Poverty and Unemployment Notes for UPSC

Poverty is the condition in which a person or family cannot meet the basic needs of life such as food, clothing, shelter, health and education. Unemployment is the situation in which people who are able and willing to work cannot find a job. These two problems are closely linked and are central to Indian economic and social policy. In the UPSC Civil Services Examination, they appear in GS Paper 2 and GS Paper 3, with questions on measurement, committees, schemes and the reasons behind them. This note explains poverty and unemployment in India in simple language, with data points, committees and schemes.

Concept and Types of Poverty

Absolute poverty means a lack of income to buy a minimum basket of goods needed for survival. It is measured by a poverty line. Relative poverty compares the income of one group with the rest of the society and shows inequality. Multidimensional poverty looks beyond income at health, education and living standards. Poverty can also be chronic (long-lasting) or transient (temporary because of shocks such as illness or a crop failure). The causes include low productivity of agriculture, population pressure, unemployment and underemployment, lack of education and skills, inequality of land and assets, social discrimination, regional imbalances, inflation, weak governance and leakages in welfare schemes.

Measurement of Poverty in India

The World Bank sets an international poverty line, updated in 2025 to 3 US dollars per day (2021 prices) for extreme poverty. According to NITI Aayog's National Multidimensional Poverty Index, the share of multidimensionally poor in India fell from about 29 percent in 2013-14 to around 11 percent in 2022-23, which means that about 25 crore people moved out of poverty in this period, thanks to better access to sanitation, cooking fuel, bank accounts, electricity and housing. Official consumption surveys show a steep fall in extreme poverty too. Poverty is still more concentrated in states like Bihar, Jharkhand, Uttar Pradesh and Madhya Pradesh, among Scheduled Tribes, and in rural areas. Always check the latest numbers from NITI Aayog and the NSO before the examination.

Poverty Alleviation Programmes

India has used a mix of growth and direct programmes. MGNREGA (2005) guarantees 100 days of wage employment per year to rural households and builds assets such as ponds and roads. PM Garib Kalyan Anna Yojana gives free foodgrains to about 80 crore people under the National Food Security Act, 2013. PM Awas Yojana offers housing. DAY-NRLM promotes self-help groups. PM Jan Dhan Yojana has brought crores of people into the banking system, enabling Direct Benefit Transfers. Ujjwala gives cooking gas, Saubhagya gave household electricity, and Ayushman Bharat PM-JAY gives health insurance. PM Kisan supports farmers. The National Social Assistance Programme provides pensions to the elderly, widows and disabled. Skill India, Startup India and Mudra loans help livelihoods.

Unemployment: Concepts and Types

The labour force includes persons who are working or seeking work. The unemployment rate is the percentage of the labour force that is unemployed. In India, the Periodic Labour Force Survey (PLFS) by the NSO measures it using different approaches, such as the usual status and the current weekly status. The main types are as follows.

• Disguised unemployment: more people work than needed, as in family farms, so some of them add nothing to output.
• Seasonal unemployment: work available only in some seasons, as in agriculture and tourism.
• Structural unemployment: mismatch between the skills of workers and the needs of industry.
• Cyclical unemployment: due to economic slowdown.
• Frictional unemployment: short gaps while changing jobs.
• Technological unemployment: loss of jobs due to machines and automation.
• Educated unemployment: graduates unable to get jobs that match their education.

India's overall unemployment rate by the usual status approach has been low, in the range of 3 to 4 percent in recent years, but youth unemployment is much higher, especially for educated youth, and a large part of the workforce is in low-quality, informal and self-employed work. About 90 percent of workers are in the informal sector without social security. A major concern is the low participation of women and the high share of agriculture in employment, even though agriculture contributes only about 15 to 18 percent of GDP.

Causes of Unemployment

The reasons are slow growth of labour-intensive manufacturing, a large population entering the workforce each year (the demographic dividend can become a burden without jobs), a gap between education and skills (only a small share of youth have formal vocational training), dependence on agriculture, the small and informal nature of firms, rigid labour laws that discourage hiring in the past, automation, and low investment in the sectors with high job potential such as textiles, construction, tourism and food processing. The pandemic and global slowdowns have added to the pressure.

Government Measures to Create Jobs

The government has used Production Linked Incentive (PLI) schemes to boost manufacturing, the Employment Linked Incentive scheme to encourage hiring, the Mudra Yojana and Stand-Up India for self-employment, the PM Vishwakarma scheme for artisans, the Skill India Mission and National Apprenticeship Promotion Scheme, the Deen Dayal Upadhyaya Grameen Kaushalya Yojana for rural youth, MGNREGA for rural wage work, the four Labour Codes to simplify labour laws, and e-Shram portal to register unorganised workers. Promotion of start-ups, MSMEs, construction and infrastructure projects also generate jobs.

