Remedies for Poverty

Increase in Saving: In order to get rid of the supply side vicious circle in these countries, efforts should be made to increase savings so that investment in productive channels may be encouraged. To increase saving, expenditure on marriages, social ceremonies, etc., should be curtailed. In under developed countries, the possibility of voluntary savings is slim. Thus, in this regard, government interference is necessary. The government can increase saving, by altering its fiscal policy. The government can impose heavy taxes on luxury goods. Moreover, it can increase the role of direct taxes. Thus, the government can curtail consumption by altering the tax system.

Increase in Investment: To break the vicious circle of poverty, apart from increasing savings, investment of saving in productive channels is also of immense use. The policies of short run and long run investment should be coordinated. By short period investment, people can get the necessary goods at fair rates, which will have a favourable impact on their skill. Moreover, along with short period investment, investment in the establishment of multipurpose projects, iron and chemical fertilizers etc should be properly encouraged. In UDCs, proper monetary and banking policies should be adopted which may provide facilities and encouragement to small savings.

Balanced Growth: To resolve the demand side vicious circle in underdeveloped countries, the extension of the market is to be done so that people may get inducement to invest. In this regard, Prof. Nurkse advocated the doctrine of balanced growth. According to the principle of balanced growth, investment should be made in every sphere of an economy so that demand of one sector can be fulfilled by another sector. Thus, an increase in demand will lead to extension of the market, and would provide inducement to investments. On the other hand, economists like Hirschman, Singer, and Fleming do not consider the policy of balanced growth effective. According to them, the policy of unbalanced growth would be more useful.

Human Capital Formation: In underdeveloped countries, the main obstacle to economic growth is the backwardness of human capital. Human capital should no longer be neglected. Many suggestions can be made to increase skill of manpower. For instance, in these countries, education, technical knowledge, and vocational training should be enlarged. Health facilities should be enhanced, which may increase the efficiency of the workers. Transportation and communication should be developed.

Industrialisation: Poverty can be eradicated by a self-sustaining process of industrialisation. All industries should have linkage to build a powerful process of ancillary industries and occupations. The percolation effect of industries can be strong through the establishment of auxiliary industries. Industry should be linked to agricultural growth. Agro-based industries should grow to provide employment to village people as they are very much labour intensive. Industrialisation can contribute to the growth process and bring improvement in the standard of living of people.