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India: achievements and challenges in reducing poverty by World Bank Group

By World Bank Group

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Since the bulk of the required investments in these forms of physical, human, and social capital come from public rather than private sources in India, it is important that poverty-reduction strategies strike and maintain the right balance between investments that return significant dividends and subsidies that can be captured by better off sections of the population and distort markets. India has not yet found that balance. A recent government study estimates subsidies on non-merit goods at 11 percent of GDP whereas spending on health and education is less than 5 percent of GDP, and about 4 percent of GDP on infrastructure.

The report's main conclusions then were: that both growth and redistributive policies played a role in reducing poverty over much of the 1970s and 1980s; and that while more rapid growth led Page 2 to significant declines in poverty, the agricultural, industrial and labor regulations prevailing at that time diluted the effect of growth on poverty reduction. The report also emphasized the importance of targeting antipoverty programs because of India's unsustainably high fiscal deficits at the end of the 1980s and the need to protect poverty programs (which the report argued were required to protect those who, because they lack the human or physical capital, or live in chronically depressed regions, cannot benefit directly or immediately from the growth process) which were likely to bear the brunt of inevitable expenditure cuts.

India's progress in reducing poverty has been uneven as well as slow. 4 percent per year, on average, between 195758 and 199394) is more than 120 times that of Bihar and more than four times that of Rajasthan. Even more noticeable than geographic differences in rates of progress in reducing poverty incidence are the inequalities that persist across gender, castes and ethnic groups. Social indicators for women--literacy, for example--are markedly lower than for men, and the level of scheduled castes and tribes in both economic and social achievements is still below the national average.

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