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Industry of 'poverty-wallahs' exposed

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More people on the earth have risen out of poverty in the past 25 years than at any other time in human history, and this has happened primarily because of sustained high economic growth in India and China. Unlike China, which has embraced growth enthusiastically, India has a vast industry of 'poverty-wallahs', who incessantly raise doubts if our growth is pro-poor.

These 'growth sceptics' tend to make our reformers defensive, which slows reforms and the nation loses the potential for even higher growth. Earlier they argued that post-reform growth was 'jobless' until recent data has proved them wrong. Nowadays, they usually say, "growth but..." While the type of growth does matter, the truth is that growth in itself is virtuous, and we should celebrate that India is experiencing this miracle.

In a paper titled "Has India's Economic Growth Become More Pro-Poor in the Wake of Economic Reforms?" two experts, Gaurav Datt and Martin Ravallion, both respected economists, conclude that "the post-reform process of urban economic growth has brought significant gains to the rural poor as well as the urban poor". The poor in urban and rural areas are now linked through trade, migration, and transfers, which explains why rising standards in India's towns are helping to reduce poverty in the villages. Even though agricultural growth has been relatively weak since 1991, overall high growth has positively affected the lives of the rural masses.

This happy news on growth, however, must be seen in the context of lost opportunities. If only India had reformed agriculture and had functioning schools and health centres, the poor would have gained even more from high growth. In another study comparing India, China and Brazil, Martin Ravallion shows that China (with higher growth) and Brazil (with lower growth) have done a much better job at poverty reduction. India's failure in education and health is not a function of money alone, as the prime minister suggested this week when he vowed to raise spending on education to 6 per cent. When one in four teachers is absent and one in four is not teaching, we need accountability in delivering services to the poor. Thus, administrative reforms are just as important to the lives of the poor as economic reforms.

For the full text that appeared in the TOI, click here

Muralidhar Rao


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economic growth an essential criterion for poverty reduction

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India has made tremendous progress in reducing absolute poverty in the past two decades. The standard way to determine whether a household is poor is to compare its daily expenditure per capita to a minimum consumption threshold, or poverty line. Based on India’s official line, the share of the population living in poverty was halved between 1994 and 2012, falling from 45 per cent to 22 per cent. During this period, an astonishing 133 million people were lifted out of poverty. Moreover, the pace of poverty reduction accelerated over time and was three times faster between 2005 and 2012 — the years for which the latest set of government data are available — than in the previous decade. At this pace, the fall in extreme poverty in India since 2005, pegged at $ 1.90 a day, 2011 PPP, matched or exceeded the average rate of decline for the developing world as a whole and the middle-income countries as a group.
- - - the story of India’s transformation remains one of optimism. Although the full potential of economic growth to reduce poverty is yet to be unleashed, the links between growth and poverty reduction have become stronger than in the previous decade.

For the full text of the report (emphasis added by me) in the Indian Express, click here.

This study pertains to the UPA-1 period, when the governance story wasn't too bad. But, most of UPA-2 was disastrous, and even with some corrections effected towards the end, the growth story was pretty much sad, leaving the NDA (led by Narendra Modi) with a hugely difficult task on hand. As of now, they seem to be coming to grips with the situation, and, as forecast, if the monsoons are good, the growth story should turn even more positive.

What emerges from this study is the relationship between economic growth and poverty reduction - for the latter, the former is essential. Economic growth, as I have stated earlier too, comes with an adverse impact on the environment - how to keep it to the minimum is the challenge.

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