July 26, 2006Economy

Nothing mystical about it

India’s success in reducing poverty is real

This is an archived blog post from The Acorn.

A few days ago, Atanu Dey found himself squaring off with Pankaj Mishra and Suketu Mehta, on a very mixed-up radio show that confused the terrorist attacks on Mumbai’s business class” train compartments for a clash between India’s haves and have-nots. Rebutting Atanu’s arguments suggesting that average incomes in rural India will go up due to growth in manufacturing and services, Mishra argued that all this was just “intellectual mysticism”. He also cited the Economic and Political Weekly as a good source for those who seek to understand the issues better. Well then, it is timely then to quote from a recent article from that very source.

The headcount poverty ratio, in a span of just five years, declined dramatically to 26.1 per cent in 1999-2000 from 36.0 per cent in 1993-94. In contrast, it took as many as 10 long years to make a dent in the poverty ratio from 44.5 per cent in 1983 to 36.0 per cent in 1993-94. While the official estimates on poverty are enmeshed in a controversy on a number of methodological issues, it is now established beyond doubt that there has been a non-negligible decline in India’s poverty in 1990s.

Deaton and Dreze (2002) calculated from different rounds of data collected by National Sample Survey by adjusting the official estimates of incidence of poverty and found that still the reduction of poverty was noticeable during the 1990s. Illustratively, the headcount ratio of rural poverty was found to have come down from 39.4 per cent in 1993-94 to 26.8 per cent in 1999-2000; urban poverty too was shown to have come down from 39.1 per cent to 24.1 per cent during the period. [EPW (Note: pdf file)]In other words, there is nothing mystical at all about 94 million rural Indians and 43 million urban Indians making it out of poverty in five years. But then Mishra also said we should be focused, not so much about facts and statistics that these folks in Bombay and Delhi keep fiddling with…”.

The authors of the article attempt to uncover the reason why employment has not increased despite economic growth and reduction in poverty. The authors conclude by suggesting that the Rural Employment Guarantee seems to be a move in the right direction’. They didn’t even consider labour reforms.

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