Understanding how the economy of the poor contributes to the economy of India

There are many methods for the poor to make money, and they have their own methods of coping with the high cost of living. This article is an attempt to discuss the big economy of the poor and how it happens in India, in some detail, by covering some of the key concepts.


Anyone who still earns around Rs.300 per day at current prices, can easily be classified as "poor" if one were to take the very high cost of living, even in the villages at this point in time. I have observed the ways in which the poor still live, and continue to live. Yet, while many experiences are particularly true of Tamil Nadu and the other four South Indian States of Telangana, Karnataka, Kerala, and Andhra Pradesh, to a large extent, the same methods, with minor modifications, apply to those in other regions as well, and once again, this is based on observations.

The economy of the poor would be at least Rs.1 lakh crore per annum, and there are no accurate methods to measure the size of this booming economy. Yet, one can easily make projections, based on data that emerges from certain quarters.

One can say that the Economy of the Poor is centered around a) Buying a vast range of the cheapest goods and services b) Making the religious economy survive and grow c) Enabling the education of children in costly English medium schools d) Setting up service businesses catering to the poor and e) Enabling a vast caring and sharing habit among themselves.

Buying a vast range of the cheapest goods and services

T. Nagar in Chennai is the central business district that houses the most number of jewelry shops and huge retail shops selling the best variety of textile goods. Everyday footfalls, during the festival season in all the shops put together, would easily account for a massive five hundred thousand people, each of whom would buy something or the other.

There is a big area of this shopping district, and under the huge over bridges, one can see the economy for the lower middle class and the poor surviving on an everyday basis. Saris can be purchased for even Rs.100/-. There are reports that the traders visit Surat and pick up saris that are weighed in kilograms. One does not really know how far this is true, but perhaps it is indeed true. The sales are always very brisk. The churidars and the dress material for the children of the poor, the numerous bangle shops, and the shops selling fancy goods for ladies, the footwear shops, and so on, might outnumber any similar shopping district of most other metro cities. The amount that changes hands is huge, going by some trade figures quoted by the local traders. For every costly item seen in the big shops, the equivalent of those can be found on the pavements. The middle and the lower middle class also buy from these shops. The hundreds of shops selling food items and cool drinks from the unorganized sector make merry as well.

Karol Bagh in New Delhi and the famous Linking Road of Mumbai, to name a few similar scenarios, are similar shopping districts where one finds such shops. The poor make the traders somewhat rich.

Making the religious economy survive and grow

For every seriously ill patient undergoing treatment in the Government hospital at any point in time, there will be a special pooja conducted by a relative at some time, and the vows are numerous indeed. For example, the prayer would indicate that if God saves the person, there will be a breaking of 108 coconuts for God. The poor who live nearby are then assured of free coconut for their chutney back home. The priests at the temple make merry too. In Tamil Nadu Government hospitals where surgery for accidents takes place on a regular basis, the doctors are thanked personally and there are many people who carry free food for such doctors.

Then there are the daily hundi collections at the major temples like the Murugan temple at Palani that would easily run into lakhs. The festival times would see ten times more, where a poor person would spend at least Rs.10 and light up a lamp. The free food that is distributed by the poor to the really poor during the annual Amman temples, across the States of Tamil Nadu and Andhra Pradesh, has to be seen to be believed. The temple economy keeps growing. Similarly, those who light up a candle for Rs.20 in churches and pray to Jesus to save the life of the patient also contribute to the religious economy.

Enabling the education of children in costly English medium schools

There are mothers among servant maids who work for 14 hours per day in at least seven or eight houses in Chennai, all part-time, and sometimes double up as cooks. They live in the encroachment areas and are the vote banks for politicians. Every such servant maid has a life goal - the education of their children in costly English medium schools, either in the CBSE or in the State Board streams.

Their expenditures on this count are at least Rs10,000 and this includes tuition as well. The urban poor is thus very highly ambitious. Of course, the reverse is also true. India is home to the fastest-growing network of English medium schools, and the poor from rural areas are as ambitious as those from urban areas. At least one child gets to study in the English medium school, nearby.

Setting up service businesses catering to the poor

If one drives along Highways in any of the five South Indian States, one can easily observe that there are small hotels that dot the entire Highway. These are set up by the poor, who borrow some Rs.10,000 from relatives and set up a small hotel business. Initially, they would start with the fast-selling idli and dosa and then keep adding other items. The cost is very cheap and it is the poor, the daily wage earners, who are the regular customers. The hotel business of this kind is at least Rs.500 crores per annum in Tamil Nadu, according to some sources. In the city of Madurai and the numerous villages that surround this third largest city of Tamil Nadu, one can find such shops that open around 5 p.m. and operate till 3 a.m. the next morning.

Then there are the inexpensive shops in Ranchi, Vijayawada, Kurnool, Chittoor, Kanchipuram, Kanyakumari, Thane, and just about everywhere in India. One needs to just multiply to get some idea of the business turnover. For example, it is possible to complete one's dinner with just Rs.30 in Madurai or Tiruchirapalli, and the other places up North might be a bit costlier. But the business of the small catering businesses keeps multiplying day after day.

Then there are the small shops, often set up with a capital of Rs.10,000/-, that comes from the chit funds operating at the local level. In fact, this method of financing the poor is a multi-billion dollar business in Tamil Nadu, a vast amount of which is unregulated as well. But the formal banking sector is beyond the scope of the poor, who sometimes feel ashamed to visit the bank branches. Hence, the chit fund movement becomes the backbone of rural savings, at least in most of the South Indian States.

Enabling a vast caring and sharing habit among themselves

The poor get to eat whatever is given in the ration shops, nationwide, at very cheap prices, or for free. They prepare food and not only have it, but also sometimes feed at least one old person in every village. The idli, for example, is made and given to such people. There are many methods of innovation. The cheapest aluminum vessels are sold for less than Rs.80 in most cases. They are always used for cooking and last at least 180 days. The usage of cooking gas is minimized, as the poor use three bricks and light up the mud pot with firewood available aplenty, available free of cost in the villages. One can regularly see women carrying waste-dried-up plants, particularly those of the thorny types, in summer. They use such stuff for cooking and minimize the cost.

During temple festivals or special occasions such as marriages, the poor who rear cattle, often donate sheep or goats to their poor relatives, who make use of the meat for feeding the relatives a few days ahead of the marriage, but not on the marriage day. Caring and sharing are largely restricted to rural areas.


Those who always talk about India's rich cultural heritage fail to notice the ways of the poor. There are no reliable studies available on the economy of the poor. Yet, this economy goes on increasing day after day. There should be more economists who should initiate grass root studies to throw up further research in this vital area of the Indian economy. Only some details have been discussed in the aforesaid paragraphs.


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