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Strategy for Poverty Reduction and Narrowing Regional Disparities

It is well known that our planning and economic policies have failed to produce inclusive growth to enable substantial parts of the country to get the benefits of development. This article suggests a set of innovative policies, specifically for accelerating growth in the backward states.


Strategy for Poverty Reduction and Narrowing Regional Disparities

It is well known that our planning and economic policies have failed to produce inclusive growth to enable substantial parts of the country to get the benefits of development. This article suggests a set of innovative policies, specifically for accelerating growth

in the backward states.


he slow but steady emergence of “united India” as one of the major democratic nations of the world and its high annual rate of economic growth over the last two decades or so have gladdened our hearts and made us legitimately proud of our achievements. We have achieved a new confidence in dealing with other nations. Furthermore, as Indians, we derive immense satisfaction from the fact that our country is acting as a positive force in the world and is using its rising strength and economic output to enhance world peace and welfare.

However, we are aware that our policies have not yielded the expected results in many areas and there are still many formidable problems to be solved. While mastering the techniques to make the economy grow at a fairly high rate (average of 8.5 per cent for the last four years) and the attainment of external account self-reliance are, indeed, creditable achievements, we have so far failed to create an equitable society, bringing down to a tolerable level economic poverty and also we have not come anywhere near achieving the universally accepted goals of social development. Although we have made considerable progress in poverty reduction in proportionate terms, vast sections of our society are yet to enjoy the benefit of development.

Thus, while the proportion of people below the poverty line has come down continuously since the mid-1970s, at the latest count (2004-05) based on the uniform recall period (URP) consumption procedure, the total number of poor people is reckoned to be 301.72 million.1 The poverty ratio, even if statistically correct, underrates the extent of poverty as the poverty line is determined only with reference to the amount of caloric consumption. It can be confidently asserted that more than half of the population does not have sufficient income to be able to live a decent life. About 370 million people are illiterate.2 Female literacy rate is only 53.7 per cent and infant mortality rate has fallen to 58 per 1,000 births (in 2005) only. These average figures for the country hide substantial differences across the major states.

Regional Disparities

In a large country such as India, with substantial regional differences in physical endowments, climatic conditions, social traditions and differences in the initial levels of development, growth rates are bound to vary among regions. It is the task of state policy to implement compensatory measures to push forward the laggard regions and spread growth and development more evenly. However, during almost the entire period of national planning, as is well known, a steady widening of regional disparities has taken place. These disparities are in growth rates, poverty levels and in indices of social development.

What is of great concern is that there is a concentration of poverty and backwardness in a group of contiguous states accounting for about as much as 50 per cent of the total population of the major states of India.3 The relative positions of these states as a group in terms of income and of almost all other indices of develop ment have deteriorated over time. The deteriorations in relative positions and the deplorable conditions of their people are shown in Table 1, covering the period 1980-81 to 2004-05.

Bihar had the lowest per capita income at the beginning and end of the period. In 2004-05, its per capita income was only Rs 5,430 i e, about Rs 450 per month at 1993-94 prices. The gap between the highest and lowest per capita income (in 1993-94 prices) among the 15 states increased from 2.55 times to 3.76 times (in absolute figures, from Rs 5,735 to Rs 14,967) in this period, indicating a stark widening of income disparity among the states.4 This difference was more in current prices (in 2004-05, the per capita income of Maharashtra at Rs 36,423 was

4.01 times larger than that of Bihar at Rs 9,082).5

Bihar, Uttar Pradesh, Assam, Orissa, Madhya Pradesh and Rajasthan, which had the six lowest ranks in per capita income in 1995-96 and 2004-05, are together referred to here as “backward states” (BWS) and the others as “betteroff states” (BOS). The gap between the average per capita income (GSDP) of the BWS and BOS (in 1993-94 prices) drastically increased from Rs 1,862 in 1980-81 to Rs 8,908 in 2004-05, both because the average GSDP of the BWS grew at a slower rate than that of the BOS and also because the average population of the BWS grew much faster (Table 2).6

