the international journal of analytical and experimental...

POVERTY AND INEQUALITY IN INDIA AN INTER-STATE ANALYSIS

Dr. T.K.S. Villalan,

ASSOCIAT PROFSSOR & Head,

Post- Graduate& Research, Department of Economics,

Pachaiyappa’s college,

Chennai-30

Mr. A. Vinayagam

Full Time Research scholar

Post- Graduate& Research

Department of Economics

Pachaiyappa’s college

Chennai-30

INTRODUCTION

In India, the question of poverty eradication and removal of regional imbalances has been

one of the major concerns before policy makers and planners. Where a lot of policies and

strategies have been made for the poverty eradication, regional equality has been a significant

objective of the national plans. But the sad reality is that despite electoral catchphrases like

―Garibi Hatad‖, ―India Shining‖ and ―Aam Admi‖ being campaign platforms during

elections, a determined assault on poverty and backwardness has in reality been low on the

list of national priorities. From 1973 to 2004, the poverty percentage has reduced by more

than half- from 54.9 percent to 23.6 perent. This gives one the notion that poverty is

declining steadily and soon there will be none of it. However, it is self serving only to look at

poverty rates because the decline of the actual number of people below the poverty line has

been less than a quarter -from 32 crore people to 25 crore people or an annual decline of only

0.81 percent. Considering that the absolute numbers of those officially deemed poverty

stricken has only decreased marginally since 1973, the notion that the problem of poverty is

being tackled is an ill-conceived one. Considering the economy grew at over 5 percent over

the same period, such a low rate of decline of poverty must be deemed unacceptable. It is not

surprising that the Planning Commission and the Government prefer not to talk about these

figures and instead dwell on the fact that the percentage of poor has declined to 26 percent

since reforms. Many experts even dispute this claim.

Same way, the another problem i.e. regional disparities in the level of growth experienced in

India, is a major challenge for policy makers and planners, as it produces serious threat to the

socio-political harmony of the country. States have experienced different pace of growth,

with some states showing fast progress and others languishing behind, although the national

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Volume XI, Issue X, October/2019

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growth has been remarkable for the past two decades. Moreover, faster economic growth has

seen rising inter-State. disparities. While India's higher-income States have successfully

reduced poverty to levels comparable with richer Latin American countries, its poorer States

- Assam, Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan, and Uttar

Pradesh - have not kept pace and are lagging behind their more prosperous counterparts. In

1983 more than 50 percent of the population in Orissa, Bihar, West Bengal and Tamil Nadu

were living below poverty line. By 2000, in West Bengal and Tamil Nadu the poverty ratio

declined by half but Orissa and Bihar continue to be the poorest states with nearly half of

their population being below poverty line. J&K, Himachal Pradesh, Haryana, Andhra

Pradesh and Maharashtra are other states which have achieved significant decline in

prevalence of poverty. The difference in rate of decline in poverty has resulted in widening of

the gap between states; for instance poverty ratio in Orissa is eight times higher than the

poverty ratio in Punjab. Thus there is much concordance between incidence of poverty and

state wise disparities in growth. Marginal reduction in HCR (Head Count Ratio) has come

along with unprecedented prosperity for a fortunate few. The states which were already in a

better footing experienced fast growth, while there has been no significant improvement in

the poorest few. Moreover, the proportion of people below poverty line is also not same for

rural and urban areas and all social groups and economic categories. Evidence suggests that

income inequality is rising and the gap in average per capita income between the rich and

poor states is growing. There is substantial disparity in social indicators between rich and

poor States, suggesting that not only income is low in the poorer States but also the quality of

life is worse. The persistence of lagging regions, with substantial concentration of the poor, is

raising concerns about social and political stability of these regions, with possible fallout for

the country as a whole.

OBJECTIVES OF THE STUDY

The specific objectives of the study are:

1. To review the state wise, social group wise and household’s type wise trends of incidence

of poverty in India.

2. To find out the relationship between state wise poverty ratio and state wise values of

indicators of development.

3. To find out the influence of various indicators of development on movement of poverty.

4. To review the trends in inter-state inequality in India.

RESEARCH METHODOLOGY

Data Collection

The study is completely based on secondary data collected from various reports of Planning

Commission, National Sample Survey organization, National Family Health Survey,

National Human Development Reports, Economic and Political Weekly Research



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Foundation, Census of India, RBI Bulletins, Economic Survey of India and various research

publications.

