Friday, February 19, 2016

World Bank notes "acceleration" of India's urban poverty, slow pace of urbanization compared to rest of Asia

By Our Representative
A just-released World Bank study noted sharp “acceleration in the pace of the urbanization of poverty” in India, especially since 2000, saying, in the early 1950s, 14 per cent of the country’s poor lived in urban areas, but by 2012 this rose to 32 per cent.
“This is broadly consistent with the pattern found in other developing countries”, the study, titled “Growth, Urbanization, and Poverty Reduction in India”, and authored by Gaurav Datt (Monash University, Melbourne), Martin Ravallion (Georgetown University, Washington DC) and Rinku Murgai (World Bank, New Delhi), says.
The study says that this pattern is found to exist because “relatively less poor rural workers may migrate, with gains, but be relatively poor in the destination urban sector”.
Suggesting that this finding is particularly significant for the country’s policy makers, the study says, “Famously, India's post-independence planners hoped that the country's urban-based industrialization process would bring longer-term gains to poor people, including through rural labour absorption.”
Suggesting that this an analysis of the available data show may not have happened, the study says, “The urban population share has been rising steadily over time in India, from 17 per cent in 1950 to 31 per cent today”, which is considerably less than the trend found in the region.
It says, “This pace of population urbanization (proportionate increase in the urban population share) has been less than either South Asia as a whole or lower middle-income countries as a whole, and markedly slower than for (say) China.”
Noting a relatively slower rate of poverty reduction in urban areas may have been the main reason for this, the study says, “In explaining this, a number of observers pointed to the slow pace of labour absorption from agriculture associated with the more inward-looking and capital-intensive development path.”
Disputing the view that “too little growth was the reason for India’s slow pace of poverty reduction”, the report states, “A deeper exploration of the data suggests that the sectoral pattern of growth played a role.”
Thus, it says, “Rural economic growth was more poverty reducing, as was growth in the tertiary (mainly services) and primary (mainly agriculture) sectors relative to the secondary (mainly manufacturing and construction) sector.”
Based on this, the study underlines, “Urban growth and secondary sector growth had adverse distributional effects that mitigated the gains to the urban poor, while urban growth brought little or no benefit to the rural poor.”
It adds, “The slow progress against poverty reflected both a lack of overall growth and a sectoral pattern of growth that did not favour poor people.”
The study says, “There was much hope in India that the higher growth rates attained in the wake of the economic reforms that started in earnest in the early 1990s would bring a faster pace of poverty reduction.”
“However, there have also been signs of rising inequality in the post-reform period, raising doubts about how much the poor have shared in the gains from higher growth rates”, the study says.

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