High growth has helped narrow the divide between rural and urban India. There can be no better antidote to poverty.

The National Sample Survey Organisation’s (NSSO) latest household consumer expenditure data shows that the country’s improved growth record in recent times has not come at the expense of the rural countryside. Between 2004-05 and 2011-12, the Indian economy registered an average annual growth of 8.2 per cent, as against 6.2 per cent during 1993-94 to 2003-04. The growth pick-up was, however, only one part of the story. In 2003-04, the average monthly per capita expenditure (MPCE) of rural households was 61.4 per cent of that for urban India, which fell to 53.1 per cent by 2004-05. The provisional results from the NSSO’s latest survey for 2011-12 reveal that the decline in the above ratio has not only been arrested, but there has actually been a marginal increase to 53.4 per cent. Moreover, the ratio is even higher – at 60 per cent or more – for the lower five deciles representing the bottom 50 per cent of the respective populations. The inequality between urban and rural MPCEs really widens, to two times or more, only for the top deciles, where we are basically comparing the richer sections among these populations.

It would follow from this that the higher growth seen over the last decade has benefited both ‘India’ and ‘Bharat’, a cliché that has now become part of the lexicon of domestic economic policy discourse. The most obvious reasons for the uptick in rural incomes are the general turnaround in farm sector output and higher minimum support prices, resulting in an overall improvement in terms of trade for agriculture in the last 7-8 years. In addition, rural wages have gone up in real terms, putting more money in the hands of those with traditionally low bargaining power. While the most convenient explanation is to ascribe this to schemes like MGNREGA, what is often overlooked, though, is the role that accelerated growth and urbanisation themselves have played. These, by generating new employment avenues in sectors from industry to construction and assorted services, have vastly increased migration opportunities for the rural workforce. That, in turn, has led to a tightening of labour markets in the countrywide, translating into higher wages there.

What this analysis points to are two things. The first is that growth, by itself, can contribute significantly to raising the living standards of the vast majority. Even if it may not trickle down immediately, any strategy aimed at reducing poverty and inequality levels, especially in developing economies, cannot ignore growth. Secondly, there is no inherent conflict between India and Bharat. On the contrary, industrialisation and the urbanisation that accompanies it are necessary for reducing the number of those living and working off the land. Without that, there would be continuing fragmentation of holdings, which, along with stagnant work opportunities outside of agriculture, is not good either for farmers or landless rural labourers. The record of recent years, indeed, is proof that India’s growth hasn’t been all that bad for Bharat.

(This article was published on August 3, 2012)
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