Growth Busts Poverty

Thursday, March 22, 2012

Poverty estimates between 2004-05 and 2009-10 show a sharp reduction in the absolute number of the poor by 52.5 million to 354.7 million. This is encouraging for several reasons. While the new poverty line at lower than the earlier Rs 32 per day benchmark – Rs 22.43 per day for rural areas and Rs 28.65 per day for urban areas – may draw grumbles, the fact is the percen-tage of below poverty line people has declined at double the pace of that bet-ween 1993-94 and 2004-05. This pushed down poverty rates by 7.4 percentage points to 29.8%. Another good news is that, though India saw one of the worst droughts in 2009-10, the gap between rural and urban poverty narrowed.

Many factors account for the fall in poverty levels. The most important is high growth, averaging close to 9% over the five-year period to 2009-10, followed by the pick-up in agricultural growth to 3%. Additionally, larger spending on welfare programmes like NREGS helped push up wage rates, making growth more inclusive. Steady rural consumption in fact contributed to propping up overall demand in the economy in the post-2008 slowdown.

Worryingly though, decline in poverty rates has been very skewed. While some states like Orissa pushed down its share of the poor by as much as 20 percentage points, others like Maharashtra, Madhya Pradesh, Tamil Nadu, Uttarakhand, Himachal Pradesh and Rajasthan shaved it by 10 percentage points or more. In contrast, the percentage of the poor went up marginally in as many as eight states and Union terri-tories, mostly in the northeast. Equally discomfiting is the rise in the absolute number of the poor in some larger states like Bihar, where it went up by close to five million, and in UP, Assam and Chhattisgarh where it went up by around a million each.

Source: The Times of India (link opens in a new window)