How important to India's poor is the urban - rural composition of growth?
Views differ on how much India's poor have shared in the growth and contraction in the country's average standard of living since independence. Some have argued that the rural growth that accompanied the green revolution in the 1970s and 1980s brought few gains to the poor in the rural sector, while others have viewed agricultural growth as the key to rural poverty reduction. Views have also differed on how much urban growth has benefited the poor. The authors used 33 household surveys spanning 1951-1991 to examine the relative importance to India's poor of both urban and rural consumption growth. Among other things, they tested for spillover effects between sectors: does urban growth have the same effects on the rural distribution of consumption as rural growth has on urban distribution? Urban growth reduced poverty, but adverse distribution effects within the urban sector reduced the gains to the urban poor, and urban growth had no significant effect on rural distribution. Rural growth was distribution-neutral within the rural sector and so brought sizable absolute gains to the rural poor. Rural growth also had pro-poor distributional effects on urban poverty. Identifying the nature of these intra- and inter-sectoral effects reinforces the importance of rural growth to national poverty reduction. Future progress in fighting poverty in India will depend on both the rate of rural economic growth and the country's success in switching to a more pro-poor process of growth.
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