Growth and Poverty in Rural India

The object of this paper is to analyse differences in poverty levels across states in rural India during the period 1983-2000. In doing so, it seeks to focus on inter-state differences in economic growth as an explanation. It also attempts to analyse the effect of policies and institutions on the poverty-reducing impact of growth. In a panel data study for India's 15 major states, we find that economic growth is a crucial determinant of poverty reduction, but it does not provide a complete explanation. Public expenditure on anti-poverty programmes has a significant impact on rural poverty, as does greater gender equality and increased democratic decentralisation. Rates of inflation and differences in initial conditions also matter.