What is really worrisome is that the current pattern of growth leads to widening disparity not only in income but also in all other indices of development. For instance, the poverty ratio (2004-05) was 46.4 per cent in Orissa (and 41.1 per cent in Bihar) as against 8.4 per cent in Punjab. The infant mortality rate (IMR) (2005) was 14 in Kerala but 76 in Madhya Pradesh. The male (female) life expectancy (2001-06) was only 59 years (58 years) in Madhya Pradesh as against 71.7 (75) years in Kerala. Bihar had the lowest literacy rate (2001) of 47 per cent and female literacy of 33.1 per cent while Kerala had the highest literacy rate of 90.9 per cent and female literacy of 87.7 per cent. The HDI (2001) of Bihar was only 0.37 and of Kerala was 0.64 (Table 3).7 Kerala is, of course, an exceptional case but even if one takes the next best performing state, the relative indices of the BWS turn out to be quite poor.

Thus, we observe not only the widening disparity among states but also that the situations in most of the BWS in terms of development indicators are really bad. About 38 per cent of poor people in India live in the two states of Bihar and Uttar Pradesh alone.

New Growth Strategy

Given the lack of worthwhile development in large parts of the country and growing regional disparities, it has been widely recognised that we need to adopt a somewhat different model of growth, which would be more inclusive and enable us to spread economic development more evenly across the states. A new model of growth would certainly require a new strategy of planning. The Planning Commission (2006) in its ‘An Approach to the Eleventh Five-Year Plan’ has stated that a new model of growth is to be adopted during the Eleventh Plan period. It says that Eleventh Plan is designed to produce both faster and more inclusive growth.

However, we find that the Planning Commission contemplates no new strategy or process of planning. It must be admitted, of course, that certain new initiatives have been recently adopted by the central govern ment and some others are contemplated in the Eleventh Plan. The most important initiatives are the National Rural Employment Guarantee Programme, Sarva Shiksha Abhiyan and National Rural Health Mission. While these programmes are specifically targeted towards the poor and needy sections of the population and would bring about a greater “trickle-down” effect, the wide regional divide requires some major changes in the planning strategy because most of the backward states do not have the capacity to bring about changes in their respective areas so as to reverse the pronounced trends during the last 50 years or so.8

The Planning Commission (2006) further notes (p 83) that the gap between the well and poorly performing states has somewhat narrowed in the area of health and education but it fails to admit clearly that the changes, if any, introduced in the planning strategy and processes during the recent years have failed to reverse the tendency towards greater divide across the states. We have to recognise that new planning procedures have to be adopted to bring about any significant changes in backward regions.

The financial situation of the BWS in terms of the capacity to raise resources of the needed magnitude for the large develop ment expenditure required has deteriorated, both because the required expenditures have accumulated and because the states’ financial capacities have dimini shed signi ficantly in relation to the developmental needs. At the same time, owing to several causes such as breakdown/

V.V. GIRI NATIONAL LABOUR INSTITUTE, NOIDA Integrated Labour History Research Programme/Archives of Indian Labour Call for Project Proposals The Integrated Labour History Research Programme (ILHRP) of the V.V. Giri National Labour Institute, NOIDA invites proposals on research and collection projects from institutions and individuals working on labour history. The core activity of the ILHRP is the building up and maintenance of a Digital Archive of Indian Labour, which is the first of its kind in India. The archive systematically preserves documents relating to labour movement, as well as historical documents generated by the state, trade unions and the business enterprises. Contemporary documents and other materials like personal narratives; video and audio material related to labour are also preserved in the archive. The proposals are invited for the next set of research and collection projects of ILHRP, to be commenced in early 2008. The current priority areas of the programme include: Informal Sector Labour History; Collections on /Documentation of Central Trade Unions; Central Government Labour Record; Collections on /Documentation of Labour in Textile Sector; Oral History Collections; and Documentation of New Forms of Work Organisation and Changing Employment Relations. Applicants are requested to send a detailed proposal (about 1500-2000 words) indicating the objectives, proposed methodology, timeframe, budget and output of the study as well as highlighting its relevance. Each project is expected to build up a collection of documents on the selected theme, apart from the preparation of a detailed report. The collection thus generated would eventually be digitized and stored in the archive. Archives of Indian Labour encourages professional institutions and trained researchers as well as trade unionists, practitioners and activists with known track record to join in the unique venture of constructing an apex repository for the documents on Indian working class movement. Among individual applicants, preference would be given to youngsters (such as M.Phil, Ph.D. students, junior faculty members and young activists). Short-term (6-10 months) and modestly budgeted proposals would be given preference. Submitted proposals will be examined by an expert panel comprising of eminent labour historians and practitioners. For further details on ILHRP and the archive, visit us at www. The proposal along with brief curriculum vitae of the principal investigator (s)/ key resource persons (s) may be forwarded to: Coordinator (Integrated Labour History Research Programme/Archives of Indian Labour), V.V Giri National Labour Institute, Sector–24, NOIDA-201301, Uttar Pradesh, India, (E-mail: Deadline for receiving the proposals: 31 October 2007

