Why Have Some Indian States Done Better than Others at Reducing Rural Poverty?

Experience in India suggests that reducing rural poverty requires both economic growth (farm and nonfarm) and human resource development.The unevenness of the rise in rural living standards in the various states of India since the 1950s allowed Datt and Ravallion to study the causes of poverty.They modeled the evolution of average consumption and various poverty measures using pooled state-level data for 1957 - 91.They found that poverty was reduced by higher agricultural yields, above-trend growth in nonfarm output, and lower inflation rates. But these factors only partly explain relative success and failure in reducing poverty.Initial conditions also mattered. States that started the period with better infrastructure and human resources - with more intense irrigation, greater literacy, and lower infant mortality rates - had significantly greater long-term rates of consumption growth and poverty reduction.By and large, the same variables that promoted growth in average consumption also helped reduce poverty. The effects on poverty measures were partly redistributive in nature. After controlling for inflation, Datt and Ravallion found that some of the factors that helped reduce absolute poverty also improved distribution, and none of the factors that reduced absolute poverty had adverse impacts on distribution.In other words, there was no sign of tradeoffs between growth and pro-poor distribution.This paper - a product of the Poverty and Human Resources Division, Policy Research Department - is part of a larger effort in the department to understand the causes of poverty in developing countries and the implications for public policy. The study was funded by the Bank's Research Support Budget under research project Poverty in India: 1951 - 92 (RPO 677-82)