SIGNIFICANCE OF THE STUDY

In the present study an attempt has been made to discuss the problem of poverty and

inequality in India in detail. Results have been drawn on most of the aspects related to the

state wise analysis of poverty and inequality. The findings of the study may serve policy

makers, programme managers, departments of government and researchers associated with

the issue of poverty reduction and removal of state wise disparities in the country.

REVIEW OF LITERATURE

CONCEPTUAL FRAMEWORK OF POVERTY

Poverty as a public policy concern is now widely considered to be a multidimensional

problem at the global, national and community level. However, these dimensions of poverty

are more interrelated and complementary rather than substitutes.

The concept of poverty has a very long and diverse history. Early studies on poverty in the

20th century can be traced back to booth’s(1892) pauperism and analysis of town life in Row

tree’s(1901) work who initially defined poverty in terms of ―physical efficiency‖—a

physiological standard referring to a prescribed ―basket of goods‖. Rowntree’s definition

provides a framework for survey conducted by Bowley.

Nevertheless by 1965, another philosopher, Townsend, contradicted Rowntree’s definition

and adopted a relative rather than an absolute standard of poverty .Townsend and Smith

(1965) argued that individuals, families and groups in the population can be said to be in

poverty when they lack the resources to obtain the types of diets, participate in the activities

and have the living conditions which are customary or at least widely encouraged and

approved in the societies to which they belong

In Harrington’s (1962) ―the other American‖ and Galbraith’s (1958) ―the affluent society‖,

much was said to arouse the attention of the public, the politicians, and especially

academicians about the importance of poverty to economic development. The 1964 report of

the council of economic advisers set out a poverty line at $3000, drawing heavily on the

research of Orshansky (1965), with more emphasis on the level of disposable income, which

was reflected in macroeconomic indicators like Gross National Product (GNP) per capita and

with an emphasis on precipitate income growth.

In the 1970’s political debate especially within the World Bank and acadmic research in

major universities, helped reshape the whole concept of poverty. Further emphasis on relative

deprivation, inspired in the UK by Runciman, helped redefine Poverty as not just a failure to



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meet minimum nutrition or subsistence, but rather as a failure to keep up with the standards

prevalent in a given society. Another important shift at this time was a broadening of the

concept of income poverty to a wider set of basic needs, including those provided within the

socio-economic environment. Following the international labor organizations (ILO)

pioneering work in the mid 1970’s poverty came to be defined not just as lack of income but

also as a lack of access to health, education and basic social services deemed necessary for

survival.

ALTERNATIVE DEFINATIONS OF POVERTY:

Adam Smith (1776): By necessaries, I understand not only the commodities which are

indispensable necessary for the support of life but whenever the custom renders it indecent

for creditable people, even of the lowest order to be without. A linen shirt for example is

strictly speaking not a necessity of life. But in the present time-a creditable day, laborers

would be ashamed to appear in public without a linen shirt, the want of which would be

supposed to denote that disgraceful state of poverty.

Seeboham Rowntree (1899): A family is counted as poor if their total earnings are

insufficient to obtain the minimum necessities of merely physical efficiency.

William Bveridge (1942): In considering the minimum income needed by person of working

age for subsistence during interruption of earnings, It is sufficient to take into account food,

clothing, fuel, light and household sundries, and rent, though some margin must be allowed

for inefficiency in spending.

Ronald Henderson (1975): Insofar as poverty is defined by references to a minimum

acceptable standard of living, it is a relative concept. It requires a value judgement that must

reflect the productivity of the economy and community attitudes. The task of determining a

minimum standard of living is difficult given the variety of life styles and values in society

and the range of matters such as food, shelter, clothing, health and education that must be

considered.

Peter Townsend (1979): Individual’s families and groups in the population can be said to be

in poverty when they lack the resources to obtain the types of diet, participate in the activities

and have the living conditions and amenities which are customary, or at least widely

encouraged or approved in the societies to which they belong.

William Bveridge (1942)



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In considering the minimum income needed by person of working age for subsistence during

interruption of earnings, It is sufficient to take into account food, clothing, fuel, light and

household sundries, and rent, though some margin must be allowed for inefficiency in

spending.

Ronald Henderson (1975): Insofar as poverty is defined by references to a minimum

acceptable standard of living, it is a relative concept. It requires a value judgement that must

reflect the productivity of the economy and community attitudes. The task of determining a

minimum standard of living is difficult given the variety of life styles and values in society

and the range of matters such as food, shelter, clothing, health and education that must be

considered.