Economic and Political Weekly August 25, 2007

weakening of administration, law and order problems, political instability and emergence of new political forces not very intimately interested in development and growth, autonomous development efforts by the concerned state governments have not amounted to much [see for example, Frankel 2006].

In this context, the central government has to undertake more direct responsibility for development, particularly in the BWS. The plan procedures have to be modified to make this possible. We suggest that the centre may establish special purpose vehicles (SPVs) to undertake large-scale development in some of the BWS where there is a need such as the Bihar Flood Control and Irrigation Authority, and Uttar Pradesh Flood Control and Irrigation Commission. To start with, such organi sations may be established as central government organisations in Bihar, Uttar Pradesh and Assam (during the Eleventh Plan itself). The representatives of the respective state governments, eminent experts, scientists and engineers may be inducted into the

Table 1: State-wise Indices of Economic Development

States Per Capita GSDP Average Annual GSDP Poverty Ratio (Rs) in 1993-94 Prices (1993-94 Prices) (Per Cent) $ Growth Rate (Per cent)# 1980-81 1995-96 2004-05* 1981-82 to 1990-91 to 2000-01 to 1983 2004-05* 1989-90 1999-2000 2004-05

Bihar 3711 (15) 4107 (15) 5430 (15) 4.42 3.19 5.01 62.22 41.13 Uttar Pradesh 4615 (13) 6120 (13) 7380 (14) 4.96 3.79 4.24 47.07 33.13 Assam 5117 (11) 6530 (12) 7807 (13) 4.18 2.68 5.23 40.77 19.70 Orissa 4469 (14) 6022 (14) 8255 (12) 5.36 3.09 6.01 65.28 46.40 Madhya Pradesh 5522 (7) 7685 (11) 9457 (11) 4.30 5.75 3.32 49.78 38.96 Rajasthan 4783 (12) 8169 (10) 10995 (10) 7.23 6.69 5.39 34.46 22.10 West Bengal 5410 (9) 8254 (9) 13403 (9) 4.27 6.64 7.01 54.85 24.70 Andhra Pradesh 5142 (10) 9015 (8) 13805 (8) 6.66 5.27 6.54 28.91 15.80 Kerala 6092 (5) 9803 (6) 15401 (7) 3.34 5.92 6.88 40.42 15.00 Karnataka 5476 (8) 9429 (7) 15431 (6) 5.65 6.93 6.12 38.24 25.00 Tamil Nadu 5861 (6) 11361 (5) 16035 (5) 5.55 6.44 4.14 51.66 22.50 Punjab 9446 (1) 14664 (2) 19002 (4) 5.74 4.45 3.95 16.18 8.40 Haryana 8636 (2) 13186 (4) 19323 (3) 6.32 5.27 6.86 21.37 14.00 Gujarat 7361 (4) 14871 (1) 19899 (2) 6.37 7.02 6.85 32.79 16.80 Maharashtra 7963 (3) 13556 (3) 20397 (1) 6.29 6.79 5.13 43.44 30.70

CV (per cent) 27.54 35.23 37.21 20.55 28.66 22.03 33.33 44.19

Gini (per cent) 14.38 19.28 20.53 11.27 15.44 12.06 18.29 23.96

Notes: Figures in parentheses indicate the relative rankings of states in terms of per capita income. # For each year, percentage change over previous year is computed and using them the average growth over the years is computed; $ 2004-05 data based on URP consumption procedure;

* Bihar’s (combined) data are the weighted average of Bihar and Jharkhand values. Uttar Pradesh and Madhya Pradesh data are also the weighted averages.

