This paper evaluates the performance of the Indian economy on five related dimensions: employment, wages, economic growth, inequality and absolute poverty. The findings run counter to some popular beliefs. For example, rather than a large slowdown as claimed by several recent studies, real wage growth in the 1990s nearly doubled its earlier pace. This finding contradicts the job scarcity conclusion. The two “facts”, low job growth and high wage growth, are reconciled by noting that the growth in the potential labor force declined significantly in the 1990s. Instead of a job scarce economy, one strong conclusion is that India is transitioning from a labor surplus economy to one with lesser surpluses and emerging labor scarcities.
The development community has changed its language from talking about growth to talking about “pro-poor” growth. There are no meetings, no pronouncements, and hardly any publications which emerge from the international aid community which do not have the “politically correct” adjective attached to growth; the pro-poor aspects presumably give growth a human face. The topic of growth and its impact on poverty reduction is not new; what is “new” is the emphasis on different growth strategies in order that the reduction in poverty be maximized. Towards this end, aid organizations like the World Bank and the Asian Development Bank have set up “filters” to weed out projects that do not conform to a pro-poor strategy.
After summarizing the controversy over the magnitude of Indian poverty, this paper discusses the trends in the survey capture ratio and the possible sources and magnitude of errors contained in both the households surveys and national accounts. The paper proceeds then to estimate poverty in India in 1999-2000 according to different methods, emphasizing in particular a method which uses information about increases in NSS household survey-measured real wages between 1983 and 1999. The paper concludes that, in particular in the light of data from the national sample surveys, it is almost incontrovertible that poverty in India was less than 15 per cent in 1999-2000 – which is some conceptual distance away from the corresponding 35 to 40 per cent world Bank estimate for the same year and is nearly half the official government of India estimate of 26 per cent.
This book is about India’s economic development since independence, but especially during the last two decades. A central concern of policy makers for over fifty years has been the alleviation of absolute poverty. Between 1950-1980, the economy barely grew at about 1 percent per capita per annum . Not surprisingly, poverty did not decline by much. In 1951-52, the first year of the National Sample Survey (NSS), the head-count ratio of poverty in India was deemed to be close to 45 percent of the population. Some thirty two years later, in 1983, the poverty ratio had stayed “constant” at 43 percent. However, since then, there has been a sharp fall in poverty with the level for 1999-2000 being “close” to 26 percent.
Poverty is best defined with reference to the best definition available on obscenity: “I know it when I see it” was the cryptic definition of a US Supreme Court justice adjudicating in an obscenity case in the mid-seventies.There is a rich history of formal definitions of poverty, going back to the mid-nineteenth century. It is an attempt to capture the bottom-half of the population, the have-nots, the poor.
