Excerpts of a mail: A Research Idea

My Theorem

Anna’s mail was so energizing – I could not hold writing a response. First of all to quote World Bank
Economy-wide variables do matter to India's poor; they have generally gained from economic growth, and lost from contraction; they have also been hurt by inflation. The net gains to the poor since the early 1970s can be attributed in large part to economic growth—distribution changed little from the point of view of the poor, although it appears to have been more important in the 1950s and '60s, when there was rather less growth. The results offer support for the view that a stable macro-policy environment, combined with micro-policy reforms conducive to economic growth, can help greatly in reducing absolute poverty in India.
However, the project’s results also reveal important nuances concerning the pattern of growth, and the importance of other contingent factors, including human and physical infrastructure. The results point clearly to the quantitative importance of the sectoral composition of economic growth to poverty reduction in India. Fostering the conditions for growth in the rural economy—both primary and tertiary sectors—must be considered central to an effective strategy for poverty reduction in India. At the same time, the relative failure of India's past industrialization strategy from the perspective of the poor points to the importance of successful transition to a strategy capable of absorbing more labor, particularly from rural areas.
In explaining the cross-state differences in the trend rates of rural poverty reduction, the project found that differences in the trend growth rate of average farm yields (agricultural output per acre) were important. By contrast, differences in the state's historical trend growth rate of non-agricultural output (urban plus rural) were not. This reflects the weak connections between urban economic growth and rural poverty reduction in India.
But that is only part of the story. Without taking account of differences in initial conditions it is hard to explain why some states have performed so much better in fighting poverty than others in the longer term. Starting endowments of physical infrastructure and human resources appear to have played a major role in explaining the trends in poverty reduction; higher initial irrigation intensity, higher literacy and lower initial infant mortality all contributed to higher long-term rates of poverty reduction in rural areas. A sizable share of the variance in the trend rates of progress are attributable to differences in initial conditions of physical and human resource development—differences which also reflect past public spending priorities.
By and large, the same variables determining rates of progress in reducing poverty mattered to the growth in average consumption. There is no sign of trade-offs between growth and pro-poor distributional outcomes. (http://www.worldbank.org/poverty/data/indiapaper.htm)
For those who need more quantities let me suggest this link – (http://www.worldbank.org/poverty/data/indiadata.htm)

This and similar studies agree that there may have been a reduction in poverty (remember there is a definition of poverty line) in percentage terms, but the absolute number of economically underprivileged (to avoid using poor) has increased. This means that the rate at which we reduce poverty is lower than the rate at which poverty increases. Further there is a sectoral component to poverty reduction which suggests that investing in certain sectors would help the cause of poverty alleviation more. (Anna you missed out on agricultural development as an important issue.)

My idea of index or ratio is that of an indicator that measures the gap between what quantum of investments required and the quantum that is provided for across different sectors to eradicate extreme poverty.

To conclude Anna gets a political message outta my previous mail, guess could try my hands at it during the next elections. Its too late this time ………..


Note: This mail was sent to PRM21 yahoo groups before the LOK Sabha elections of 2004. As it turned out, perceived neglect of the agricultural sector proved detrimental to BJP's political fortunes, inspite of the economy churning out some brave numbers under it.