Sources: (Basic data): CSO (website) and EPW Research Foundation for GSDP and GDP figures; Planning Commission (2003, 2007) for poverty ratios.

Table 2: Combined Economic and Social Development Indices of BWS and BOS

Details Period Backward Better Off 15 Major India States States States (GDP)

Per capita GSDP (Rs) 1980-81 4599 6461 5579 (6468) at 1993-94 prices 1995-96 6191 11296 8820 (10711) 2004-05 7799 16707 12256 (15358) Combined GSDP (1993-94 prices) 1981-82 to 1989-90 4.88 5.59 5.31 (5.81) growth rate (per cent) 1990-91 to 1999-2000 4.28 6.2 5.51 (5.70) 2000-01 to 2004-05 4.35 5.79 5.31 (5.78) Poverty ratio (per cent) 1983 50.68 40.14 45.16 44.48 2004-05 34.87 21.61 28.25 27.5 Infant mortality rate 2005 70 43 54 58 Per cent of children undernourished 2002-04 52.5 42.3 47.9 49.2 Life expectancy – male 2001-06 61.6 66 64.3 63.9 Life expectancy – female 2001-06 61.7 69 66.1 66.9 Literacy person 2001 46.9 61.3 54.2 64.8 Female literacy 2001 35.7 53.5 44.7 53.7

Notes: Weighted average of backward, better off and 15 major states are computed by the authors.

Sources: CSO (website) and EPW Research Foundation for GSDP and GDP figures; Planning Commission (2003, 2007) for poverty ratios; ‘Reproductive and Child Health Report’ (2002-04) for child nourishment data; Economic Survey 2006-07 for others.

boards of these organi sations with the majority being central government nominees. The funding will be the responsibility of the centre but the states may be requested to contribute in kind.

The enormous gains in human welfare that would be achieved with more effective and scientific flood control arrangements, the gains from savings of standing crops from the floods every year, the gains from proper irrigation and prevention of salinity and all of these, leading to higher agricultural output would mean such a great addition to national and human welfare. This project (worked out in detail) should be posed by the centre to the World Bank for International Development Association (IDA) assistance to the extent of, say, Rs 450 billion, i e, about $ 12 billion. This debt can be incurred against the “security” of the foreign exchange reserves of more than $ 200 billion that the country holds at present.9 In the Twelfth Plan period a similar programme of the required magni tude can be launched to benefit the other three BWS of Madhya Pradesh, Orissa and Rajasthan.

This mega investment through SPVs will be in addition to the normal plan transfers (“assistance”); the former will not flow through state budgets. However, the state governments concerned will be associated with the entire process from planning to implementation through participation in the boards of management of the SPVs. Additionally, there should be some change in the formula for central plan assistance: 25 per cent of the assistance given as grants should be allocated on the basis of quantifiable performance indices weighted by a fraction (say 10 per cent) of the population of the state. As regards the distribution of borrowing entitlements for plan investments among the states, weightage may be given to need, and to success in implementation in selected spheres.

While striving to achieve the growth of output and the pace of social development, we must also take concerted action to reduce the rate of growth of population, in the backward states in particular.

Alternative Growth Scenarios

According to official projections, during the period from 2004-05 to 2016-17, the total population of the BOS will grow at

1.079 per cent per annum and the population of these states will reach 59.15 crore in 2016-17. The population of BWS will grow at 1.539 per cent per annum and it will reach 62.2 crore in 2016-17. The share of the BWS will rise to 51.3 per cent in 2016-17 from 49.9 per cent in 2004-05 (Table 4).10 Scenario-1: If we concentrate on accelerating the average growth of the combined GSDP of the 15 major states representing the country to 9 per cent per annum during 2004-05 to 2016-17 (i e, the next 12 years) and if the combined GSDP of the BWS will grow only at 5 per cent (as against the present 4.35 per cent), then the combined GSDP of the BOS will need to grow at

