That growth is the best antidote to poverty has been well established from the results of successive National Sample Surveys, including the last one for 2011-12. The Planning Commission has used this data to show that the rate of poverty decline between 2004-05 and 2011-12 was almost three times more than that between 1993-94 and 2004-05. The fact that the Indian economy grew by an average 8.3 per cent a year over the latter period, as against 6.2 per cent from 1993-94 to 2004-05, played no small part here. A recent paper by Arvind Panagariya and Vishal More of Columbia University has gone a step further. It has shown that poverty reduction rates for Scheduled Castes (SC), Muslims, Other Backward Classes (OBC) and Scheduled Tribes (ST) exceeded the national average between 2004-05 and 2011-12. True, the percentage of poor still remains higher among STs (43), SCs (29.4), Muslims (25.4) and OBCs (20.7) than for the average Indian (22). But the fact that the poverty ratio for these communities fell more than for the general population in the recent high-growth period is significant.

The Panagariya-More study makes it clear that growth must be the centrepiece of any strategy to fight poverty. What the sustained 8 per cent-plus growth over the last decade did was create new jobs, especially for the rural poor, that previously had limited options outside of working in the farms. The study reveals that of the poverty reduction rates across occupational categories, the highest were recorded by agricultural and casual labourers. But growth matters not just for creation of jobs and income opportunities. It is also necessary in order for governments to raise the resources to spend on education, health and other welfare schemes. In other words, socialism cannot exist without growth.

Rather than engaging in endless growth-versus-distribution debates, the current slowdown in the economy should persuade us to shift the focus from the ‘why’ to the ‘how’ of growth. Even here, there are clear lessons from our recent experience. The most important of them is the need for fiscal discipline coupled with a strong government focus on infrastructure and welfare programmes that target vulnerable sections through direct cash transfers. The other key ingredient is putting in place the necessary administrative mechanisms that ensure projects come to a timely fruition. The absence of these, along with practical and transparent rules for grant of statutory clearances, had a major role in ending the last investment boom. The next growth phase deserves a more solid fiscal and institutional foundation that can make a sustainable dent on poverty.

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