Peter Townsend (1979):

Individual’s families and groups in the population can be said to be in poverty when they

lack the resources to obtain the types of diet, participate in the activities and have the living

conditions and amenities which are customary, or at least widely encouraged or approved in

the societies to which they belong.

Amartya Sen (1992): Poverty is the failure of basic capabilities to reach certain minimally

acceptable levels. The functioning relevant to this can vary from such elementary physical

ones as being well-nourished, being adequately clothed and sheltered, avoiding preventable

morbidity etc to more complex social achievements such as taking part in the life of the

community being able to appear in public without shame and so on.

Deaton, Angus and Dreze, Jean (2002) examined the poverty ratio during 90s by measuring

head count ratio and poverty gap index based on the data from the consumption expenditure

survey of NSS, the CSO’s National Accounts Statistics, the Employment- Unemployment

surveys’ of NSS and data on agricultural wages and inequality for the time period during

1993-94 to 1999-2000. The authors conclude that 54th round survey based results reveal no

change in poverty during 1993-94 to 1998, but, the official counts based on 55th round reveal

that head count ratio declined from 36 to 26 percent during 1993-94 to 1999-2000. On the

other end, the adjusted estimates for head count index reveal around two third declines in the

official counts based poverty in rural area and about 90 percent decline in urban area. The

poverty gap index based measurement of poverty also reveals decline in poverty in both the

rural and urban areas. Further in regards to the inter-state inequality it is clear from the study

that it increased during 1993-94 to 1999-2000 due to the increase in divergence of per capita

expenditure across states (expenditure was more in the states from southern and western

regions). Further more rural urban disparities of per capita expenditure also rose. Thus the

study indicates towards a continuous decline in poverty and a significant increase in inter-

state inequality during the nineties.



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Datt, Gaurav, Kozel, Valerie and Ravallion, Martin (2002)

using an econometric model on state level poverty measures based on the data of NSS rounds

examined the rates of poverty reduction over the period 1994-2000. The authors conclude

that incidence of poverty declined from 39 percent in 1993-94 to 34 percent in 1999- 2000 or

at the rate of about 0.8 percentage point per year. Besides this, the authors traced state

specific elasticities of poverty to non farm output growth, yield per hectare, per capita

development spending and rate of inflation. They find that higher farm yields, higher

development spending and higher non farm output significantly contributed to the poverty

reduction. On the other hand, higher inflation rate significantly contributed to the increase in

incidence of poverty.

Deaton, Angus (2003) estimated poverty for 1999-2000 by adjusting the poverty estimate of the

55th round to make them comparable with earlier large rounds. He uses the expenditure data

on six broad categories namely- fuel and light, miscellaneous goods, miscellaneous services,

non-institutional medical services, rent and consumer cesses and taxes to get an idea of

poverty. He concludes that the adjusted rural poverty estimates were somewhat higher than

the official estimate of 27.1 percent. Most of states show a similar pattern, though in cases of

Madhya Pradesh, Orissa, Punjab and Tamil Nadu, the adjusted estimates were lower than the

official numbers. In case of urban sector, adjusted estimates were very close to the official

estimates. Across the states, some of the adjusted figure were lower and some higher than the

official figures. Notable changes were in Rajasthan and West Bengal where the adjusted

poverty counts were considerably higher than the official ones. Thus the results reveal that

the official poverty counts based on the 30-day recall period questionnaire are not seriously

misleading in urban area, though in the rural sector it appears that out of total decline

measured by the official estimates only around two-thirds decline in poverty is real.

Deaton, Angus in one more study in 2003 highlighted the trends on poverty for the period of

1987 to 2000 calculating his own price indexes and making use of these price indexes to

calculate a new set of poverty lines. His calculated inflation rates were somewhat lower than

those used by the planning commission; as a result, his rural poverty lines were also lower

than the official ones. Moreover his urban poverty lines were on an average 15 percent higher

than his rural poverty lines which were nearly 40 percent higher in the official liens. Further

the results of the study reveal that head count ratios showed a rapid decline in poverty rates,

by 1 percentage point a year from 1987-88 to 1993-94 and by 1.9 percentage points a year

from 1993-94 to 1999-2000. On the other hand urban head count ratio fell by 0.8 percentage

points a year from 1987-88 to 1993-94 and by 1.4 percentage points a year from 1993-2000,

which resulted to the persistent decline in poverty in both the rural and urban areas.



