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Bhagwati vs Sen: Poverty data gives the verdict-Mayank Mishra
-The Business Standard


Growth, not entitlement, reduces poverty, according to the latest data

The numbers may seem unrealistic, but the broad indication is loud and clear: among all available medicines, growth seems to be the most effective medicine against poverty at the moment. According to the recently released poverty data, states like Odisha, Bihar and Rajasthan have done well when it comes to reducing poverty in the last seven years. And these are the states which have grown at impressive rates in this period.

Growth

Among less developed states, on the other hand, Jharkhand and Uttar Pradesh failed to make a serious dent on poverty because of their below par growth performance. The case of Chhattisgarh is unique in the sense that it registered good economic growth and had decent entitlement programme in place, yet the state did not do well in its fight against poverty.

According to the data released by the Planning Commission, Odisha recorded the sharpest decline in poverty levels between 2004-05 to 2011-12 followed by Bihar and Rajasthan. These states performed exceptionally well in reducing rural poverty. The reduction in rural poverty was by 25.1 percentage points in Odisha, 21.6 percentage points in Bihar and 19.75 percentage points in Rajasthan. Jharkhand, on the other hand, could reduce the poverty level by a mere 8.34 percentage points, Chhattisgarh by 9.47 percentage points and Uttar Pradesh by 11.6 percentage points against the national average of 15.3 percentage points during this period.

What is the correlation between growth and poverty levels? It is quite visible in case of Bihar. Nitish Kumar-led Bihar recorded the highest average growth of 11.42 per cent between 2004-05 to 2011-12 and recorded one of the sharpest falls in poverty levels. What worked in Bihar's favour was even better agriculture growth of 15.17 per cent during this period. What helped Odisha's fight against poverty was its impressive growth of 9.04 per cent growth in this period. "While Odisha benefitted from mining activities, the states of Bihar and Odisha have been major beneficiaries of migrant workers sending their money back home. Significant fall may also be attributed to the fact that there are lot of people who are just marginally below the poverty level. An additional income of few rupees can change their status," says V Upadhyay, professor of Economics at Indian Institute of Technology, Delhi.

However, Anirban Kar of the Delhi School of Economics does not quite agree with direct growth-poverty correlation. He says: "Globally speaking, there is not much empirical support in favour of growth - poverty reduction thesis. There are as many success stories as there are failures. In India, so far, the growth-poverty reduction connection has remained pretty weak.

Before 2005, poverty reductions in fast growing states such as Gujarat and Maharashtra were not significantly more than that in the so-called BIMARU states. The same can be said about the relation between growth and employment growth."

What has not worked in the past is probably working now. Rajasthan benefitted from growth rates of 7.36 per cent between 1994-95 to 2000-2001 and 6.75 per cent between 2004-05 to 2011-12. The desert state reaped the benefits of way above the average performance on the agriculture front. The state's agriculture and allied sector grew by 7.34 per cent from 1996-97 to 2004-05 and by 6.42 per cent from 2005-06 to 2011-12. That is the reason why the state's poverty level is at par with more developed states.

Jharkhand's cause suffered a great deal because of lacklustre growth performance. The state recorded a meagre GSDP growth rate of 6.34 per cent from 2004-05 to 2011-12, much below the national average of 8.28 per cent. Uttar Pradesh too with a growth of 6.81 per cent fared worse than the national average. That is the reason why these states could reduce their poverty levels at rates much slower than the national average.

However, what is most surprising is the performance of Chhattisgarh. The state registered an above average GSDP growth rate of 8.69 per cent, a robust 7.27 per cent growth in agriculture and allied sector from 2005-06 to 2011-12, and has a much talked about public distribution system in place. Yet the state still has nearly 40 per cent people below the poverty line, almost double the national average. The state already has food security legislation in place which covers nearly 90 per cent of the state's population. "While Chhattisgarh has not done well despite a relatively better working PDS, Tamil Nadu and Kerala would be examples of low poverty -good public service states," Kar explains.

Does this bring in a new twist to the growth versus entitlement debate? Does this data afford us an opportunity to look at the food entitlement legislation in new light? Politicians may choose to ignore the data in the form it is presented here, but the ongoing debate between two noted economists, Amartya Sen versus Jagdish Bhagwati, may become livelier in days to come following the release of poverty numbers.