Way Forward

To tackle poverty and unemployment together, India needs faster and more inclusive growth in labour-intensive sectors; better quality of school and higher education; vocational training linked with industry; strengthening MSMEs; a social security net for informal workers; improvements in agriculture through productivity, processing and rural non-farm jobs; more women in the workforce through safety, childcare and flexible work; and use of data to find the poorest households. The government should focus on outcomes such as employment generated and skills acquired, and not only on money spent. A strong Mains answer will link jobs with poverty reduction and growth, and will mention both short-term support and long-term structural reforms.

Link Between Poverty and Unemployment

Poverty and unemployment feed each other. A poor family cannot afford quality education or health, so its children enter the labour market with weak skills and find only low-paid work. Low income means low demand for goods, which slows business growth and creates fewer jobs. On the other hand, a person who loses a job quickly falls into poverty if there is no social security. The informal workers of India, who are daily wage labourers, street vendors, domestic workers and construction workers, are the most exposed. They have no pension, insurance or paid leave, and the COVID-19 lockdown revealed how fragile their lives are when millions of migrant workers walked back to their villages. Because of this link, policies should work on both sides together: create jobs through growth and training, and protect the poor through a safety net like food, pensions and health insurance.

Regional and Social Dimensions

Poverty is not spread equally. Southern and western states have lower poverty rates, while eastern and central states have higher poverty and out-migration. Within states, tribal belts and backward districts lag behind. Scheduled Castes, Scheduled Tribes and women-headed households face higher risks. Rural poverty is linked with landlessness and small, unviable farms, while urban poverty is linked with slums, informal work and lack of housing. These patterns explain why the Aspirational Districts Programme and the focus on backward regions are important, and why a one-size-fits-all approach does not work. A good Mains answer includes at least one regional or social angle.

Role of Growth, Inequality and Welfare

Economic growth is the most powerful engine for reducing poverty, since it creates jobs and income. But the benefit of growth depends on its quality: growth driven by labour-intensive sectors reduces poverty faster than capital-intensive growth. Inequality also matters; if the rich gain much more than the poor, poverty reduction slows. Welfare programmes, when well targeted through Aadhaar, bank accounts and digital payments, can cut leakages and reach the poor directly. The debate between "growth first" and "welfare first" is therefore a false choice; both are needed, in a balanced way, with accountability and monitoring of results.

Quick Revision

• Tendulkar (2009), Rangarajan (2014); NITI Aayog MPI uses 12 indicators.
• MGNREGA: 100 days of work; PMGKAY: free foodgrains; PM-JAY: health cover.
• Disguised unemployment is typical for Indian agriculture.
• PLFS is the main source of employment data.

Poverty and unemployment can be reduced only by combining growth with inclusion. Learn the committees and schemes in a table, keep updated numbers from the latest NITI Aayog and PLFS reports, and bring in your analysis of causes and solutions.

Related Notes to Read Next

Continue your preparation with these related notes from the same subject:

• Health and Education Policy Notes for UPSC
• Welfare of SC, ST and Persons with Disabilities Notes for UPSC
• Role of Civil Society, NGOs and SHGs in India Notes for UPSC
• All Social Justice and Social Issues notes

Frequently Asked Questions (FAQ)

What is the poverty line?

The poverty line is the minimum level of income or consumption needed to buy a basic basket of essential goods and services. People below it are considered poor.

Which committee recommended the poverty line based on a basket of goods?

The Tendulkar Committee of 2009 moved away from calorie-based estimates to a basket of goods and services including health and education.

What is the Multidimensional Poverty Index?

MPI measures poverty using many indicators of health, education and standard of living instead of income alone. NITI Aayog publishes India’s National MPI with 12 indicators.

What is MGNREGA?

The Mahatma Gandhi National Rural Employment Guarantee Act, 2005 guarantees up to 100 days of wage employment per year to rural households that demand it.

What is disguised unemployment?

It is a situation where more people work on a task than needed, so that some of them could be removed without reducing output, common in family-run agriculture.

What is the Periodic Labour Force Survey?

The PLFS is the survey by the National Statistics Office that provides regular estimates of employment, unemployment and labour force participation in India.

What is the difference between unemployment and underemployment?

Unemployment means having no work at all, while underemployment means working fewer hours than one can or being in jobs below one’s skill level.

What is structural unemployment?

Structural unemployment results from a mismatch between the skills of workers and the skills that employers need, or from changes in the structure of the economy.

What is the PM Garib Kalyan Anna Yojana?

It is a scheme to provide free foodgrains to about 80 crore beneficiaries under the National Food Security Act to ensure food security for the poor.

What is the e-Shram portal?

e-Shram is a national database of unorganised workers, launched in 2021, to extend social security benefits to them.

What are the main causes of poverty in India?

Main causes are low agricultural productivity, unemployment, inequality, lack of education and skills, population pressure, social discrimination and weak implementation of schemes.

How can unemployment be reduced?

It can be reduced through labour-intensive growth, skill development, support to MSMEs and start-ups, rural non-farm jobs, better education and public works programmes.