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The New Poverty and Inclusive Growth Agenda in India as Emerging Middle Income Country

Amita Shah
Gujarat Institute of Development Research, Ahmedabad

Presented at
Workshop on Social Inclusiveness in Asia’s Middle Income Countries (MICs) Jakarta





Status is acclaimed not only for

being a potentially economic
super power but also for making it happen within a democratic framework

The Complexity rests in the fact that a large part of the middle income people (that surpassed the number of poor) is highly vulnerable and devoid of even basic amenities

1. Identifying the opportunities and challenges with special reference to the changing labour market conditions, migration and urbanization, environmental implications and social policies,. 2. Assessing India’s role as a development aid agency and impact on the recipient countries in Asia

3. Drawing important lessons from India’s experiences on poverty reduction
4. Discussing strategic policy measures India may adopt for steering inclusive and also sustainable growth trajectory with stability and security.

Table 1: Poor, Middle Income and the Non-Poor in India: Changes Over Time All India Per capita Expenditure 1993-94 per day ($) 2004-05 Urban 1993-94 2004-05 Rural 1993-94 2004-05

Poor <1.25 Vulnerable 1.25-2.0 2.0-4.0 4.0-10.0
10.0-20.0 Middle Class Rich >20.0 All

46.5 23.6 18.0 8.7
2.1 28.8 1.1 100

36.3 23.2 22.3 12.3
3.5 38.1 2.4 100

34.0 20.8 22.1 15.2
5.0 42.3 2.9 100

26.0 17.7 23.6 19.6
7.4 50.6 5.8 100

51.0 24.5 16.5 6.4
1.1 24.0 0.5 100

40.5 25.4 21.8 9.4
1.9 33.1 1.0 100

Main Features of Policy Approaches for Poverty Reduction in India

1. Growth
 

Overall Agriculture Tertiary/Service Sector Infrastructure and Construction

 

2. Special Programmes

     

Natural Resource Management (NRM) Water and Sanitation Immunization and Nutrition (ICDS) Housing Commutation and Migration Skill Training Self-Employment and Micro Credit

Centre-state Resource Transfer

3. Social Security/Protection; Rights Based Approach (RBA); Public-Private Partnership (PPP); and Deepening of Democracy

National Rural Employment Guaranty Act (NREGA) Public Distribution System (PDS) Un-organized Workers Tribal Area Development and Forest Rights Act Resettlement and Rehabilitation (R & R)

Box 1: Polices that have Worked for Poverty Reduction
  Land Reforms and Land Development Public Investment in Irrigation and Water Harvesting Structures R & D and Extension Services for Agricultural Growth Institutional and Infrastructural Support for Rural Economy Subsidies/Price Support and Restricted Trade in Agriculture Sustained High Rate of Growth; FDIs; and Rise in Income among Upper Middle and the Rich Segment, Leading to Boom in Service Sector Infrastructure and Real Estate Development creating Additional Jobs in Construction Sector Development of Peri-Urban Areas Employment Guarantee and Influx of Wage Income Distribution of Grains at Highly Subsidized Price Involvement of Civil Society Organisations; Rights based Approach; and Strengthening of Local Governance (yet to work) Some Innovative Models of PPP

   
     


Hitherto slow pace of Urbanisation and Migration


Table 4: Urbanisation in India: Growth across Size
Exponential Growth Rate

Categories of Cities/ Towns

(% per annum)

Metro Cities Class I

1981-91 1991-01 3.25 2.88
2.96 2.76





Table 5: Migration Rates by Categories, 1983 to 2007-08 Rural Male Female Person Male Urban Female Person

1983 1987-88 1993 1999-00 2007-08

7.2 7.4 6.5 6.9 5.4

35.1 39.8 40.1 42.6 47.7

20.9 23.2 22.8 24.4 26.1

27.0 26.8 23.9 25.7 25.9

36.6 39.6 38.2 41.8 45.6

31.6 32.9 30.7 33.4 35.4

Rural-Urban Linkages: Some Peculiarities

   

Informality in Urban Economy Circulatory Migration Partly Rural-Partly Urban Premature Mechanization in Agriculture Elite Capture in Urban Space

Need to strengthen rural-urban linkages and create interfacing spaces

Table 6: Economy and Human Development in Gujarat
Sr. No.
1. 2.

