POVERTY REDUCTION STRATEGY AS PER lATE SUKHMAOY CHAKARVORTY WAS TRICKLE DOWN THEORY ' . THEN IT CHANGED TO DIRECT ATTACK ON POVERTY BY 1980 WITH INTRODUCTION OF IRDP , 1974- 78 , THE TERM BASICS NEEDS WAS INTRODUCED FOR THE FIRST IME , THEN CAME 11TH AND 12 PLAN [UPA ] ATLEAST IN DOCUMENTS BASIC NEEDS , INCLUSIVE GROWTH ; BUT A RAGING DEBATE WHERE EMINENT ECONOMISTS LIKE PROF BHAGWATI AND PRF SEN ARGUE ON GUJARAT AND KERALA MODEL ; IS THE CURRENT STRATEGY REVERTING BACK TO GROWTH FIRST

1. 1
STEPS UNDERTAKEN TO REDUCE
POVERTY IN INDIA
The government’s policy, as reflected in various plans, has all along been
that of the removal of poverty.
For this, the problem of poverty has been conceived as one of low
productivity of the poor, which stems from the lack/inadequacy of
work/employment, as also from little and poor equipment, and almost nil
infrastructural facilities such as credit, marketing, etc.
(i) General Growth:
This is concerned with the moulding of the growth strategy in a manner
that has helped to some extent in improving the conditions of the poor.
This involved such a restructuring of the production, and of product­mix,
that provided more work/income and more mass­goods, to the poor.
In concrete terms, this was attempted along the following lines :
expansion of agricultural and non­farm activities in the rural areas, as also
of activities in the unorganised sectors in the urban areas ; adoption of
labour­intensive techniques ; enlarged production of food grains and other
items of necessities, etc. All these together with the development of other
sectors like industries, etc., were supposed to benefit the poor.
However, it has also been realised that these measures are by
themselves not sufficient for the purpose. This awareness became acute

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in recent years, when it was found that the trickle­down effects of the
general growth have been of little help.
(ii) Supplementary Measures
One category of such measures consists of anti-poverty programmes
like National Rural Employment Programme (NREP), Integrated
Rural Development Programme (IRDP), Rural Landless Employment
Guarantee Programme (RLEGP), etc.
These programmes have twofold purpose. In the first place, these
provide direct employment on wages paid in cash, and in cash and
kind (like wheat, etc.). Secondly, these help the poor in earning by
providing them with assets, inputs, credit, marketing facilities,
training for skill formation, etc.
The government has been expanding these programmes by devoting
more and more resources, and by enlarging its coverage in terms of
the number of the poor, the areas and the activities.
Another category of measures relates to the provision of
cheap/subsidised food grains to the poor through the Targeted
Public Distribution System (TPDS). PDS was redesigned as TPDS

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higher rates of subsidies were given to the poor and the poorest
among the poor.
As a result of these government efforts, some improvements have,
in fact, been effected in the situation. As per the estimates (by NSSO
61st Survey), the percentage of poor below the poverty line has
fallen from 54.9 per cent in 1973­74 to 36 per cent in 1993­94 and
further to 27.5 per cent in 2004­05.
There is again some progress in the provision of productive assets
and facilities of production for the poor. Some advances have also
been made in raising the skill and health status of the poor.
While all these measures have helped, the lasting solution to the
problem of poverty lies only in the framework of an expanding
economy and dynamic agricultural sector.
A budget theme of “open economy, markets and poverty reduction.”
fits nicely with the “growth” expectations unleashed by Prime
Minister Modi. Also, these are the three legs for equitable growth.
“Open Economy” stance
Since 1991, an “Open Economy” policy stance has been
consistently followed in external trade. The problem is, India has not
benefited as much as our neighbors in East Asia. The fault is clearly
our own.

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Our government has not seized opportunities overseas which could
be dovetailed with domestic comparative advantage to make the
economy part of global value chains. This becomes vital now if jobs
are to be added in India.
The real issue is what we must do next to “open” the economy to
both domestic and international competition.
Four steps are suggested:
1.​Linking markets physically by a first rate “infrastructure grid” –
ports, roads, rail and electricity are key to creating a seamless
national market.
2.​A digitized “tax grid” that links national, state and local level tax
systems to enhance revenues; the reduction of tax evasion and the
reduction of the aggregate tax burden by avoiding “the pancaking of
multiple autarchic taxes.” The ongoing Goods and Services Tax
(GST) initiative barely scratches the surface.
3.​Aggressive privatization of state­owned enterprises, including in
arms and ammunition, as Modi has just announced. This can provide
the required business momentum for competitiveness, assist in
reaching fiscal deficit targets and benefit consumers.
4.​Opening of hitherto closed domestic markets in land, legal and
media services to foreign investment, except where considerations
of national security exist.
The Finance Minister could signal a second wave of liberalization
and reform to follow up on the 1991 wave – focusing on supporting

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Indian business to reap the benefits of an open economy
internationally.
SOME ECONOMISTS HAVE POINTED OUT THAT THE CURRENT
GOVERNMENT'S STANCE HAS CHANGED TOWARDS GREATER
ROLE OF THE MARKETS
Living by market logic
The BJP has always enjoyed the trust of business. Curiously, the party’s
commitment to expand markets and competition is not deeply ingrained
enough.
Instead, there is a lingering fondness for using and growing the already vast
powers of the state to bypass markets and to advance “fast-track” development
in a top-down “Developmental State” mode.
Ending poverty by creating jobs
The international consensus on poverty reduction is that strategies that
allocate more resources for human development, livelihoods and private
sector employment work best.
India has lagged in enhancing budgetary allocations to education and
health (including water and sanitation), as compared to any other
growth­oriented sectors of the economy.