10.42 per cent (this is difficult to achieve and undesirable) to achieve the overall objective of 9 per cent. If this is achieved, the average per capita income of the BWS (1993-94 prices) will be only Rs 11,706 and that of the BOS will be Rs 48,321 at the end of the period, i e, at the end of Twelfth Plan period (Table 5). Scenario-2: If we can have a moderated target of a growth rate of 8.5 per cent per annum during the next 12 years for the combined GSDP of all major states, and of 6 per cent growth of GSDP of the BWS, the combined GSDP of the BOS will need to grow only at an average rate of 9.48 per cent. With these targets, at the end of the Twelfth Plan period, the average per capita income of the BWS at 1993-94 prices will be only Rs 13,116 (Table 5), if the population of these states grows at the rate of 1.539 per cent as projected in the Census of India (2006). Hence, we should launch a grand campaign to bring about a reduction in the average rate of growth of population of the backward states to 1.079 per cent per annum (the rate at which the population of BOS will grow) during the period 2004-05 to 2016-17. That would mean a reduction in the number of children born during that period by about 3.3 crore. This would significantly help in accelerating the growth of GSDP and improving the conditions of young children.

The rate of growth of population has fallen in the country fairly significantly since the 1980s. However, ever since the lifting of the Emergency in 1977, it seems that official policy action in relation to family planning has been somewhat low key, particularly in the BWS. We are recommending greater emphasis than hitherto on the control of population growth. But the recommended large efforts should be undertaken by the civil society through non-government organisations (NGOs). The effort in this field should be first initiated and intensified in Bihar and Uttar Pradesh with relatively high population growth rates and where there are huge populations.

A significant role can be played by the better-off sections of the whole country and the corporate sector in the area of family planning and in the area of elementary education. We suggest that a “national people’s endeavour to educate the child” should be set up as a large trust, as the guiding body with the support of the Confederation of Indian Industry (CII), Federation of Indian Chambers of Commerce and Industry (FICCI), Associated Chambers of Commerce and Industry of India and other business associations, in consultation with the major NGOs already working in the field of education. A large plan should be prepared to increase the


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    Economic and Political Weekly August 25, 2007

    enrolment rate and quality of teaching in elementary education, in 400 or 500 districts of the states having the bottom indices of child literacy and enrol ment rates, across the country. Better off sections of civil society in all states should be encouraged to come forward to help existing NGOs and form new ones. Financial support could be provided by the “national peoples’ endeavour to educate the child”, to cover a part of the cost or the full cost, depending on the intensity of the need of the area. United action by the people from various states in such a vital task of nation building in the area of children’s education would not only bring about substantial improvement in child literacy and education but also change the quality of our social life.

    It is encouraging to know that the volun tary effort of the kind we suggest above has already been successful in Bihar. The Bihar Education Project (BEP), one of the first large-scale donor supported education programmes in India (introduced in the early 1990s in seven districts of undivided Bihar), developed community groups or village education committees (VECs) to support education at the school level in addition to training teachers. Due to its success, this project has been later incorporated into the District Primary Education Project (DPEP) and the DPEP has reconstituted the VECs into Vidyalaya Shiksha Samitis (VSS). It has created another component – Mahila Samakhya (MS) programme to mobilise communities and educating pre-school children and

    Table 3: State-wise Indices of Social Development

    Percentage of Child Life Expectancy HDI Literacy (2001)
    States IMR Undernourishment (2001-06) (2001)
    (2005) (2002-04) Male Female Person Female
    Bihar 61 53.9 65.7 64.8 0.367 39.0 27.6
    Uttar Pradesh 73 55.1 63.5 64.1 0.388 46.3 34.9
    Assam 68 32.2 59.0 61.0 0.386 63.3 54.6
    Orissa 75 42.8 60.1 59.7 0.404 63.1 50.5
    Madhya Pradesh 76 53.7 59.2 58.0 0.394 52.7 41.7
    Rajasthan 68 58.1 62.2 62.8 0.424 60.4 43.9
    West Bengal 38 44.9 66.1 69.3 0.472 68.6 59.6
    Andhra Pradesh 57 42.3 62.8 65.0 0.416 60.5 50.4
    Kerala 14 35.8 71.7 75.0 0.638 90.9 87.7
    Karnataka 50 44.8 62.4 66.4 0.478 66.6 56.9
    Tamil Nadu 37 38.3 67.0 69.8 0.531 73.5 64.4
    Punjab 44 40 69.8 72.0 0.537 69.7 63.4
    Haryana 60 35.6 64.6 69.3 0.509 67.9 55.7
    Gujarat 54 46 63.1 64.1 0.479 69.1 57.8
    Maharashtra 36 47.7 66.8 69.8 0.523 76.9 67.0
    CV (per cent) 32.63 17.46 5.70 7.19 16.30 19.28 26.44
    Gini (per cent) 17.56 9.59 3.09 3.93 8.69 10.04 13.88

