Arvind Panagariya, the Jagdish Bhagwati Professor of Indian Political Economy at Columbia, says that contrary to popular
perception, poverty has declined shapely in
India during the last two decades.
In his latest ‘working paper’ — Poverty by
Social, Religious & Economic Groups in India
and Its Largest States 1993-94 to 2011-12 — co-authored with Vishal More, an associate professor at Columbia, he says India is finally winning the war on ‘abject poverty along virtually
all fronts’ and that growth has been the most
important factor behind the progress.
He speaks to India Abroad about the data
available, what it means and the way forward.
Your working paper talks about alleviation in
the poverty level in India, which in some ways,
contradicts popular perception of a major discrepancy in income and wealth as well as economic growth between rural and urban areas,
both nationally and state wise. How did you
arrive at your conclusion?
My conclusions are primarily based on the
latest NSS (National Sample Survey) data.
Every five years NSS does this very large sample survey. We used that data to estimate poverty by social religious groups etc, and so this
In the paper you talk about two different
things behind poverty alleviation — the per
capita income in 2004-2005 that was significantly higher than in 1993-1994, and the
growth acceleration between 2004-2005 to
2011-2012. How do these factors translate into
actual removal of poverty or deceleration of the poverty
Your question is what part of the acceleration in the
decline (in poverty) was due to acceleration in growth and
what part of the decline was due to anti-poverty programs.
Frankly, we do not know yet. That is the question that
remains to be analyzed.
But we certainly speculate that going by the sharp decline
in the urban area, growth was an important reason for it.
This is because in the urban area you do not have the
National Rural Employment Scheme. Probably this needs
to be verified.
I have not done that so far, but my gut feeling is that even
in terms of public distribution system in the urban areas
perhaps there has not been that kind of major change during the second period relative to the first period. So at least
in the urban areas I am inclined to think that it was mostly driven by growth.
In the rural areas you might see a different story because
there was employment guarantee scheme, which was not
there in the first period. That needs to be studied. So we or
somebody else will be studying that in the next few years.
You talk about the Tendulkar line in the paper while talk-
ing about poverty. Could you elaborate what that line is?
The line is more or less equivalent to the World Bank line
of poverty. The World Bank draws a poverty line at pur-
chasing power parity and the line happens to be pretty
close to that.
It is named after Indian economist Suresh Tendulkar
who had been appointed by the Planning Commission as
chair of the committee that was appointed to look into the
issue of whether the poverty line was OK and if not, to suggest measures. Tendulkar looked at various issues with the
old poverty line that was used and suggested a revision.
The revision more or less amounted to keeping the old
urban poverty line, but suggested aligning the new rural
poverty line with the urban poverty line. The old rural
poverty line had fallen below urban poverty line… so there
were some anomalous things…
Tendulkar employed a methodology under which in
future various poverty lines remain aligned to each other in
You mention poverty rates declining among various social
and religious groups, including Muslims, while traditionally many view a large part of the community as lagging
behind in terms of income and wealth. How did you arrive
at that conclusion?
We are reporting what the NSS data shows. We are not
saying that either ways there is more discrimination, less
discrimination or no discrimination. Discrimination can
take many different forms.
The commonest one is the way police treatment of
Hindus versus Muslims. It can happen in the education
sphere… All I am saying is that as per the data
there are seven states where the overall poverty
rates among Muslims has dropped out of 16
states. The seven states include Gujarat, Tamil
Nadu, Kerala, Andhra Pradesh, Madhya
Pradesh, Rajasthan and Jammu and Kashmir…
Compared to Hindus, the rate is slightly low
still, but not abysmally low as used to be the
case, or the perception in earlier decades.
But there is a view among a section of economists that although the poverty rate is down,
inequality between the rich and poor in terms of
income and wealth is rising. Any comment on
We have been doing a lot of work on inequality also as part of our program. That is not this
particular paper, but what you find actually is
that inequality in rural areas shows no particular trend — rise and fall and rise again. From
1983 to 2011-12 there is no net increase actually.
Rises, falls, and rises again. So rural inequality, if
anything, is below than what it was in 1993.
There has been a slight increase in urban
inequality, but not a huge increase. At the least
in the ways we measure inequality — which we
call the Gini coefficient that is a measure of statistical dispersion intended to represent the
income distribution of a nation’s residents —
there has been not a huge one.
But the form of inequality is very visible is if
you think in terms of the wealthiest 2 percent or
the wealthiest 1 percent relative to the bottom 10
percent or so. If you take that then that gap has
definitely widened, but that is inevitable.
The simple fact is urban inequality tends to be
higher than rural inequality because that is
where the growth centers are and that is where
wealth is created.
So when wealth is created, whoever creates the
wealth does get a bit wealthier relative to places
where wealth is not created. That kind of gap
will certainly be rising — urban-rural gap or wealth of top
1 percent or 2 percent relative to the bottom 5 or 10 percent.
Is that not a matter of concern?
I do not think sociologically people get worried. Today if
Donald Trump’s wealth doubles or triples, it does not mean
anything to me. What worries me is how my salary is rising
relative to my colleagues’ salary. That is the kind of inequality that matters more.
So, there has been increase in rural areas, and a modest
increase in urban areas; I think it is far more outweighed
by the fact that India is really bringing these poor people
above the poverty line.
People who are really disadvantaged are becoming better
off. And that to me counts much more than even if there is
some increase in inequality…
Social inequality is of concern, but there we are talking
about Scheduled Castes and Scheduled Tribes versus the
rest of the population. We are concerned, but there we are
making progress, meaning that the poverty rates between
Scheduled Castes and Scheduled Tribes on the one hand
and the general population on the other is declining. There
are still more poor people among them and poverty rates
among Scheduled Castes and Scheduled Tribes are still
higher than the general population. That is still of concern
The Business Interview
In conversation with Suman Guha Mozumder, the economist presents a different
view of inequality in the face of India’s declining poverty
November 29, 2013