Friday, April 13, 2012

India is less poor but more unequal

Poverty as measured by head count ratio may have dropped in India by 7.3 percentage points from 37.2% in 2004-05 to 29.8% in 2009-10 but the decline could have been much more had the country been more equal. To the dismay of pro market economists, a new ADB report entitled Asian Development Outlook 2012: Confronting Rising Inequality in Asia tells that had inequality remained unchanged from the 1990s to the 2000s, the poverty headcount rate in India could have been brought down to 29.5% in 2008, instead of the actual 32.7%. It is a widely held belief that growth ultimately trickles down to the poor living at the bottom, thus reducing poverty. However, the new report finds that rising inequality due to growth has affected poverty reduction.

The new ADB report has given ample attention to the extreme level of inequality existing in the Asian economies. People’s Republic of China (PRC) and India—the world’s two most populous countries—with annual GDP growth rates of 9.9% and 6.4%, respectively have witnessed rise in inequality from the early 1990s to the late 2000s. During the period of economic reforms, Gini coefficient*—a common measure of inequality—deteriorated from 32.4 in 1990 to 43.4 in 2008 in the PRC and from 32.5 in 1993 to 37 in 2010 in India.

The yawning gap between the rich and the poor in India could be observed from the ratio of the per capita expenditure of the top 20% to that of the bottom 20%. The quintile ratio has increased from 4.8 in 1993 to 5.7 in 2010. In India, the annual mean per capita expenditure growth was only 1.1% for the bottom quintile but 1.9% for the top quintile during 1993-2010. Rising inequality in India has been driven by income redistribution to the top 20%, at a cost to the bottom 80%, the report mentions. 

A central message of the ADB report is that income inequality is caused by inequality of opportunity in developing Asia. Inequality of opportunity arises out of unequal access to public services, especially education and health. In some Asian countries including India where the average proportion of out-of-school primary school-age children was about 20% in 1999–2003, children from the poorest quintile were three times as likely as those from the richest quintile to be out of school. Infant mortality rates among the poorest households in some Asian countries were double or treble the rates among the richest households. The chance of a poor infant dying at birth was more than 10 times higher than for an infant born to a rich family in Asia.

Unlike the popular belief, the ADB report cautions that high and rising inequality can bring down medium-term growth by reducing social cohesion, undermining the quality of governance, and increasing pressure for inefficient populist policies.

Key findings of the ADB report:

·         In  India,  the urban Gini  grew  from  34.4  in  1993  to  39.3  in 2010, much faster than the contemporaneous growth of the rural Gini, from 28.6 to 30.5. India’s rural inequality is lower and urban inequality is higher than in the PRC and, unlike the PRC but like most developing countries, India’s urban inequality is higher than its rural inequality.

·         The average annual growth rate of labor productivity was 7.4% during 1990–2007, while average annual real wage growth rate was only 2%. Gains in productivity were not passed on to wages and, consequently, the labor share of India’s organized manufacturing sector declined from 37% in 1990 to 22% in mid 2007 in India.

·         Wage employment elasticity of growth fell from 0.44 in 1991–2001 to 0.28 in 2001–2011 in PRC and from 0.53 to 0.41 in the case of India thus showing jobless growth.

·         During 1990−2010, the region’s average per capita GDP in 2005 PPP terms increased from $ 1633 to $ 5133. The proportion of the population living on or below the $ 1.25 a day poverty line fell from 51.8% in 1990 to 20.8% around 2008, as 714 million people were lifted out of poverty.

·         If inequality had remained stable in the Asian economies where it increased, the same growth in 1990–2010 would have taken about 240 million more people out of poverty—equivalent to 6.5% of developing Asia’s population in 2010 and 8.0% of those countries with rising inequality.

·         Inequality widened in 11 of the 25 economies with comparable data, including the three most populous countries and drivers of the region’s rapid growth—the PRC, India, and Indonesia.

·         The gaps between urban and rural incomes in developing Asia have increased, as have those between prosperous and lagging areas.

·         Although average Gini coefficient across developing Asian economies (38) was lower than that in Latin American economies (52), most Latin American countries have seen narrowing inequality in the last 2 decades.

·         Disparities in the means to raise one’s living standards—such as physical assets (e.g., capital and land), human capital (e.g., education and health), and market access (e.g., labor)—are common.

·         High gender disparities could be noticed for tertiary education in South Asia and the Paciic.

·         Differences in educational attainment can explain 25%–35% of inequality between households in many regional economies, and the earnings premium for skills and tertiary education has increased in recent years.