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Sundaram, K. and Tendulkar, Suresh D. (2003) analyzed poverty in India partly on the basis

of published result and partly on the basis of the unit-level records of the 50th and 55th

rounds of NSS using five indicators namely- Head Count Ratio (HCR), Poverty Gap Index

(PGI), Squared Poverty Gap Index (SPG, denoted as FGT*), Sen Index (SI) and Number of

Poor People. They also compare the 50th round with the 55th round by recalculating 50th

round with MRP (mixed reference period). They trace that in the case of rural India, over the

six -year period from January 1,1994 to January 1,2000 the Head Count Ratio declined by

close to 9 percentage points which was significantly higher than the average annual decline

in HCR , of 0.9 percentage points, between 1983 and 1994. Further the authors conclude that

the number of poor people declined by a average annual rate of 6.5 million during January

1,1994 to January 1,2000, which was 10 times more than the decline during July l, 1983 to

January1, 1994. The decline in terms of PGI, FGT* and Sen Index was also more during

January 1,1994 to January 1,2000 as compared to during July l, 1983 to January1, 1994.

Same trends were recorded in case of urban area.

Sundarm, K. and Tendulkar, Suresh D. (2003) highlighted the change in poverty during 1990s

for 15 major Indian states using the head count index, size of poor population, the poverty

gap index and squared poverty index. The results conclude that in terms of head count ratio

except from Assam in all other states poverty declined and weighted head count ratio

declined by 8 percentage points. The size of poor population declined by around 45 million at

an average rate, per annum weighted average PGI and FGT also declined by 28 and 35

percent, respectively. Except from Orissa, Madhya Pradesh and Assam in all remaining 12

states reduction in head count ratio, the size of poor population, the poverty gap index and

squared poverty gap index remained more during 1990s as compared to 1980s. Thus a

significant reduction in poverty took place during 1990s.

Sen, Abijit and Himanshu (2005) examined the poverty and inequality in India during 1990s

and compared the results of the 55th round of NSS with earlier rounds. Authors conclude that

poverty reduced very slowly during 1990s and the reason was the increase in inequality

during this time period. Results from unadjusted 55th round based on the official poverty line

reveal a fall of 8 and 11 percentage points in rural and urban poverty. Moreover the 55th

round poverty ratio was lower than the ratio of the earlier rounds. However, the number of

poor increased in 29 rural and 42 urban regions out of 58 NSS regions in major states.

Quinqnennial comparison suggests that urban poverty reduced very rapidly in the late 1980s

but very slowly during 1990s. Pace of reduction in rural poverty also declined from 1-1.5

percentage per annum during 1970s and 1980s to 0.5 percentage points in the 1990s and the

reason was an increase in inequality during 1990s. Furthermore the Urban Rural gap

increased as increase in cereal prices led to transfer of income from the poor to the rich for

most of the 1990s.



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Hintanshii (2007) traced the trends in poverty and inequality based on comparable uniform

reference period for major states and all India for the 38th, 43rd, 50th and 61st rounds of

NSSO using Head Count Ratio, Poverty Gap Index, Squared Poverty Gap Index and Gini

Ratios. It is evident from the study that although poverty did reduce between 1993-94 and

2004-05, the pace of poverty reduction was lower than in the previous two decades. The pace

of poverty reduction fell from 1.1 percent point per annum during 1973-88 to only 0.6

percent point per annum during 1987-2005 and 0.7 percent point per annum during 1993-

2005.Further Himanshu analyzes inequality using Gini ratios. Results highlighted that

inequality increased between 1993-94 and 2004-05 in both the rural and urban areas as well

as at the all India level. However in rural areas reverse trend is seen in case of Bihar,

Jharkhand, Karnataka, Madhya Pradesh and Rajasthan where inequality declined during the

same period of time. Furthermore it has been established by the results of the study that most

of the poverty reduction between 1993-94 and 2004-05 had occurred in the period after 1999-

2000, despite lower growth of wage rate and agricultural output during 1999-2000 to 2004-

05. The reason as explained was the high food price increase between 1993-94 and 1999-

2000, which nullified much of the poverty reduction that could be expected from the

improvements in wages and agricultural productivity. On the other hand, food price growth

decelerated sharply between 1999-2000 and 2004-05 which resulted in the rapid poverty

reduction despite lower growth of wage rates and agricultural output during this period of

time.

