Growth better at reducing poverty

Monday, June 13, 2005

Growth has been a more important factor than reduction in inequality in reducing poverty in India and the tertiary sector is the most important source of poverty reduction, said Tim Besley, Professor, London School of Economics (LSE).

However, impact of growth on poverty reduction, varied with the specific policies adopted at the state level and with institutional factors, said Besley, while presenting a study on ’Operationalising pro-poor growth in India’, which he has conducted jointly with Robin Burgess, also from LSE.

Based on their analysis of 16 major states of India in the period 1958-2000, they cound that states like Assam, Bihar, Jammu and Kashmir, Karnataka, Madhya Pradesh, Rajasthan and Uttar Pradesh had seen low growth and a low impact on poverty of that growth.

On the other hand, there were states like Andhra Pradesh, Gujarat, Kerala and Punjab, which had shown high growth and a high elasticity of poverty reduction with respect to growth.

Orissa and West Bengal had seen low growth over the 40 year period, but the impact of that growth on poverty reduction had been significant, they found, while in states like Haryana, Maharashtra and Tamil Nadu, high growth had not resulted in commensurate poverty reduction.

The study found that almost 57 per cent of the poverty reduction in India was driven by higher output per head in the tertiary sector. The manufacturing sector had a lower impact on poverty, a little over 18 per cent, while the agricultural sector had made the least impact (14.2 per cent) on poverty reduction.

The last was only an indicator that the focus needed to be shifted from agriculture, per se, to the rural economy, Besley said.
Stroy found here.

Source: Business Standard