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Reducing Poverty and Inequality in India: Has Liberalization Helped?

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  • Jha, Raghbendra

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Abstract

This study examines the empirical relationship among inequality, poverty and economic growth in India. Using data on consumption from the 13th to the 55th Rounds of the National Sample Survey, the author computes, for both rural and urban sectors, the Gini coefficient and three popular measures of poverty. The observed changes in inequality and poverty are explained in terms of the behaviour of key macroeconomic aggregates. A sharp rise in rural and, particularly, urban inequality and only a marginal decline in poverty have characterized the post-reform period. The rise in inequality is explained in terms of an increase in the relative share of output going to capital as compared to labour, a drop in the rate of labour absorption and the rapid growth of the services sector. The rise in inequality has diminished the poverty-reducing effects of higher growth. The reforms have also been characterized by widening regional inequality. This is especially true in the case of the incidence of rural poverty, but also, to a lesser extent, urban poverty. Statistical convergence among states in terms of inequality, poverty and real mean consumption is weak. Several policy conclusions are advanced.

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Paper provided by The Australian National University, Arndt-Corden Department of Economics in its series Departmental Working Papers with number 2002-04.

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Length: 65 pages
Date of creation: 2002
Date of revision:
Handle: RePEc:pas:papers:2002-04

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  1. Ravallion, Martin & Datt, Gaurav, 1999. "When is growth pro-poor? Evidence from the diverse experiences of India's states," Policy Research Working Paper Series 2263, The World Bank.
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Citations

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Cited by:
  1. Dilip M. Nachane, 2010. "Liberalization, globalization and the dynamics of democracy in India," LSE Research Online Documents on Economics 38356, London School of Economics and Political Science, LSE Library.
  2. Singh, Nirvikar, 2005. "The Idea of South Asia and the Role of the Middle Class," Santa Cruz Department of Economics, Working Paper Series qt1ph1x8dv, Department of Economics, UC Santa Cruz.
  3. Shashanka Bhide & Nidhi Dhamija, 2010. "Dynamics of Chronic Poverty: Variations in Factors Influencing Entry and Exit of the Chronic Poor," Working Papers id:2950, eSocialSciences.
  4. Baliamoune-Lutz, Mina & Lutz, Stefan H., 2004. "Rural-urban inequality in Africa: A panel study of the effects of trade liberalization and financial deepening," ZEI Working Papers B 06-2004, ZEI - Center for European Integration Studies, University of Bonn.
  5. Gulati, Ashok & Fan, Shenggen & Dalafi, Sara, 2005. "The dragon and the elephant," DSGD discussion papers 22, International Food Policy Research Institute (IFPRI).
  6. Gaurav Datt & Martin Ravallion, 2002. "Is India's Economic Growth Leaving the Poor Behind?," Journal of Economic Perspectives, American Economic Association, vol. 16(3), pages 89-108, Summer.
  7. Raghbendra Jha & Bagala Biswal & Urvashi D. Biswal, 2001. "An Empirical Analysis of the Impact of Public Expenditures on Education and Health on Poverty in Indian States," ASARC Working Papers 2001-05, The Australian National University, Australia South Asia Research Centre.
  8. Raghbendra Jha, 2002. "Rural Poverty in India: Structure, determinants and suggestions for policy reform," ASARC Working Papers 2002-07, The Australian National University, Australia South Asia Research Centre.
  9. Bhattacharya, Haimanti & Innes, Robert, 2006. "Is There a Nexus between Poverty and Environment in Rural India?," 2006 Annual meeting, July 23-26, Long Beach, CA 21201, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  10. Raghbendra Jha, 2001. "The Challenge of Fiscal Reform in India," ASARC Working Papers 2001-11, The Australian National University, Australia South Asia Research Centre.
  11. Heshmati, Almas, 2004. "Regional Income Inequality in Selected Large Countries," IZA Discussion Papers 1307, Institute for the Study of Labor (IZA).

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