Sundaram, K. (2007) has made an attempt to examine the trends of poverty in India using head

count ratios based on the 61st round consumer expenditure survey of the National Sample

Survey (NSS) for the time period from 1994 to 2000 and 2000 to 2005. The study concludes

that head count ratio of households below the poverty line declined in both the rural and

urban areas during both the time periods. The decline was more in urban area during the first

time period i.e. 1994 to 2000 and in rural area during the second time period i.e. 2000 to

2005. Moreover in rural area the rate of decline was higher during 2000 to 2005 as compared

to first time period i.e. 1994 to 2000. On the other hand, in urban area the rate of decline in

poverty was lower in the second period of time as compared to the first period of time.

Nayyar R. (2004) has highlighted relationship between state wise growth rate and reduction in

poverty, during the post reforms period. The author finds no positive relationship between

growth rate and poverty reduction. Many states where growth rate has remained very high,

have not shown rapid reduction in poverty, while in the states where growth rate remained

slow, have shown higher reduction in poverty, which clearly indicates towards the impact of

other factors on incidence of poverty. Besides this, the author concludes that even in the high

growth states, which have done well in poverty reduction, backward regions and

communities witnessed little poverty reduction. And a high positive correlation has been

found between poverty reduction and physical infrastructure.



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Purfleld (2006) using data for 15 largest Indian states during 1973-74 to 2002-03 analyzed the

variation of growth across states in the form of income gap between rich and poor states. It

was found that the faster growing states have remained more effective in reducing poverty.

On the other hand, the poor states have not been much successful in reducing poverty. The

author further concludes that differences in policies adopted by states, failure of poor states

in generating private sector jobs and failure of labour and capital flow to close income gap

have remained the reasons behind inter-state imbalances in terms of growth.

Finding of the study

From the data on numbers and percentages of poor population in fifteen major Indian states in

1983, it is evident from the table that the all-India percentage of poor people was 44.48 percent

with Six out of fifteen states-namely Bihar, Madhya Pradesh, Orissa, Tamil Nadu, Uttar Pradesh

and West Bengal-recording a percentage higher than the national average. The highest

percentage was in Orissa, where 65.29 percent people were poor and the lowest was in Punjab,

where it was 16.18 percent.

It has been observed that the percentage of poor people was higher than the national average in

Bihar, Madhya Pradesh, Orissa, Tamil Nadu and Uttar Pradesh, in each case including the all

India, rural India and urban Indian. Furthermore, it is clear that Uttar Pradesh registered the

highest percentage at the all India level and rural India but in urban India it was highest in

Madhya Pradesh. However the lowest percentage was recorded in Punjab in each case and Uttar

Pradesh repeatedly registered the largest number of poor people. Moreover both the number as

well as percentage of poor people was high in rural area as compared to urban area.

In 1993-94 at the all-India level 35.9 percent people were living below poverty line; a higher-

than-average percentage was recorded in Assam, Bihar, Madhya Pradesh, Maharashtra, Orissa

and Uttar Pradesh. The highest percentage was in Bihar, where 59.96 percent people were poor.

In contrast, the lowest percentage was in Punjab, where just 11.77 percent were poor. With

regard to the rural areas it was found that 37.27 percent people were poor which is marginally

higher than the combined value (urban and rural). Seven states-namely- Assam, Bihar, Madhya

Pradesh, Maharashtra, Orissa, Uttar Pradesh and West Bengal recorded a percentage higher than

the national average. Bihar again registered the highest percentage with 58.21 percent people

living below poverty line.

The lowest percentage was again recorded in Punjab, where 11.95 percent people were poor.

Further, in relation to the urban areas it can be observed that 36.36 percent people were living

below the poverty line. In the states of Andhra Pradesh, Bihar, Karnataka, Madhya Pradesh,

Maharashtra, Orissa, Tamil Nadu and Uttar Pradesh this percentage was higher than 36.36

percent. The higher percentage was recorded in Madhya Pradesh, where 48.38 percent people



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were poor. The lowest percentage occurred in a Assam where the percentage of poor people was

7.3 percent.

