The Hindu Business Line : Reforms help in poverty reduction: Unctad study

"Contrary to the perception of services sector providing employment only for the highly skilled, nearly two-thirds of the employment in the sector might benefit low-skilled or medium-skilled people."

New Delhi , Jan. 11

A NEW study by the UN Conference on Trade and Development (Unctad) team in India reveals that Maharashtra, Tamil Nadu, Gujarat, Karnataka, Andhra Pradesh and Punjab are better integrated into the global process as evidenced from their growing share in the country's total exports. They have also witnessed the highest reduction in poverty rates, both urban and rural.

In the case of agriculture, domestic reforms would have a greater impact on rural poverty than external sector reforms even as a rise in world agricultural prices on account of liberalisation of world trade would substantially reduce the incidence of poverty globally. The poverty reduction gains would be especially significant for India where the majority of the poor live in rural areas, it says.

In the ongoing agricultural negotiations in the WTO, the Unctad study notes, developing countries such as India would stand to gain immensely if agricultural protectionist and trade distorting measures in developed countries are immediately addressed.

An interesting point brought out is that contrary to the perception of services providing employment only for the highly skilled, nearly two-thirds of the employment in the services sector might consist of low-skilled or medium-skilled people.For instance, it said, a major proportion of telecom investment in developing countries including India is directed towards building wire lines and mobile networks. There is also appreciable involvement of less skilled labour in the telecom and construction sectors, it notes.

The study is also categorical that most of the poverty gains from trade liberalisation would result from India's own reforms. Describing the advent of G-20 coalition pre-Cancun as an important opportunity for India to follow a trade reform agenda, it says increases trade among these countries would enhance the levels of incomes and employment and have both direct and indirect effects on poverty alleviation in India. "What India has to examine and weigh is whether the G-20 can also successfully deliver on its other market access requirement such as Mode-4 (movement of natural persons as service providers), textiles and other non-agricultural sectors," the study says.

The Unctad team in India's study was discussed at a workshop on impact of trade reforms on the Indian informal economy and poverty macro and case study analyses, organised by the National Council of Applied Economic Research (NCAER) and Unctad for two days here.

In her presentation, Prof Barbara Harriss-White of the Oxford University stated that far from being temporary, the informal sector in India had persisted over time and was dynamic.

She presented the findings of two joint studies — on garments in Tripur and rice in Punjab and West Bengal, which Oxford University had carried out with NCAER. She maintained evidence from field study pertaining to the informal economy suggested that formal and informal goods were hard to distinguish and that plurality of technologies coexists in the informal sector including textiles and garment.

Dr. Veena Jha, Coordinator, Unctad India Programme, said studies showed that traditional approaches such as global or universal free trade might not be optimum for poverty alleviation and that differential liberalisation could yield maximum poverty benefit for India.