    Sources: (Basic data): Planning Commission (2002) for HDI; ‘Reproductive and Child Health Report’ (2002-04) for child nourishment data; Economic Survey (2006-07) for others.

    Table 4: Projected Population in 2016-17 (Per cent)

    States Combined Projected Implicit Annual Population in Population in Population in Growth Rate 2016-17 if It 2004-05 2016-17 (2004-05 to Grows at 1.079 Crore Per Cent Share Crore Per Cent Share 2016-17) Per Cent (Per Cent)

    Backward 51.783 49.9 62.198 51.3 1.539 58.899 Better off 52.003 50.1 59.151 48.7 1.079 59.151 15 major 103.786 100.0 121.349 100.0 1.311 118.050

    Source: (Basic data): Census of India (2006). Mid-year population figures are used. Table 5: Projected GSDP and Per Capita GSDP in 2016-17 (at 1993-94 Prices)

    Scenario-1 (2016-17) Scenario-2 (2016-17)

    States GSDP (2004-05) GSDP in Per Capita GSDP in Per Capita Per Capita GSDP if in Rs Crore Rs Crore GSDP in Rs Rs Crore GSDP in Rs Population Grows at 1.079 (Per Cent)

    Backward 405427 728089 11706 815799 13116 13851 Better off 869627 2858211 48321 2577995 43583 43583 15 Major 1275054 3586299 29554 3393794 27967 28749

    Source: Computed by the authors.

    adolescent girls. The MS groups have proved to be powerful decision-making bodies at the village level. Additionally, in the field of health, a non-profit society called Janani registered in 1995 is involved in the social marketing of birth control through a franchising system [see World Bank 2005 for more details].

    Interstate Cooperation

    The next item on the agenda that we recommend is action by the governments of advanced states (BOS), in the field of poverty alleviation. In our total programme of action to bring about more inclusive growth, the governments (and people) of the BOS will be implicitly contributing to the growth of the BWS insofar as the central government, which draws resources from the people of all the states, would be financing the mega development initiatives in the BWS through IDAfinanced investments. In addition, the governments of the BOS could be requested to help through their contributions to poverty alleviation. This would mean some transfers of resources from the BOS to the BWS but the programme could be arranged in such a way that some benefits will also accrue to the poor in the BOS. It is proposed that the BOS spend 10 per cent of their own plan outlay (additional amount) on producing some essential goods – food items, children’s clothing, slates, school notebooks, etc, through the employment of some of the poor and unemployed people in the backward parts of the BOS. Goods so produced would be sent to the BWS to be distributed free to the needy and poor. The states themselves could work out a comprehensive plan for this purpose. This scheme would have double benefits, but beyond that would have to enlist, to a limited extent, the help of more advanced states for poverty alleviation in the poorer states, thus promoting camaraderie among the states and strengthening national unity. At the same time, some disadvantaged sections in the BOS would gain through, not charity but employment.

    A Revised Strategy

    The strategy of development advocated in this paper does imply a change in the relative emphasis on the different objectives of growth. The Planning Commission (2006) describes the plan as one for faster and more inclusive growth. In detailing the various problems facing the nation, it recognises the growing regional inequalities as among the serious challenges. However, it does not seem to recognise that the strategy and pattern of investment that would need to be implemented to maximise the overall rate of growth (i e, in raising the growth rate of GDP from 8 to 10 per cent) might come in the way of significantly improving the GSDP growth of the most BWS and of promoting their faster social development and thus, not do enough to break the vicious circle of poverty that holds these six or seven major states in its grip. The relevant statistics that we have presented relating to these states – indeed they are well known to the experts and planners – clearly show that a special effort is needed to set these states on a satisfactory growth path and bring about sizeable improvement in the basic social conditions of the vast masses in these states. This may require pitching the target of the overall rate of growth at a lower level of 8 to 8.5 per cent per annum.

