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close this bookNews & Views - A 2020 vision for food, agriculture, and the environment - September 1999: Pushing back Poverty in India. (IFPRI, 1999, 10 p.)
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Pushing Back Poverty in India

In August 1999, India's population reached 1 billion, and by 2035 experts project that India will overtake China as the world's most populous country. But India already holds first place in another category: the country is home to the world's largest number of poor people. Today an estimated 350 million out of 1 billion Indians fall below the poverty line. This number represents enormous human suffering: While India claims self-sufficiency in production of grains, two-thirds of Indian children under age 5 are malnourished infant mortality is 65 per 1,000 live births compared with 33 for China. Adult literacy rates of 65 percent for men and 38 percent for women fall far short of those in China - 90 percent for men and 73 percent for women.

To be sure, India has reduced the share of its people living in poverty significantly, from 55 percent in the early 1970s to about 35 percent today, but India's record of poverty reduction pales when compared with that of other Asian countries. Indonesia, for example, slashed the proportion of its population living in poverty from 58 percent in 1970 to just 8 percent in 1993 (although the Asian economic crisis has set the country back significantly). China reduced the incidence of absolute poverty within its borders from 270 million in 1978 to 65 million in 1996.

Studies show that economic growth, particularly agricultural growth, has been the main source of poverty alleviation in India. "In the areas where growth has been strongest, poverty has fallen the most. The problem is that by itself it's not enough," says Pranab Bardhan, professor of economics at the University of California at Berkeley. G. S. Bhalla, coauthor of a forthcoming 2020 Vision discussion paper on India's food balances, says, "The underlying sources of agricultural growth during the past quarter century have largely run their course, and new sources of production growth must be found."

Can India achieve its own economic miracle, pushing back poverty and stimulating a vibrant economy with opportunities for all of its people? The task for India's policymakers is to recharge agricultural growth, enabling poor people to contribute their skills and energies to the country's economic activities and to reap the benefits of economic success.

The Record on Growth and Poverty

When India achieved independence in 1947, about half of its people lived in poverty, and for the next two decades, poverty remained entrenched. "Before the 1970s, growth did not help poverty, mainly because the rate of growth was far too slow to have any impact," says Siddiq Osmani, professor of development economics at the University of Ulster, Belfast. "After 1970 growth picked up, not by East Asian standards, but by India's own standard. And since growth was especially strong in agriculture, on which most of the rural poor depend, poverty did decline, from about 55 percent in 1973 to about 33 percent in 1993."


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What was behind the falling poverty rates? The key was the Green Revolution, in which farmers used improved crop varieties, fertilizers, and irrigation to raise crop yields and accelerate agricultural growth. The government's investments in new technologies and infrastructure together with the farmers' efforts in the fields averted a predicted famine and helped pull millions out of poverty.

Poverty did not fall evenly throughout India, however. In 1990-91, less than 20 percent of the population of Punjab and Haryana was poor, compared with nearly 60 percent in Bihar. States that managed to make a sizable dent in poverty followed one of two strategies. One was rural economic growth. Punjab and Haryana, for example, benefited from the agricultural growth stimulated by the Green Revolution. As yields rose, poor farmers and even landless agricultural workers reaped the benefits. The second strategy was development of human resources, through education. Kerala stressed universal education, but its economy did not grow enough to absorb all of the skilled labor. As a result many workers migrated abroad, and their remittances helped reduce poverty in Kerala.

"No Indian state effectively combined both approaches. Research suggests that if any state had done so, it would have achieved rapid reductions in poverty, comparable to the progress made in a number of East Asian countries," says Martin Ravallion, lead economist in the Development Research Group of the World Bank.

In the early 1990s, India experienced a balance of payments crisis. In response, the government devalued the rupee, cut government spending, and raised interest rates. Rural poverty increased temporarily and then returned to its pre-reform level, where it has remained. "Overall, the post-reform period has seen no reduction in rural poverty, unlike the decade and a half preceding the reforms, although GDP growth has been similar, and in fact better since 1992," says Abhijit Sen of the Center for Economic Studies and Planning, -Jawaharlal Nehru University. According to Sen, the reasons are several. "Agricultural growth has been somewhat slower in the 1990s than in the 1980s. Cuts in public spending have slowed the extension of the Green Revolution to the poorest regions and, restrained the growth of rural infrastructure and rural nonagricultural opportunities. Also, the relative price of cereals has increased considerably during the 1990s, compared to the reduction of the 1980s."

The Promise of Agricultural Growth

"The important poverty story in India is the rural sector," says Ravallion, "In terms of sheer numbers, this is where the poverty problem lies." Three out of four of India's poor live in the rural areas. "Urban poverty has fallen somewhat in recent years, but rural poverty has not," says Ravallion.

"There are still big disparities between regions," says Gaurav Datt of the World Bank, "and that speaks to a lot of potential for growth."

