1. RURAL POVERTY IN INDIA Lodewijk Berlage KU Leuven February 2013

2. (1) Evolution of rural poverty (2) Evolution of other indicators of human development (3) Labor market

3. (1) Evolution of rural poverty If income inequality does not rise, economic growth raises incomes of all income classes, including the poor. Rising income inequality may counteract the favorable impact of economic growth on poverty.

4. Growth rates of GDP and agricultural output, per capita, all India

5. Rising (expenditures) inequality (Gini coefficients) Source: Planning Commission No trend in rural inequality, increasing inequality in urban areas. Inequality is moderate compared to some other countries. RuralUrban 1973-740.2810.302 1983-840.2970.325 1993-940.2820.340 2004-050.3000.371 2009-100.2910.382

6. Poverty: percentage of people below the (old) poverty line Based on national poverty lines (pre-Tendulkar Commission) Poverty rate decreased faster after 1993 (3.1%) than before (2.3%). Result of strong decrease between 2004 and 2009. All IndiaRuralUrban 198345.2%46.2%42.1% 1993-9435.8%36.8%32.8% 2004-0527.5%28.0%25.8% 2009-1021.6%22.9%20.8%

7. Decomposition of change in rural poverty headcount ratio (Thorat and Dubey, EPW March 10, 2012) ChangeGrowth effect Distribution effect 1993-94 to 2004-05 -8.2-11.12.9 2004-05 to 2009-10 -5.8-5.0-0.8

8. (2) Human wellbeing: more can be done Initial yearRecent year Poverty headcount ratio (Tendulkar poverty line) 45.3% (1993-94) 29.8 % (2009-10) Children below three years with underweight (%) 51.5% (1992-93) 40.4% (2005-06) Literacy rate 15 – 24 years old 61.9% (1991) 91.0% (2001) Proportion of pupils starting grade I who reach grade V 62% (1999) 76% (2008-09)

9. (3) Employment : a major problem Share of agriculture in employment falling, but still dominating → many people still employed in low productivity, low income jobs. Rising share of casual labour (exception: women in urban areas) Lack of employment generation in registered manufacturing

10. Casual Labor, Rural

11. Casual Labor, Urban

12. Absence of job creation in registered manufacturing (?) P. Kannan and G. Raveendran (EPW, 2009); for third period B. Goldar (EPW, 2011) Explanation of lack of employment creation: strong protection of labour (Amendments to Industrial Disputes Act, 1976 and 1982)? But remark employment creation in manufacturing 2003-2008! Av. Annual growth rates 1981-82 – 1991-92 1992-93 – 2004-05 2003-04 – 2008-09 Gross value added 7.0%7.4%13.7% Employment0.4%0.6%7.6%

13. Conclusion Growth has resulted in substantial decrease in percentage of households in poverty. But a fairly high fraction of population continues to live in poverty, even though poverty head count is based on low and constant (in purchasing power terms) poverty line. Remark: government action could/should speed up human development and poverty reduction.