·         From 1990 to 2010, the average annual growth rate of gross domestic product (GDP) for developing Asia reached 7.0% in 2005 purchasing power parity (PPP) terms, more than double the 3.4% for Latin America and the Caribbean.

* Note: A Gini of zero denotes absolute equality, while a value of 1 (or 100 on the percentile scale) means absolute inequality.

Asian Development Outlook, April 2012, Asian Development Bank (ADB),

Press Note on Poverty Estimates, 2009-10, Planning Commission, March 2012,  

Give us growth and we’ll handle the inequality by Manas Chakravarty, Live Mint, 11 April, 2012,

'Rapid growth leaving millions behind in Asia', The Business Standard, 12 April, 2012,

‘Inequality has gone up, notwithstanding dip in poverty'-K Balchand, The Hindu, 21 March, 2012,

Reign of the one per cent?-N Chandra Mohan, The Business Standard, 26 March, 2012

The great Indian poverty game-Sonalde Desai, The Business Standard, 29 March, 2012

New methods needed to answer old controversy in poverty measurement-Sreelatha Menon & Indivjal Dhasmana, The Business Standard, 9 April, 2012,

Pronab Sen, principal advisor to Planning Commission interviewed by Indivjal Dhasmana, The Business Standard, 6 April, 2012,

Planning Commission’s Poverty Charade, Economic and Political Weekly, Vol XLVII, No. 14, 7 April, 2012,

India undercounts its poor-Himanshu, Live Mint, 26 March, 2012,

Poverty line: Usefulness of poverty data-S Mahendra Dev, The Economic Times, 28 March, 2012,

States' data cast doubt on growth-poverty equation; welfare schemes have a strong role to play by Devika Banerji, The Economic Times, 26 March, 2012,

Poverty line: Myths, perceptions and reality by Sriram Balasubramanian, CNN-IBN, 23 March, 2012,

Is India Fudging Its Poverty Numbers?-Tripti Lahiri, The Wall Street Journal, 20 March, 2012,

Abhijit Sen, Member, Planning Commission interviewed by Pallavi Polanki, First Post, 20 March, 2012,

Bihar's growth story has a poor side-Rukmini Shrinivasan, The Economic Times, 20 March, 2012,

5 crore people moved out of poverty: Government, The Economic Times, 20 March, 2012,

Thursday, April 12, 2012

Setting the priorities right for dryland farming

The Finance Minister in his Budget Speech 2012-13 made tall claims regarding the initiative of Bringing Green Revolution to Eastern India (BGREI), which he asserted has raised paddy production and yield in the eastern states. As far as the green revolution technology is concerned, it is applicable only in areas with assured irrigation along with suitable usage of chemical fertilizers, pesticides and high yielding varieties of seeds. However, in drought prone states like Orissa, Rajasthan, Madhya Pradesh, Karnataka, Chhattisgarh, Maharashtra and Jharkhand, more than half of the cropped area goes without irrigation as per the latest available data accessed from State of Indian Agriculture 2011-12. Almost 35.0 percent of India’s rural poor reside in these 7 states. (Please check the table 1 below for a comparison between irrigation coverage and rural poverty). Farm crisis is evident in these states since more than half (i.e. 55.2 percent) of the total number of farmers in India who committed suicides in 2010 originated from them. (Please read table 1). 

* State of Indian Agriculture,
** Press Note on Poverty Estimates, 2009-10, Planning Commission,
*** Accidental Deaths & Suicides in India-2010,

Current status of dryland farming

Since the mainstay of majority of the rural population is agriculture and allied activities including livestock, the cure to reducing poverty lies in developing and promoting dryland farming. According to the report entitled Elucidation of the 4th National Report submitted to UNCCD Secretariat, 2010, produced by Ministry of Environment and Forests, India has a total geographical area (TGA) of 328.2 million hectares (mha) with drylands covering 228.3 mha (69.6%) of the total land area. As per the State of Indian Agriculture 2011-12, majority of the drought prone areas lie in the arid (19.6%), semi-arid (37%) and sub-humid (21%) areas of the country that comprise 77.6 percent of its total land area of 329 mha. Rainfed agriculture supports 60% of livestock population and supplies roughly 40% of India's food demand of 1.2 billion people. It plays a key role in ensuring food and livelihood security of the rural poor.  

The report titled State of Indian Agriculture 2011-12 reveals that major coarse cereals, pulses and most of the oilseeds are grown in dryland and rainfed areas. Crop-wise irrigation coverage varied from 27 percent for oilseeds, 16 percent for pulses to 15 percent for coarse cereals during the year 2008-09.