Given the persistence of rural poverty, many experts agree that the key to reducing poverty in India is agricultural growth, accompanied by strong nonagricultural growth that reaches the rural poor. Moreover, research conducted by Ravallion and Datt has shown that economic growth in rural areas tends to help the poor in both the country side and the cities.

But Benoit Blarel, an economist with the World Bank, is concerned that substantial rural growth may be hard to come by. "The historical sources of growth and poverty reduction in rural India are now difficult to find. Rapid technological change, massive public investments, declining food prices, and agricultural diversification are no longer there to support rural growth, raise wages, and reduce rural poverty. These historical sources of growth have been undermined by lopsided public spending, especially on subsidies that do little for either growth or poverty. And even with 300 million poor people, much-needed reforms are politically difficult."

Peter Hazell, director of IFPRI's Environment and Production Technology Division and a coauthor with Bhalla of the forthcoming 2020 discussion paper, agrees: "Further expansion of irrigated area will be more costly, and agriculture must increasingly compete with other water users such as industry and urban households for limited water resources. The Green Revolution technologies have also already spread widely in the areas where they are most economic, so there is limited scope for further production gains from the greater use of improved varieties and fertilizer."

The potential for agricultural growth differs for different growing conditions in India, says Hazell. Irrigated areas were the source of the rapid growth during the Green Revolution, but productivity growth is stagnating in these areas, partly because the biggest gains have already been made and partly because intensive irrigated farming is leading to environmental stresses like salinity and waterlogging of soils. Use of new varieties, better crop management, and better management of irrigation water could help raise yields in irrigated areas.

Nonirrigated areas fed by rain may offer the most promise for agricultural growth. Rainfed areas can be divided into high-potential areas with good rainfall and fertile soils and low-potential areas that get little and uncertain rain. "On the whole," says Bhalla, "high-potential rainfed areas may represent India's easiest option for expanding production. Historical trends suggest that improved varieties and inputs will continue to spread to these areas, and continued improvements in infrastructure and increases in education will also help raise returns to agriculture."

In the low-potential rainfed areas, farmers produce mainly sorghum, millet, and pulses. Some higher-value activities, such as oilseeds and dairying, have expanded in those areas in recent years in response to favorable incentives, and this raises some hopes for the future. "But generally, technical solutions here are less clear than in the more favorable environments, and output growth is likely to be limited," says Hazell.

A recent IFPRI study shows that additional investment in agricultural R&D and rural infrastructure in rainfed areas, even many lower-potential areas, now offers higher returns for growth and poverty alleviation than additional investments in many irrigated areas. "These results reflect the high levels of investment that have already been made in irrigated areas, their stagnating productivity growth, and the past neglect of many rainfed areas," says Hazell, one of the coauthors of the study. Coauthor Shenggen Fan, an IFPRI senior research fellow, cautions, "Rainfed areas will need better natural resource management to avoid the same environmental problems that are contributing to stagnant yield growth in irrigated areas."

Another IFPRI Study found that investing in more agricultural R&D and in more rural roads may be two of the most important steps toward raising growth and lowering rural poverty. "Our work shows that government investment in agricultural R&D is more effective than any other kind of investment at boosting agricultural growth, by producing new technologies for farmers," says Hazell. According to Fan, lead author of the study, "We found that marginal investments in roads have the biggest impact on rural poverty. This is because roads improve access to markets and reduce transport costs, they help people reach new jobs, they help kids get to school, they help farmers get access to new technologies. Lack of roads can be a big bottleneck for development."

Making the Poor Full Participants

Clearly, reaching India's millions of rural poor will require jump starting growth in the rural areas. Squeezing more productivity growth out of India's agricultural lands will be far from simple, but the task is crucial. Beyond producing more food and bringing more income to farmers and agricultural workers, agricultural growth can help revitalize the entire rural economy, including activities outside of agriculture.

"In the long run, creation of well-paying productive employment in the nonagricultural sector is the solution," says Kirit Parikh, director of the Indira Gandhi Institute of Development Research in Mumbai. "For that, human capital has to be built up through education."

Even the poorest and least-favored areas will require investment in their agricultural and nonagricultural economies, says Sen "The poverty reduction impact of overall growth is larger if nonagricultural growth generates jobs and if the rural poor have access to them. This in turn is more likely if nonagricultural growth is regionally dispersed," he explains. The state has an important role to play in providing agricultural research, infrastructure, education, and social security. "Obviously, the ability of the state to play these essential roles depends on the resources at its disposal, and since growth eases the resource constraint, these are more likely to be undertaken if the overall GDP situation is better."

As India passes the 1 billion mark, the future of its 350 million poor people hangs in the balance, subject to the decisions of policy leaders: Whether their future will be one of increasing prosperity, food security, and improved quality of life or instead a continuing struggle against grinding poverty depends on the steps decisionmakers take now.

Reported by Heidi Fritschel with Uday Mohan.

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