty.
On the other hand, income inequality is the state of an economy, in which the shares of the total income earned by the various participants in the economy are distributed unequally. Poverty and income inequality is a global issue, and is discussed widely on platforms such as the social media, electronic media and print media. Significant measures have been taken to eradicate and alleviate these issues by various organizations and policy makers. However, the success of their acts is debatable. Most of the developing economies are facing these issues; however, I will be shedding light on Asian countries like India ND Cambodia.
There are several contributing factors to the high rate of poverty and income inequalities in these economies. India is a massive nation with immense resources. An interesting fact highlighted by Jeez Ghana is that “if income in India was distributed completely equally, the entire nation would still be living on less than half the I-J poverty line. (The I-J poverty line is a relative line: you’re poor in the I-J when your income after tax is below 60% of the national median)”. [Statistics on poverty in India] The government of India practices a rather different method for calculating the poverty rate.
They believe that a person consumes food nutrition which varies from 2000-2500 calories per day to sustain their body. So, an individual who is not earning enough to meet this requirement is regarded as poor. However, this unorthodox method of calculating poverty was updated by the consumer price indices after the asses. In 2010, the World Bank reported that “32. 7% of the total Indian population fall below the international poverty line of IIS$ 1. 25 per day (APP), while 68. 7% live on less than IIS$ 2 per day’. [The world bank, "poverty and equity’]. Of Indian’s population of almost 1. Billion, 300 million people live below the poverty line. The people suffering from poverty are dominated by the people living in rural areas of the country. There are several factors contributing to this issue. The most important of all, according to my beliefs is that the people stricken with poverty have a very low stock of human capital, such as education, training or skill development. In India, over 70 percent of heads of poor households are illiterate compared with about 30 percent in the general population and much less for those above the poverty line.
They have a very mall amount of physical capital, such as land or machinery. Those lacking education, minority groups, children, and the elderly are generally poorer. This is because there is limited access to land and irrigation facilities. Those without access to land, not necessarily owning it, had a much higher incidence of poverty. Apart from this, India as an economy is largely dependent on the agricultural sector and it is the largest source of employment for the population. Agriculture is highly dependent on the monsoon season. Due to uncertainty and irregularity of the weather, the agricultural sector suffers a lot.
Hence, this affects the production process and results in a decrease in income. People with no other source of income suffer due to this, and the only option they are left with is to starve. Moreover, unemployment in the rural areas drives people to migrate to the urban areas, and migrants form the majority of the urban poor. Since most residents in the urban areas don’t have much physical capital unless they are in the highest income level, the lack of education or other human capital is the major accounting for poverty in the urban areas. A vicious cycle of poverty perpetuates.
Poverty results in high dependency rates, low education of hillier, and low wages as well as significant periods of underemployment. As we are aware that the distribution of income in India is extremely unequal as it is mentioned in the Human Development Report, that the leading 5% of the households possess 38% of the total assets and the bottom 60% of the households own a mere 13%. [H[Human development report]This is merely because of the differences in the wages and salaries of the working population. The caste system is also one of the major factors that influence income disparities.
The presence of discrimination amongst the lower caste allows the income inequalities to grow to a wider extent. Moreover, people born with inherited wealth remain to be economically strong, but the children who belong to poor families are born with debt over them, and thus this result in income inequalities. Another country that is immensely suffering from poverty is Cambodia. Cambodia is a South East Asian country with a population of over 14. 8 million. Almost 70 percent of its population earn their livelihood from subsistence farming.
Cambodia is regarded as one of the poorest countries of the world as 40 percent of their population lives under the poverty line. Their involvement in war and internal conflicts resulted in economic stagnation, loss of infrastructure and a loss of agricultural land which resulted in loss of food. Although the Khmer rouge period was ended in 1978, still the growth rate and the Job opportunities have been inadequate for the Cambodia economy. The growing youth of the country is in need of employment opportunities, and this is a serious challenge for the Cambodia economy to overcome.
The gender disparity amongst the gender is also one reason for the increasing poverty level of the economy. The women do not have equal access to education and training which is essential for better employment opportunities. The absence of a fair democratic system, the presence of high levels of corruption in the constitutional monarchy and lack of a firm Judiciary system results in the exploitation of the common man and results in poverty, and income disparities. The increase in the population is also a major reason for the growing poverty in Cambodia.
The vicious cycle of poverty, lack of health facilities and expensive health care affect the poor Cambodia families economically. The influential measures of inequality and poverty include the gin coefficient and growth elasticity of poverty. The gin coefficient is a widely used measure for the statistical aspersion of income distribution. The gin coefficient in India is 0. 37. The gin coefficient in the rural areas is higher I. E 0. 39 as compared to the urban areas, where it’s 0. 30. (Confronting rising inequality in Asia, Asian Development Bank, 2012). The gin coefficient of Cambodia is similar as to Indian’s I. 0. 39. (The World Bank, 2008). These statistics prove that these are countries with high inequalities in income. The growth elasticity of poverty gives us a better insight into the relationship between income growth, changes in the distribution and the extent of poverty reduction. The Roth elasticity of poverty for India is -0. 13(2004), whereas for Cambodia, it is -0. 6. This interprets that the relationship between the change in income and the poverty level is inelastic I. E a substantial change in the income will not help in reducing poverty to a large extent.
This is mainly because of the presence of inequalities in income in these economies. Reduction in the poverty rate and reducing the disparities in income has been a major concern for the policy makers of these economies. Rapid economic growth by means of growth in investment reduces poverty more than any other factor. In India, the growth in the employment opportunities in rural areas other than farming Jobs has been a major factor for the reduction in the poverty there. This implies onto Cambodia as well, as their employment structure is growing efficient as well.
The reason why India and Cambodia have failed to alleviate poverty strongly is the inefficient policies implemented by their parliamentarians. They have been unable to proportionate the budget in an efficient manner which results in cutting on crucial development expenditure. Some effective policies for addressing urban and rural poverty can be uplifting the status of women in the country, relaxing the tenancy regulations, providing rural infrastructure, encouraging rural labor migration, establishing property rights, accelerating economic growth, provision of social services, such as education and health services.
Developing an effective and strong plan to implement on these policies can certainly help to alleviate poverty and income differentials. India and Cambodia have been generally successful in reducing poverty during the past several decades. This success has largely been the result of economic growth. Selectively, other factors have also been important in helping to reduce poverty, particularly among some disadvantaged groups that have benefited from specific policies targeted at them, such as asset redistribution, land reform, and some subsidy programs.
However, many of these policies have not played a major role in poverty reduction. According to my beliefs, policy changes and outcomes in the education and health sectors have been supportive of poverty reduction and have contributed to more rapid growth. To conclude, I would say that to take the advantage of the potential benefits that can be gained from globalization and the menstruate spread of technology and increases in productivity, these economies have to further develop their economies and their policy frameworks to benefit from these enhanced flow of resources.