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Economic liberalisation strategies and poverty reduction across Indian states

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  • Kaliappa Kalirajan
  • Kanhaiya Singh

Abstract

The focus of the study is the pace of poverty reduction across Indian states and its determinants. In particular, the role of foreign direct investment (FDI) and industrialisation in reducing poverty is examined. Empirical evidence shows that poverty reduction did occur during the 1990s following the implementation of India's economic liberalisation program, which included mainly industrial and FDI policy reform. The empirical analysis shows that, thus far, FDI has not contributed significantly to poverty reduction, but it did influence structural changes in the economy, particularly with respect to industry, which is an important driver of poverty reduction. The analysis clearly shows that states with dominant industrial sectors have been able to reduce poverty faster than states dominated by agriculture. It is argued that targeting of FDI in India has been misplaced. Had it been in the more labour-intensive manufacturing, it would have more effectively contributed to the reduction of poverty. Copyright © 2010 The Authors. Journal compilation © 2010 Crawford School of Economics and Government, The Australian National University and Blackwell Publishing Asia Pty Ltd..

Suggested Citation

  • Kaliappa Kalirajan & Kanhaiya Singh, 2010. "Economic liberalisation strategies and poverty reduction across Indian states," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 24(1), pages 26-42, May.
  • Handle: RePEc:bla:apacel:v:24:y:2010:i:1:p:26-42
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    File URL: http://hdl.handle.net/10.1111/j.1467-8411.2010.01248.x
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    References listed on IDEAS

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    1. Jeffrey D. Sachs & Nirupam Bajpai & Ananthi Ramiah, 2002. "Understanding Regional Economic Growth in India," Asian Economic Papers, MIT Press, vol. 1(3), pages 32-62.
    2. 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.
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    5. Jagdish Bhagwati, 2002. "Trade and Poverty in the Poor Countries," American Economic Review, American Economic Association, vol. 92(2), pages 180-183, May.
    6. Gaurav Datt & Martin Ravallion, 1998. "Farm productivity and rural poverty in India," Journal of Development Studies, Taylor & Francis Journals, vol. 34(4), pages 62-85.
    7. Maurizio Bussolo & John Whalley, 2003. "Globalisation in Developing Countries: The Role of Transaction Costs in Explaining Economic Performance in India," OECD Development Centre Working Papers 219, OECD Publishing.
    8. Ashok V. Desai, 1999. "The Economics and Politics of Transition to an Open Market Economy: India," OECD Development Centre Working Papers 155, OECD Publishing.
    9. Vijay Joshi, 1998. "India's economic reforms: Progress, problems, prospects," Oxford Development Studies, Taylor & Francis Journals, vol. 26(3), pages 333-350.
    10. Jeffrey D. Sachs & Ananthi Ramiah & Nirupam Bajpai, 2002. "Understanding Regional Economic Growth in India," CID Working Papers 88, Center for International Development at Harvard University.
    11. Angus Deaton, 2003. "Adjusted Indian Poverty Estimates for 1999-2000," Working Papers 200, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
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    Cited by:

    1. Kalirajan, Kaliappa & Otsuka, Keijiro, 2012. "Fiscal Decentralization and Development Outcomes in India: An Exploratory Analysis," World Development, Elsevier, vol. 40(8), pages 1511-1521.
    2. Narayan, Seema & Rath, Badri Narayan & Narayan, Paresh Kumar, 2012. "Evidence of Wagner's law from Indian states," Economic Modelling, Elsevier, vol. 29(5), pages 1548-1557.

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