    One could stipulate that the main objective for the next 10 years or so would be to achieve not less than 6 per cent annual rate of growth of the BWS, subject to that of maintaining the overall rate of growth of the economy at 8 to 8.5 per cent. Another specified objective would be to bring down the rate of growth of the population of the BWS to around 1 per cent per annum during this period. This set of objectives is consistent with that of maintaining satisfactory growth with price stability. With these targets, the per capita income of BWS would significantly increase to Rs 13,851 (i e, increase by Rs 735) in 1993-94 prices as against Rs 13,116 if the population growth of these states is not reduced to 1 per cent level (see last column of Table 5).11

    Experience shows that given the various inefficiencies and inelasticities in our system, trying to maintain consistent long-term 10 per cent growth of GDP would heat up the economy and lead to inflation, which adversely affects the poor to a greater extent. We have to then reverse gears.

    When all is said and done, the fast deve lopment of a state in a federation will take place only when local leaders provide sound governance and have the growth and all-round development of their state as their foremost objective. The needed policies will then follow. In the last two decades or so, there has been much political instability, particularly in the two large poorer states, and it may be said that the new leaders of the BWS have not given the priority that development objectives deserve [see, for example, Frankel 2006].

    More recently, however, a new leadership has emerged in Bihar and Utttar Pradesh, and Assam has a stable government. Similar changes may take place in the other BWS. The governments of these states have a crucial role to play in lifting their


    The Centre for Development Economics at the Delhi School of Economics is organizing a Winter School that will run from December 14 to December 17, 2007.

    The broad theme for this year’s Winter School is the application for the tools of standard economic theory to public policy problems.

    Participation in the Winter School will be limited to the panel of invited experts, local participants and guests, and invited external participants. The external participants will be invited on the basis of peer evaluation of their curriculum vitae and submitted research work.

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    Mr. Surjeet Singh Attn: Winter School Centre for Development Economics Delhi School of Economics, University of Delhi, Delhi 110 007 Telephones: [+11] 2766-6533, 2766-6534, 2766-6535, 2766-6703, 2766-6704, 2766-6705 Fax: [+11] 2766-7159 Email:

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    Economic and Political Weekly August 25, 2007

    masses out of poverty. A major national task is to induce them to undertake this responsibility. First and foremost, law and order have to be improved/restored in all parts of these states. It is encouraging to know that this is already happening to some extent in Bihar and would happen in Uttar Pradesh soon. All the other four backward states must follow suit. The masses, who put the leaders in power must resort to all peaceful ways to get them to do so. Secondly, implementation of policy is quite weak and the degree of corruption is high. The leaders should resolve to bring down corruption drastically. This is their part of the bargain. Thirdly, the leaders of these states should seek and obtain expert advice on budgeting, tax reform and tax administration. Such advice is now available from specialised institutions for a fee. Fourthly, they should fully cooperate with the central government in planning and implementing SPA investments. Of course, they should also give high priority to the carrying out of their five years plans. Fifthly, and most importantly, the leaders should undertake significant acts of land reforms. It may be too late to try to redistribute land, except give some uncultivated but cultivable land held on government account to the poor, marginal, or landless farmers, as is being done in Tamil Nadu. However, tenancy and tenurial reforms can and should be carried out on a sufficiently large scale. The leaders of the left parties can play a crucial role in mobilising support for this important task.

    The vast majority of the citizens of the BWS are poor and most of them live in rural areas. They should use their electoral power to force the leaders of the governments, who anyhow need their support, to undertake the much needed tenancy reforms. The Planning Commission (2006) mentions tenancy reforms that must be carried out during the Eleventh Plan period. It should arrange to have special meetings with the chief ministers of the BWS, in particular, to work out means of bringing about tenancy reforms and to decide on the basic elements of the reforms. The prime minister should appoint a high profile committee on tenancy reforms.