Data on the annual compound growth rates of the per capita GSDP at current prices in fifteen

major Indian states from the years 1980-1981 to 2005-06 depicts that from 1980-81 to 1985-86

the all-India annual compound growth rate in per capita GSDP at current prices was 11.16 per

cent per annum, with five of the fifteen states – namely Assam, Bihar, Haryana, Punjab and

Tamil Nadu -recording a value greater than the all-India average. During 1985-86 to 1990-91

this rate marginally rose to 11.80 per cent per annum; the growth rates of all other states except

Assam, Bihar and Orissa were greater than the all-India growth rate.

From the data on state wise percentage of population below poverty line it can be inferred that

the percentage of people below poverty line continuously declined during this period except for

one year during 1999-2000 to 2004-05. In 1973-74 the percentage of poor people was 54.9

percent. It fell to 27.5 percent in 2004-05. The largest percentage of poor people was

continuously recorded in Orissa except for one year i.e. 1993-94. In this year the highest

percentage was recorded in Bihar. Moreover, the top four positions in terms of the largest

percentage of poor people were repeatedly occupied by Orissa, Bihar, Madhya Pradesh and Uttar

Pradesh. On the other hand in Haryana, Punjab, Andhra Pradesh, Gujarat and Rajasthan this

percentage remained comparatively low for all the years

Provides information about state wise rural consumption expenditure from the year 1983 to

2004-05. A close perusal of the data reveals that the highest expenditure was recorded in Punjab

in 1983 and 1993-94 and in Kerala in 1999-2000 and 2004-05. At the other end, the lowest

expenditure for 1983 and 1993-94 was in Bihar. However, in 1999-2000 and 2004-05 the lowest

value was recorded in Orissa.

The all-India unemployment rate increased from 6.09 percent in 1987-88 to 7.32 percent in

1999-2000, and states show very wide variation from 2.86 percent in Madhya Pradesh to 21.14

percent in Kerala in 1987-88 and from 1.33 and 3.06 percent in Rajasthan to 15.50 and 20.77

percent in Kerala in 1993-94 and 1999-2000, respectively.

Provides information about the state-wise literacy rate in fifteen major Indian states from 1981 to

2011. It is evident from the data that the all-India literacy rate was 43.6 per cent in 1981, 52.5 per

cent in 1991, 64.8 per cent in 2001 and 74.04 percent in 2011. The highest literacy rate for the

states examined consistently appeared in Kerala, where the value grew from 60.4 in 1981 to

93.91 per cent in 2011. In 1981 the literacy rates of Gujarat, Haryana, Karnataka, Kerala,

Maharashtra, Punjab, Tamil Nadu and West Bengal were greater than the all-India rate and only

seven states registered values lower than the national average. In 1991 the states with lower-



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than-average literacy rates were Andhra Pradesh, Madhya Pradesh, Orissa, Rajasthan and Uttar

Pradesh. In 200land 2011 the literacy rate was recorded as higher than the all-India value in

Gujarat, Haryana, Karnataka, Kerala, Punjab, Maharashtra, Tamil Nadu and West Bengal.

Data on state wise percentage of total cropped area irrigated in fifteen major states of India

reveals that the all-India percentage of total cropped area under irrigation was 29 percent during

1980-83, with six of the fifteen states -namely Haryana, Punjab, Uttar Pradesh, Bihar, Andhra

Pradesh and Tamil Nadu -recording a value greater than the national average. During 1990-93

the all-India percentage rose to 36; the same six states and one more i.e. west Bengal registered

the values greater than this percentage. The national increase in this percentage continued during

2003-06 with an average value of41 percent; the values in Haryana, Punjab, Uttar Pradesh,

Bihar, West Bengal and Tamil Nadu were greater than the national average.

SUGGESTIONS

The constitutional directives in India make it binding to remove inter-state disparities in the

country and to bring all the units in the federation to a national minimum level in respect of

certain basic social and economic services.23 As a result, removal of regional disparity has

been an acknowledged goal since the Second (1956- 61) and Third (1962-66) Five-Year

Plans of India. Moreover, the issue of regional balance has been directly or indirectly

addressed in almost every Five-Year Plan in India since the Second Plan (1956-1961) till the

recent eleventh Plan (2007-2012). The adoption of planning and a strategy of state-led

industrialization were intended to lead to a more balanced growth in the country. Besides

this, the improvement in the socioeconomic conditions of the people, at large, and mitigating

the impact of socioeconomic ills like incidence of poverty, regional backwardness,

unemployment, morbidity to name a few, have always figured at the core of Indian planning

since its inception in the early 50s. This approach has been realized through policies designed

to facilitate more investments in the relatively backward areas. It was expected that inter-

state disparities would be minimized in the long run. However, the perception is that regional

imbalances have actually been accentuated, particularly over the period of economic reforms

