Nishant Navneet Soren
X A Roll-176
Mentor
Utkarsh Verma
Poverty and Inequality in India after Economic
reforms
Introduction
India embarked on big-bang economic reforms 25 years back in 1991. It is well-known that
GDP growth has been much higher in the post-reform period. However, GDP is only one
metric. Ultimately, the success of reforms depends on whether the well-being of people,
particularly that of poor, increased over time. In this context, lets examine the impact of
economic reforms on poverty and inequality.
There are two conclusions on trends in poverty. The first one, shown in a World Bank study
by Gaurav Datt and others, is that poverty declined by 1.36 percentage points per annum after
1991, compared to that of 0.44 percentage points per annum prior to 1991. Their study shows
that among other things, urban growth is the most important contributor to the rapid reduction
in poverty even though rural areas showed growth in the post-reform period.
The second conclusion is that in the post-reform period, poverty declined faster in the 2000s
than in the 1990s. The official estimates based on Tendulkar committees poverty lines shows
that poverty declined only 0.74 percentage points per annum during 1993-94 to 2004-05. But
poverty declined by 2.2 percentage points per annum during 2004-05 to 2011-12. Around 138
million people were lifted above the poverty line during this period. This indicates the
success of reforms in reducing poverty.
Literature Review
The poverty of Scheduled Castes and Scheduled Tribes also declined faster in the 2000s. The
Rangarajan committee report also showed faster reduction in poverty during 2009-10 to
2011-12. Higher economic growth, agriculture growth, rural non-farm employment, increase
in real wages for rural labourers, employment in construction and programmes like the
Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) contributed to
higher poverty reduction in the 2000s compared to the 1990s.
Another issue discussed all over the world, whether it is the Arab Spring or Brexit, is rising
inequality. According to a Credit Suisse report, the richest 1% owns half of all the wealth in
the world. What happened to inequality in post-reform period India? The evidence shows that
inequality increased in this period. The Gini coefficient measured in terms of consumption
for rural India increased marginally from 0.29 in 1993-94 to 0.31 in 2011-12. There was a
significant rise in the Gini coefficient for urban areas from 0.34 to 0.39 during the same
period. However, consumption-based Gini underestimates inequality. If we use income data
from the National Council of Applied Economic Researchs India Human Development
Survey, the Gini coefficient in income (rural+urban) was 0.52 in 2004-05 and increased to
0.55 in 2011-12. In other words, inequality is much higher in India if we use income rather
than consumption. If we consider non-income indicators like health and education,
inequalities between the poor and rich are much higher.
There can be several solutions, but lets focus here on the two important measures: creating
productive employment and providing quality education for reduction in poverty and
inequality. There is a feeling that we should have some flagship programmes like
MGNREGA to reduce poverty. No doubt these programmes are important for protecting the
poor. But equitable growth is much broader than this and productive inclusion in terms of
generating quality employment should be the focus of any inclusive approach. Employment
focus is the major part of equity approach.
For reducing inequality, some advocate measures such as redistribution of assets and wealth
in favour of the poor via higher taxes for the rich. However, these may not be pragmatic
solutions. The tax/GDP ratio has to be raised with a wider tax base. Fiscal instruments like
public investment in physical and social infrastructure can be used to reduce inequality. The
new generation wants equality of opportunity rather than redistributive measures.
TWENTY FIVE YEARS OF ECONOMIC REFORMS: A SIGNIFICANT VISIBLE
CHANGE BUT SOME FAILURES
Economic reforms were initiated in mid-1991 due to problems such as insurmountable external debt,
unmanageable balance of payments situation, high possibility of acceleration in the rate of inflation
and the underlying fiscal problems. The external factors like the Gulf war and the collapse of the
Soviet economy have also contributed a bit to this crisis. With a view to tide over the unprecedented
economic crisis and ensuring the sustainability of the growth process, it was considered necessary to
introduce certain major policy reforms on industrial, trade and public sector fronts, almost
simultaneously with measures of stabilization for reduction in fiscal and current account deficits. The
reforms aimed at fundamental shift towards greater reliance on the market mechanism to allocate
resources and influence decision making. In the first budget speech in 1991, the finance minister Dr.
Manmohan Singh said that the idea of the emergence of India as a front ranking powerhouse of the
world economy was an idea whose time had indeed come. Quoting Victor Hugo, he also mentioned
that no power on earth can stop an idea whose time had come.
