globalization-impact-ind-Ravi-presentation

8/8/2019 globalization-impact-ind-Ravi-presentation

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IMPACT OF GLOBALIZATION

AND RECESSION ON SOCIALAND ECONOMIC INEQUALITIES

IN INDIA

C. Ravi

Centre for Economic and Social Studies

The views expressed in this paper/presentation are the views of the author and do not necessarily reflect the views or

policies of the Asian Development Bank (ADB), or its Board of Governors, or the governments they represent. ADB does notguarantee the accuracy of the data included in this paper and accepts no responsibility for any consequence of their use.

Terminology used may not necessarily be consistent with ADB official terms.


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CONTEXT

Severe BOP crisis of late eighties

Economic reforms initiated in 1990shave unleashed the growth potential ofIndia

Deregulation of Industry

Promoted Foreign Investment

Trade LiberalizationAttained a high growth trajectory

Sustainable


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CONTEXT

Remarkable spread of IT and

communication technology

Also raises some concerns

- Inter-state disparities- Rural-Urban Differentials

- Inequalities

- Income and non- income poverty

Imperative to monitor these


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OBJECTIVES

Review recent trends in

- Inter-state disparities

- Rural-urban differentials

- Inter personal Inequalities- Social Inequalities (to be incl.)

- Poverty

Impact of growing disparities on

Poverty


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REGIONAL INEQUALITIES

Large variations in GSDP growth

Low growth rates in States with high

concentration poverty

Interstate variation on riseGini Coefficient of regional

inequality increasing

Increases are sharper after 1993-94


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REGIONAL INEQUALITIES


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RURAL-URBAN DIFFERENTIAL

CSO has been compiling estimates of Rural and

Urban income at subsector level Possible to construct long time-series

Agricultural income is almost entirely rural

Rural share in Industry stagnant at 37% in theeighties increased later to reach 47%

Service sector share of rural areas declined

marginally from 36% to 44% during 1980-1994,

but declined sharply to 24%

Share of rural India in total income comes down

from 58% to 45% during 1980-2005


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SHARE OF RURAL AREAS IN

NATIONAL INCOME-

SECTORS/TOTAL


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RURAL-URBAN DIFFERENTIALS

The per capita income in urban areas as % of

rural per capita income was 220% in the early1980s

it became 250% in the mid nineties

By 2005-06 it became more 300% Major factors responsible

Low growth in Agriculture

Shrinking rural share in services- the fastest

growing sector


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RURAL-URBAN DIFFERENTIAL IN

PER CAPITA INCOME


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RURAL-URBAN DIFFERENTIALS

(CONSUMPTION)

NSSO consumption data for 1983 to 2004-05

Differentials computed for bottom30%, Middle40% and Top 30% separately

Consumption differentials are lower than income

differentials but increasing Differentials among the rural-urban poor lower

than for richer groups

Even for the poor the differentials are increasing

The differentials for the top 30% increasing

faster


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RURAL-URBAN CONSUMPTION

DIFFERENTIALS


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CONSUMPTION INEQUALITIES

Gini coefficient using NSS data 1974-2005

Inequalities have always been higher in urbanareas

Stable till 1990 in both rural and urban

Show upward movements in later period Sharper increases in urban areas

Mixed trends across states

Except a few, inequalities increased between1993-2005 in al states

Urban inequalities have increased faster for allthe states


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TRENDS IN CONSUMPTION

INEQUALITIES


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SOCIAL INEQUALITIES

To be added


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POVERTY

All the three measures of Poverty (HC, PG and

FGT) show reduction in the incidence of povertyover the last three decades in both rural and

urban areas

Decline in severity of poverty is faster than the

extent or depth of poverty

Abysmal if numbers are considered- total poor

declined from 323 million 301 million in 30 years!

The rates of decline in poverty not in tune withthe high growth achieved in recent periods


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POVERTY

Incidence of poverty varies largely across states

in both rural and urban areas There have been no major changes in the relative

rankings of states (1983, 1993-94 and 2004-05)

Coefficient of variation of HCR increased

between 1983 and 2004-05- No convergence

The poorer states have not exhibited any

significant improvement in poverty reduction

Increasing concentration poverty in few states


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% DISTRIBUTION OF POOR ACROSS

STATES


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POVERTY

Four states - Bihar, Madhya Pradesh, Orissa and

Uttar Pradesh accounted for half of Indian poorin 1983

Their share increased to 61% in 2004-05

Punjab, Haryana, Himachal Pradesh and Jammu

and Kashmir account for only 2% of Indias poor

in 2004-05

Maharashtra- one of the highest per capita

income states is increasing its share of poor overtime- 9% in 1983 to 10% in 2004-05


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GLOBALIZATION AND

INEQUALITY AND POVERTY

If the policy of Globalization improves both

growth and distribution poverty wouldunambiguously reduce

If growth is accompanied by adverse distribution

effect, it would dampen the impact of growth on

poverty

What has been the experience of India in this

regard?

Simulation exercise to isolate the effect of interpersonal, rural-urban inequalities and growth on

poverty


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DECOMPOSITION OF CHANGES IN

POVERTY

Uses Lorenz functions of form L(p)=p-apb(1-p)c

estimated for rural urban distribution separately Decomposition considers

- Per capita expenditure (MPCE)

- Inequality (G)

- Rural-urban differentials (R)

- Urbanization(U)


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POVERTY

Reduction in all India Poverty (Rural + Urban)

between 1983-93-94 = 8.6 percentage points(ppt)reduction due to growth in MPCE = 8.47ppt

reduction due to Rural/urban diff = neg.

reduction due to Inequality = neg.

Reduction in all India poverty between 1993-94

and 2004-05 = 8.1 ppt

reduction due to growth in MPCE = 12.1 ppt

reduction due to Rural/urban diff = - 1.0 ppt

reduction due to Inequality = - 3.3 ppt.


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DECOMPOSITION OF CHANGE IN

HCR


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POVERTY

Marked differences in the sources of reduction of

poverty during the periods 1983/94 and1993/2005

In 1983/94 entire reduction is due to growth with

no adverse impact of inequalities

In 1994/2005 almost one third of the growthimpact is offset by rising rural-urban

differentials and inequalities

There are variations across states in sources ofreduction of poverty


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POVERTY

Himachal Pradesh, Jammu and Kashmir,

Maharashtra and West Bengal changes ininequalities had adverse impact of poverty

reduction even in 1983/94

In 1993/2005 almost all the states, the growth

impact on poverty was blunted by the risinginequalities and rural/urban dichotomies

Even is some of the poorer states like Orissa,

Madhya Pradesh and Assam, reduction would

have been considerable but for the adverse

inequalities


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CONCLUSIONS

The Post reform period has seen some

achievements and some adverse consequences Indian growth rate accelerated to 7.3% during

2000-08

Balance of payments and foreign exchange

reserves showed considerable improvements

The achievements were accompanied by

increasing regional and personal inequalities

These developments had adverse impact onpoverty reduction

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