Growth in NSDP: 2000-10 (Rank) Sectoral Share (2009-10) Primary Secondary Tertiary in GSDP 14.2 38.6 47.2 13.12 (1) 10.22 (1)

Sr. No.
6 7

Human Development
Rural Poverty ((Rank) Hunger Index (Rank) Nutritional Deficiency Underweight Children Infant Mortality Rate 39.1 (11) 24.69 (13) 23.3 (11) 44.7 (13) 6.1 (8) 36.3 (9)


Growth in NSDP from Agriculture (2008-09) (Rank) Per Capita SDP from Agri. (Rank) % Area under (2008-09) Irrigation


Chronic Calorie Deficiency (CED) among Women Anemia among Ever Married Women (Rank) Literacy Rate (Rank)

4. 5

3954 (8) 33.90

9 10

55.5 (9) 69.97 (5)


The central message of the Gujarat

experience is that: growth is important
for creating job opportunities, but those






calibrated by appropriate institutional mechanisms so as to make that work in favour of the poor workers and migrants.

• Enhancing the productive capacities that generate additional productive work to absorb the under-employed in the informal sector
• Tightening of the wage markets through skill formation employmentlinked education • Public sector investment and ploughing back a part of the incomes and profits into enhancement of the rural economy • Promoting inclusive urbanization and rural-urban continuum by simultaneously working on sectorally integrated as well as balanced growth in rural as well as urban economies. • Rights based approach for basic livelihood and human development among the poor and vulnerable

• Involvement of citizenry and civil society organizations as part of the PPP models for service delivery
• Strengthening local governance through innovative institutions and empowerment of the poor.

India as Donor
By mid 2010 India became the fifth largest donor to Afghanistan and its aid to Africa has grown at a compound annual growth rate of 22 per cent over the past 10 years. India has chosen a rather different approach and routes for

leveraging the aid programmes unlike several other emerging
donor countries like China and Brazil. It is pertinent that deviating from the larger mechanisms, may keep open an alternative avenue for promoting global development and aid to promote indigenous growth by strengthening the local resources including manpower.

India’s Approach
At the outset, India has chosen a rather different approach and routes for leveraging the aid programmes unlike several other emerging donor countries like China and Brazil. In the process the country has deviated from the standard definition adopted by the Development Assistance Committee (DAC). At present, India’s aid programme consists of three different features: a) grants and preferential bilateral loans to Governments; b) contributions to International Organisations and Financial Institutions; and c) subsidies for preferential bilateral loan provided by India’s EXIM Bank. In what follows we present the flow of funds through different routes over a 18 period of 7 years

Key Findings
1. Poverty has halved during three decades since the 1970s; the pace slowed down since the mid-nineties. 2. With emergence of the middle class, the high growth has accentuated inequity across states, communities, R-U locations.

3. Poverty reducing migration has remained confined mainly to big cities; smaller cities and towns and also migration slowed down and/or stagnated in the last decade. Recent emergence of a number of new small towns opens up fresh avenues. 4. The high growth trajectory led to a skewed pattern of employment ; a few jobs with very high salaries and earnings in large cities, combined with a large segment of informal workers in urban and rural areas. Overall widening of the gap between those included (or moved up) in the process of growth and those excluded from that.
5. The migration-urbanization combine is poised with certain peculiarities, which make it imperative to build further upon the existing rural-urban linkages. Key Findings contd...

Key Findings Contd...

6. A large number of anti-poverty programmes/policies have been undertaken over a long period of time. Broadly these could be grouped into three: growth and percolation mechanisms; special schemes; and rights based programmes. There are indeed some good lessons to learn though, several of the policy initiatives are rather too new to be made amenable to a critical assessment.

7. It is difficult to clearly identify the policies that may work for the poor and for those in the lower end of the middle class. Broadly speaking one may argue that the rights based approach for social protection (entailing employment, food distribution and nutritional support; and housing), and provisioning of basic amenities like drinking water, electricity, roads and transport facilities, cater to the poor (< 2$ day). Whereas the programmes that help promoting agricultural productivity through high value chain, providing social security to informal sector workers, and above all skill training for educated youth may cater mainly to the lower middle class.
Key Findings Contd...

Key Findings Contd...

8. The case of high growth in Gujarat suggested need for appropriate institutional mechanisms to make the growth induced opportunities work in favour of the poor workers and migrants.

9. India has chosen a rather different approach and routes for leveraging the aid programmes unlike several other emerging donor countries like China and Brazil. It is pertinent that deviating from the larger mechanisms, may keep open an alternative avenue for promoting global development and aid to promote indigenous growth by strengthening the local resources including manpower.