Monday, April 22, 2024

Growth, Poverty reduction and inequality

Most people construe that being rich or poor is associated with levels of income. Hence many countries follow the method of defining poverty in terms of income or expenditure when data is lacking regarding the former. In India expenditure is taken as the basis for calculations of poverty after initially having experimented with income as yard stick. Our focus, development efforts, political rhetoric all centered around poverty alleviation after attaining independence up till recent times. However, the earlier ‘trickle down’ theory had fortified the approach of aggregate growth. The assumption was that the reduction of poverty can only be tackled after a certain level of attainment of GDP.

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Number of poor coming down

The trends of incidence of poverty showed significant pace of reduction in the post reform period especially in the high growth time. However, the pandemic Covid reversed the phenomenon according to some economists temporarily. Former studies on poverty based on expenditure bear testimony to the reducing trend of poverty. Tendulkar Committee showed that over a seven year period, between 2001-05 and 2011-12, the number of poor came down by 137 million despite the increase in population. Ranga Rajan Committee went a step further to show the drastic reduction in one year period.

Real ‘catching up trend’

In 2018, UNDP and Oxford University came out with a report on Global Multinational Poverty Index (MPI). This was developed taking ten indicators namely health, child mortality, years of schooling, school attendance, cooking fuel, sanitation, drinking water, electricity, housing and assets into consideration. According to the report, India achieved an impressive record of reducing 50% of MPI in between 2005-06 to 2016-17. The report had all praise for India as poorest groups dwindled and showed biggest reduction in MPI, during the above period. The number of millionaires also increased. It was the real ‘catching up’ trend in their words.

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It is heartening to notice the receding levels of poverty calculated either by consumer expenditure levels or MPI index. Anyhow, various non economic indicators of poverty are mere reflections of inadequate income. As the proverb goes money makes many things.

Declining growth breeds poverty

Coming back to the context of high growth rate period and reducing levels of poverty, in recent years the increasing discussion is not about poverty reduction as much as on that of mounting inequality and its social consequences. Poverty and inequality can move in opposite directions, especially in the periods of fast growth. Strong growth also increases and enables resources and social sector spending by public sector authorities. Sound growth in rural areas stemming from state development spending and presence of good initial physical and human infrastructure was found to be the main factor in poverty reduction as exemplified by Punjab and Haryana. The other approach was based on purely human resource development as typified by Kerala experience. No state, however, had right mix of both the elements. It must be noted that declining growth however breeds poverty also.

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So what is required to ameliorate poverty is not mere upward growth rate alone but also simultaneously ensuring how quick the growth is inclusive in itself.

Prof. Sivamohan Marepalli
Prof. Sivamohan Marepalli
The writer is a researcher, consultant and teacher. He worked at ASCI and had brief stints at Cornell University, IWMI and other international organizations.


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