    Political changes over the last two decades or so have substantially affected the functioning of our federal system, particularly in relation to the backward states. The federal principle, which was adopted by our Constitution to increase the autonomy and welfare of the citizens of various states, now acts in the opposite direction, particularly in poorer states insofar as the people of those states are deprived of some of the benefits enjoyed by people of the other states because of the deteriorated political order. The old strategy and process of planning are no longer effective in promoting development in the backward states. Furthermore, the standards of government administration have fallen and the delivery of services is no longer efficient in most cases. Hence, civil society has to play a much larger role in promoting social development and imparting political education. The new strategy, which we have advocated, keeps these developments and needs in view. As far as the economic aspect is concerned, our advocacy of giving primary importance to raising the growth rate of the backward states, as a plan objective, would be widely accepted.




    [The research assistance provided by S Satya Moorthi is duly acknowledged.]

    1 There are controversies regarding the decline in the headcount ratio and absolute levels of the number of poor. For our present purpose, it is enough to indicate that even by official estimates, the number of poor people is about 300 million.

    2 India has the largest number of illiterates in the world.

    3 Throughout, we deal with 15 major states (as representing the country), listed in Table 1. It is to be noted that after 2000-01, Bihar was bifurcated and a new state of Jharkhand was carved out of Bihar’s southernmost region. Madhya Pradesh and Uttar Pradesh were also bifurcated and two new states, namely, Chhattisgarh and Uttaranchal were created. Throughout the paper, we use data of combined Bihar, Madhya Pradesh and Uttar Pradesh for proper comparison over time.

    4 Both measures of inequality (Gini and CV) also confirm widening income inequality among the states over time. Thus, the available evidence suggests that rich states got richer and the poor got poorer.

    5 The latter is only 25 per cent of the former.

    6 The combined population of the BWS grew at an annual rate of 2.26 per cent and 2.23 per cent during the 1980s and 1990s as against the population growth rate of 2 per cent and

    1.65 per cent in the BOS.

    7 The Planning Commission (2002) has provided HDI values for major states using the following indicators: life expectancy at age 1, IMR, literacy rate, intensity of formal education, and per capita consumption. The HDI value lies between zero and one. It shows the distance the state has to travel to reach the maximum possible value. Although the computation procedure is the same, this index is not strictly comparable with the HDI of UNDP, which uses life expectancy at birth, educational attainment measured by adult literacy with two-thirds weight attached to it and the combined primary, secondary and tertiary enrolment ratio with one-third weight attached to it and real per capita income in purchasing power parity dollars.

    8 The greater emphasis on agricultural growth during the Eleventh Plan is partly intended to make growth more inclusive but the problem is to bring about that growth in the BWS.

    9 This is a better course than the alternative method suggested for directly using part of the reserves for infrastructure development.

    10 The report of the technical group on population projections, ‘Population Projections in India and States 2001-2026’, Census of India, May 2006, which provides the projected population for each state and for the country from 2001 to 2026 based on the age-sex distribution of population and migration data of the 2001 census and the latest available levels and trends of fertility and mortality data from the sample registration system using the popular “compound method”.

    11 In terms of Purchasing Power Parity dollars (1 PPP $ = Rs 7.02 in 1993) the per capita income of BWS would increase from 1111 PPP dollars (Rs 7,799) to 1973 PPP dollars (Rs 13,581) in 2016-17.


    Frankel, Francine (2006): ‘Social Justice and Stalled Development: Caste Empowerment and the Breakdown of Governance in Bihar’, India in Transition: Economics and Politics of Change, Centre for the Advanced Study of India at the University of Pennsylvania, Spring.

    Government of India (GoI): Economic Survey 2006-07 (website:

    – (2007): Reproductive and Child Health Report (2002-04).

    Planning Commission (2002): National Human Development Report, Government of India.

  • (2003): Five-Year Plan 2002-2007, Vol III, Government of India.
  • (2006): Towards Faster and More Inclusive Growth: An Approach to the Eleventh Five-Year Plan, Government of India, December.
  • (2007): ‘Poverty Estimates for 2004-05’, Press Information Bureau, Government of India, March.
  • World Bank (2005): Bihar: Towards a Development Strategy, a World Bank Report No 32819,Office of the Regional Vice Pres (SARVP).

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