Failures that country is facing due to governance system
1 Slow Infrastructure development - Although there is lot of progress, almost all
indicators score poorly if one looks at Indias infrastructure particularly compared
with countries like China. For example, power shortage is perennial in India. This
is one of the single biggest constraints for our growth. Meeting the energy
requirements for growth of this magnitude in a sustainable manner presents a
major challenge.
2 Failure in increasing labour intensive manufacturing -Rise in manufacturing
employment is need of the hour. Share of manufacturing in total employment has been
almost stagnant at 11 to 12 per cent for a long time. It increased marginally to 13 per cent
in 2011-12. In 2010, India accounts for 1.4% of the world exports of manufactures while
the share of China is a whopping 15%. The reforms since 1991 have not been
comprehensive enough to remove the bias towards capital and skill intensive industries.
Also there are distortions in input markets like land and labour. For example, some
strongly believe that among other things, labour market reforms are one of the key factors
for revival of manufacturing sector particularly in the organized sector.
3 Not taking advantage of demographic dividend -It is known that with demographic
dividend, there will be large numbers joining labour force. Labour force in India is
expected to increase by 32 per cent while it will decline by nearly 5.0 per cent in China
over the next 20 years. India is supposed to have surplus of 56 million while rest of the
world will have shortage of 47 million working population. Demographic dividend varies
across regions. Northern states will have young population (dependency ratio in Bihar
1.05 , UP 1.08)Southern states have already started aging (dependency ratio TN 1.74,
Kerala 1.79)..
4 Slow social sector development -Although there have been achievements in social sector
during the reform period, the progress has been very slow. India has success in growth but
there is a failure in progress of social indicators11. The country is not only behind china
but the progress is slower than many of the Asian countries. It is known that Indias rank
of human development index (HDI) is lower compared to many other developing
countries. Basically the argument is that compared to economic growth, reduction in
inequality, hunger, malnutrition is much slower. Improvement in health and quality of
education is slower. There is disconnect between economic growth and malnutrition.
Slow reduction in malnutrition is one of the failures in the post-reform period.
5 Governance Failures -Last and fifth one is governance. Reforms were expected to
improve governance at various levels. However, there are new problems in governance
and persistence of old problems including corruption. Apart from many achievements, the
post-reform period also witnessed many scams in the financial and real sectors. These
scams in the last 25 years could have been avoided with better governance. There has
been a nexus between politicians, business people and bureaucracy. Crony capitalism is
one of the factors for corruption. Jalan (2006) says the interface between politics,
economics and governance, and their combined effect on the functioning of our
democracy, which will largely determine India's future.
Statement of problems
Economic reforms should focus more on efficient delivery systems of public services. Many
reckon that poor governance is the biggest constraint in achieving the aspirations of a new
generation and reduction in poverty and inequality. A major institutional challenge is the
accountability of service providers, particularly the public sector. Issues like electoral
reforms, crony capitalism, election funding and corruption should be part of the reform
agenda to reduce inequalities. In the last 25 years of reform period, India has done well and one can
see significant visible change. But, there have been some failures in policies, processes and outcomes
in the post-reform period.
RESEARCH OBJECTIVE:
1. To study the causes, the problem of poverty and inequalities conditions in rural India.
2. To examine the impact of poverty of population on the families.
3. To suggest measures to control, minimize and, if possible, eliminate the consequences
of poverty conditions in India.
4. To study the UNs contribution on upgrading health status in India.
5. To review the implementation status of the health care programs and infrastructure in
India and suggest suitable measure for its effective implementation.
6. To study the legal and constitutional remedy regarding the matter.
RESEARCH METHODOLOGY:
To undertake a detailed study of poverty & inequality in India . This is a doctrinal research in
which the author will collected the data from different sites to make his project effective. An
extensive research has been done using secondary sources.
This research will be restrained within the ambit of Indian context.
PROPOSED CHAPTERISATION:
Abstract
Introduction.
Brief discussion on actual economic conditions in India.
Various causes for poor health infrastructure in the country.
Governmental policies regarding upliftment of the poor.
Roll of NGOs in upgrading the life style of the rural area.
Parallel running schemas connected with upliftment of the poor by State and Centre.
To study the legal and Constitutional remedy regarding the issues.
Measures to control and minimize the poverty and inequalities in the country.
Conclusion.
Reference.