Steps undertaken to promote dryland farming

Since rainfed agriculture done in alluvial, black and red soils is susceptible to water erosion, there is need for soil and water conservation measures. Efforts required in dryland areas include: improving in-situ moisture conservation through ground water recharge; adopting dryland farming approach-raised bed, ridge furrow, zero tillage, mulching; convergence with various watershed development programmes; diversification towards livestock, horticulture, silviculture, fodder production; integrating farming systems with livestock and fisheries etc.

The country's leading agricultural R&D institution—International Crops Research Institute for the Semi-Arid Tropics (ICRISAT) in partnership with Indian Council for Agricultural Research (ICAR) and various state universities is engaged in developing drought tolerant, pest resistant and climate change ready crops for dryland farming regions.

There has been demand from a group of NGOs and social scientists to include the provision of local procurement of millets in the National Food Security Bill—the most vocal among them is Dr. MS Swaminathan-the father of Green Revolution who thinks that nutri-millets can provide nutrition to millions of undernourished children in India.  

During 2011-12, under the Rashtriya Krishi Vikas Yojana (RKVY), Rs. 300 crore was allocated to Integrated Development of 60,000 Pulses Villages in Rainfed 300 Areas (60,000 Pulses Villages), Rs. 300 crore was allocated to Initiative for Nutritional Security through Intensive Millets 300 Promotion (Nutri-cereals), Rs. 250 crore was allocated to Rainfed Area Development Programme (RADP) and Rs. 400 crore was allocated to the initiative of Bringing Green Revolution to Eastern Region (BGREI). For the BGREI, the allocation was raised to Rs. 1000 crore in 2012-13 seeing the success of paddy revolution in the North-east. For the National Mission on Micro Irrigation, Rs. 1500 crore was allocated in 2012-13 and the ongoing RADP was merged with this.

Thanks to the Accelerated Maize Development Programme (AMDP), which later got merged into the Integrated Scheme of Oilseeds, Pulses, Oil palm and Maize (ISOPOM) in April, 2004, maize was cultivated on an area of 8.55 million hectares with an all time record production of 21.73 million tonnes during 2010-11. After the launch of Technology Mission on Oilseeds (TMO) in May, 1986 with the objective of making the country self-reliant in oilseeds production, pulses, oilpalm and maize were also brought subsequently into the ambit of the Technology Mission in 1990, 1992-93 and 1995-96, respectively. Despite efforts made on the part of past governments, 50 percent of domestic edible oil consumption were met from imports in 2009-10.

Recent trends

Some of the initiatives undertaken by the government have yielded results. Average annual growth rate of areas under coarse cereals production increased from a negative 2.42 percent during 1990-91 to 1999-2000 to a negative 0.13 percent during 2000-01 to 2010-11 (see table 2). Average annual growth rate in areas under pulses cultivation increased from a negative 0.91 percent during 1990-91 to 1999-2000 to 2.30 percent during 2000-01 to 2010-11. The Economic Survey 2011-12 has asked for a breakthrough in pulses production technology so that supply can meet rising demand. The same Economic Survey has also warned that area under jowar cultivation in Maharashtra, Rajasthan and Gujarat, area under bajra cultivation in Maharashtra, Gujarat and Haryana and area under pulses in Maharashtra, Uttar Pradesh, Andhra Pradesh, and Rajasthan have witnessed shortfall during 2011-12 (2nd advance estimates) as compared to 2010-11.

Source: State of Indian Agriculture,


Press Note on Poverty Estimates, 2009-10, Planning Commission,  

Chapter 8: Agriculture and Food, Economic Survey 2011-12,

Budget Speech 2012-13 delivered by Pranab Mukherjee,

Highlights of Central Plan 2012-2013,

State of Indian Agriculture,

Accidental Deaths & Suicides in India-2010,

Rainfed Agriculture: Unlocking the Potential (2009)-edited by Suhas P Wani, Johan Rockström and Theib Oweis, CAB International, ICRISAT and IWMI,

To the hungry, god is bread-MS Swaminathan, The Hindu, 1 October, 2011,

Elucidation of the 4th National Report submitted to UNCCD Secretariat, 2010, Ministry of Environment and Forests, GoI,

Weathering the Perfect Storm by William D Dar,

President for out-of-box solutions to deal with farming issues, The Economic Times, 16 February, 2012,

Millet group demands local sourcing clause in Food Security Bill, The Hindu Business Line, The Hindu Business Line, 9 December, 2011,

Pranab Mukherjee looks east for 2nd green revolution, The Times of India, 29 March, 2012,