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If this logic is followed, the small and medium scale manufacturing sector,
rather than mega projects, should be the focus for jobs and poverty
reduction.
We must avoid the trap of subverting the “growth” agenda into glitzy but
sub­optimal “action” points.
To grow jobs for the poor, it is the small things that count, like removing
municipal and police harassment of street vendors, simplifying tax
assessment processes and “problem solving” by getting local and state
governments in growth mission mode.
India’s economy consists of 10% of the workforce in the “large, formal”
sector and 90% in the informal sector. The key dialectic of India is this:
The lot of employees in India’s informal sector can only be improved by
“facilitating” employers to grow their businesses.
BJP GOVERNMENT HAD GIVEN INDICATION IN ITS MANIFESTO AS
TO WHY ​why Growth is Fundamental to India’s Progress
​Earlier issues of the Sign have discussed the need for India to unlock the
potential of its people, its resources, its entrepreneurs and its government
in order to realise its true economic potential The policies implied by this
approach have the potential to accelerate India’s GDP economic growth
to double digits.

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For India, GDP growth is more than just a number, it is also a proxy for
development indicators such as productive employment and poverty
reduction.
For example, India has made the most progress on reducing poverty
during the periods of rapid growth. India today still has an estimated
300m living in poverty and economic growth is a fundamental necessity in
order to create opportunities for them.
India today needs @.10% growth simply to maintain current levels output
per workforce participant given the number of youngsters entering the
labour force in this decade, and even faster growth to solve the issue of
underemployment in its current labour force.
Moreover, this pace of growth needs to be sustained over the next
several decades with 250m more people expected to enter the labour
force by 2030
Creating and maintaining the required level of development will require
more than just short­term stimulus measures – it will involve fundamental
transformation of India’s productive potential.
Finally, growth is not just critical to India economically and socially, it is
critical to India’s leaders politically. Achieving high rates of economic
growth is also the best way for India’s politicians to counter natural

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anti­incumbency trends and therefore the best way for them to ensure
political stability and continuity at both the state and central levels.
The most obvious examples of this are the strong positions enjoyed by
leaders who have emerged in states such as Bihar, Madhya Pradesh,
Tamil Nadu, and, of course,
Gujarat (the home state of the BJP’s prime ministerial candidate, Mr
Narendra Modi) and delivered high growth for their constituents.
The best way for the incoming government and India’s leaders to ensure
success is to make tangible progress on creating an economic system
which allows all Indians to feel that they have the opportunity to realise
their potential. Creating such a system goes to the core of the many
challenges of the huge and complex democracy that is modern India.
In case you’ve lost track of the debate between Nobel Prize winning
economist Amartya Sen and Jagdish Bhagwati, professor of law and
economics at Columbia University in New York, here’s a Friday
briefing of the confrontation, which has taken on a political dimension
in recent data
In the social spending corner, Mr. Sen, who says that economic
growth must accompany social improvement and government must
spend money on education, healthcare and food subsidy programs.

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The two economic heavyweights have slugged the issue out before.
But this time, both of them have books to sell.
Mr. Bhagwati wrote to The Economist newspaper​ in mid­July
criticizing the central assertion of Mr. Sen and Jean Dreze new book
“An Uncertain Glory: India and its Contradictions,” that redistribution
has led to rapid growth in Asia.
That proposition, he wrote, “has no basis in reality and puts the cart
before the horse.”
“Growth has made redistribution feasible, not the other way round,”
the Columbia professors wrote.
Incidentally, the pair are co­authors of, “Why Growth Matters: How
Economic Growth in India Reduced Poverty and the Lessons for Other
Developing Countries,” published in India in December.
“Economic growth is very important as a means for bettering people’s
lives but…it has to be combined with devoting resources to remove
illiteracy, ill health, undernutrition and other deprivations,” Then local
media in India picked up the spat between two of the country’s
greatest minds, and a flurry of opinion pieces followed.

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Some compared the differences between the two economists to the
main political divide in India between the ruling Congress party, which
has a large social spending program, and the Bharatiya Janata Party
the main opposition, whose campaign for election is led by
business­friendly Gujarat Chief Minister Narendra Modi.
In a subsequent piece for Mint headlined, Mr. Bhagwati praised
Gujarat’s development story but added that his theories on growth
could be adopted by any party.
PREPARED BY MR NARESH SEHDEV MA MPHIL
nareshsehdev200789@gmail.com
pocket c­2 , flat 8­c , keshav puram ,new delhi ­ 35