1991-2011. Despite sustained high economic growth rate, approximately 80 percent of its

population lives on less than $2 a day (PPP). A quarter of the nation's population earns less

than the government-specified poverty threshold of $0.40/day. 27.5 percent of the population

was living below the poverty line in 2004-2005. Wealth distribution in India is fairly uneven,

with the top 10% of income groups earning 33 percent of the income.24 over the period of

time, it became obvious that, growth by itself, was unlikely to eliminate and resolve poverty

and other social issues confronting the society and the benefits of economic development

were not being adequately reflected in per capita terms due to unprecedented and

uncontrolled growth in population, levels of unemployment, regional backwardness etc.

India’s trajectory over the last sixty years has been remarkable, but there will be reason to



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truly celebrate this when the overall gains filter down to the poorest and the most deprived

sections of India’s vast population.

A number of studies substantiates that, economic development, has not been able to solve

major problems like poverty, hungers, malnutrition, disparities of income, slums, inequality

and poor health. Though, there has been a rise in per capita real income levels, however, the

benefits of economic growth has failed to reach the majority of population. A marked

dichotomy between the forward and backward groups of states has been emerging. The

forward states are characterized by better demographic and social development, higher per

capita incomes and more developed economies, lower level of poverty, higher level of

revenue receipts and state government expenditure on plan and non-plan, higher per capita

resource flows and private investment and significantly better infrastructural facilities. On the

other hand, the backward states are characterized by lower level of demographic and social

development, lower per capita incomes and backward economies, higher level of poverty,

lower level of revenue receipts and lower state government expenditure on plan and non-

plan, lower per capita resource flows and private investment and underdeveloped

infrastructural facilities. While the advanced industrial states have tended to leapfrog in the

reform years, other states have lagged behind.

The regional disparity in the growth rates becomes sharper in terms of per capita income.

The poorer states have not only performed poorly but their failure to stem population growth

has left them in even worse position. The growing regional disparity in the post-reform

period is now a matter of serious concern. With deregulation of private investment, faster

growth in turn would induce more investment, and this in turn would further accentuate

regional disparity.

The problem is compounded by the negative relationship between population growth and

income growth during the 1990s. Unfortunately, backward states with higher population

growth are not able to attract investment - both public and private - due to a variety of

reasons, like poor income and infrastructure and probably also poor governance.

Evidence suggests that income inequality is rising and that the gap in average per capita

income between the rich and poor states is growing. There is substantial disparity in social

indicators between rich and poor states, suggesting that not only income is low in the poorer

states but also the quality of life is worse. The persistence of lagging regions, with substantial

concentration of the poor, is raising concerns about social and political stability of these

regions, with possible fallout for the country as a whole. And as the main reason behind all

these facts is that all parts of the country are not equally well endowed to take advantage of

growth opportunities, and since historical inequalities have not been eliminated, it is

necessary to identify the causative factors behind continued backwardness of certain states so

that planned intervention could be made to ensure that large regional imbalances do not



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occur. Policymakers and development analysts have to give more attention on the disparities

in levels of development between different sections of the population and different regions in

India.

REFERENCE

1. Census of India, 1991. .

2. Census of India, 2011.

3. Deaton and Tarrozi (2000), ―Prices and Poverty in India‖, Research Programme in

Development Studies, Princeton University, Processed.

4. Deaton (2008), ―Price Trends in India and Their Implications for Measuring Poverty‖,

Economic and Political Weekly, 9 February.

5. Deaton, A. and Dreze, J. (2002), ―Poverty and Inequality in India: a Re-examination‖.

Economic and Political Weekly, 7 September 2002.

6. Dreze, J., and Sen, A. (Eds). (1996), ―Indian Development, Selected Regional

Perspectives‖, Clarendon Press, Oxford

7. Derived by the authors using the data provided by various rounds of NSSO on the

Consumer expenditure survey

8. Deaton, A and Dreze (2002), ―Poverty and Inequality in India- A ReExamination‖,

Economic and Political Weekly, September 7.

9. National Sample Survey organization,

10. National Family Health Survey,

11. National Human Development Reports,

12. Economic and Political Weekly Research Foundation,

13. Census of India,

14. RBI Bulletins,

15. Economic Survey of India and various research publications.



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