Why Has Economic Growth Been More Pro-Poor in Some States of India than Others?

Abstract

We use 20 household surveys for India's 15 major states spanning 1960?1994 to study how the sectoral composition of economic growth and initial conditions interact to influence how much growth reduced consumption poverty. The elasticities of measured poverty to farm yields and development spending did not differ significantly across states. But the elasticities of poverty to (urban and rural) non-farm output varied appreciably, and the differences were quantitatively important to the overall rate of poverty reduction. States with higher elasticities did not experience higher rates of non-farm growth. The non-farm growth process was more pro-poor in states with initially higher literacy, higher farm productivity, higher rural living standards (relative to urban areas), lower landlessness and lower infant mortality.

Keywords: Poverty, Inequality, Economic growth, Rural development, Human development

JEL Classification: I32, O15, O40