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BA LLB 2nd semester Economic notes:Have Economic Reforms Bypassed the Poor

BA LLB 2nd semester Economic notes: Have Economic Reforms Bypassed the Poor

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Have Economic Reforms Bypassed the Poor?


Economists generally believe that as a country progresses economically, its cumulative wealth increases over a period of time, the benefits of which eventually reach all sections of the society. This is based on the assumption that the benefits of growth ‘trickle’ down to the poor. However, it is now believed that this does happen not through the ‘trickle down’ process but when the middle class and poor try to seek and find new avenues for economic participation in order to derive benefits of growth.

The question arises-has this been happening in India? In other words, have the poor benefited from the country’s high economic growth rates over the past few years?                                           The National Sample Survey (NSS) of households suggests that the proportion of people below the poverty line has remained more or less unchanged at around 36 percent in the 1990s. It also suggests that the consumption levels in all groups have improved very little, so inequalities remain more or less unchanged. This means that the rich have also stagnated along with the poor in the 1990s.


However, the Central Statistical Organisation (CSO) figures tell a totally different story. They show a record economic annual growth of over 6 percent Since 1992. According to the CSO data, per capita availability of cereals has increased from around 150 kg per year to 170 kg. But the NSS data shows that there has been a fall from 164 kg to 145 kg per capita in the same period.

The wage of rates unskilled agricultural workers (adjusted for inflation) rose sharply by an average of 4.6 percent annually in the 1980s (believed to be a major reason for the fall in poverty during the time). They continued to rise in the 1990s at a modest rate of 2.4 percent annually. This is not consistent with stagnation in poverty. It could however mean a slower rate of reduction in poverty. Poverty depends on the casual wage rate and the number of days worked: both of which have increased in recent years.

The NCAER, which also conducts household surveys, finds that the proportion of low-income houses in rural areas declined substantially from 58.8 percent in 1988-89 to 48.9 percent in 1995-96. It also shows that ownership of consumer durables (television, refrigerator, cars) has increased in every income group.

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