Bharat Shining
Source: By Rajesh Shukla: The Financial Express
It is, by now, well known that poverty levels have been falling much more sharply in rural India as compared to urban India. This is largely a function of the fact that there are more poor people in rural India, and the more numbers there are around the poverty line—that is, households who earn just a little less than the poverty line—the faster poverty ratios will fall. Between 1993 and 2004-05, while urban poverty ratios fell 0.55 percentage points per year, those in rural areas fell 0.75 percentage points. Between 2004-05 and 2009-10, this difference accelerated and, while urban poverty levels fell 0.96 percentage points, rural poverty levels fell 1.6 percentage points. In the next two years, the difference rose dramatically and while urban poverty levels fell 1.7 percentage points, rural poverty levels fell more than two-and-a-half times faster, by 4.2 percentage points.
While it is commonly believed poverty levels fell faster due to a better monsoon—2009-10 was a drought year—this is only part of the explanation. The real explanation lies in the dramatic change in the number and proportion of rural households who are no longer dependent upon agriculture and the impact this has had on household expenditures.
In 2004-05, of the 150 million households in rural India, nearly 62% were dependent upon agriculture in one form or another; they were either cultivating their own land or were working as agriculture labourers. These households were spending R32,635 per year in 2004-05 and R68,750 in 2011-12, based on the National Sample Survey data for each year. This was not a small achievement and while 45.2% of such households were below the poverty line in 2004-05, just 28.2% were below the poverty line in 2011-12.
By far the greater change has been that in occupation patterns. While 38.3% of households were in the non-farm sector in rural areas in 2004-05, this rose dramatically to 44.7% in 2011-12—an increase of nearly 20 million households and 110 million people in a short span of just 7 years and incredible by any stretch of the imagination. For this group, annual household expenditure rose from R36,082 in 2004-05 to R74,020 in 2011-12. Given the 7.6% higher expenditure levels for the segment, the shift was more than enough to get a larger number people out from under the poverty line—the “distance-to-poverty-line” is lower in rural areas.
What are these households working on if not on agriculture? It is worth keeping in mind, while 96% of households engaged in agriculture in India are to be found in rural areas, over 45% of households working in the industrial sector are also to be found here. The figure is a higher 56% in the case of ‘traditional services’ and a reasonably high 44% for ‘modern services’.
With households moving away from agriculture—there was a fall of 2.5 million households who worked as agricultural labour between 2004-05 and 2011-12—wages have risen in the sector and that is a big reason why poverty levels have fallen even for those still dependent upon agriculture.
The much bigger shift has been the over 40% increase in the number of households engaged in ‘casual labour’, either in public works like MGNREGA but more likely in industrial or service sector areas. How much higher the earnings here are can be seen from the fact that while 38.3% of households engaged in ‘agriculture labour’ are poor, the figure is a lower 33.5% for casual labour.
For the salaried class, where there has been a jump of over 55%, household expenditure are even higher. Even in 2004-05, just 21.2% of the households in this category were below the poverty line versus 34.1% for agriculturist households, 62.8% for agriculture labour and 41.8% for the entire rural sector. By 2011-12, just 13.1% of such households were below the poverty line in comparison with 22.9% for agriculturist households, 38.3% for agriculture labour households and 25.7% for the entire rural sector.
When you look at the disaggregated data in terms of education levels, they show what is intuitively obvious, that those with a higher education tend to be less poor. While increasing agriculture productivity is obviously a good thing to reduce poverty levels, a far greater kick will be got from increasing the penetration of industry and modern services.
It is, by now, well known that poverty levels have been falling much more sharply in rural India as compared to urban India. This is largely a function of the fact that there are more poor people in rural India, and the more numbers there are around the poverty line—that is, households who earn just a little less than the poverty line—the faster poverty ratios will fall. Between 1993 and 2004-05, while urban poverty ratios fell 0.55 percentage points per year, those in rural areas fell 0.75 percentage points. Between 2004-05 and 2009-10, this difference accelerated and, while urban poverty levels fell 0.96 percentage points, rural poverty levels fell 1.6 percentage points. In the next two years, the difference rose dramatically and while urban poverty levels fell 1.7 percentage points, rural poverty levels fell more than two-and-a-half times faster, by 4.2 percentage points.
While it is commonly believed poverty levels fell faster due to a better monsoon—2009-10 was a drought year—this is only part of the explanation. The real explanation lies in the dramatic change in the number and proportion of rural households who are no longer dependent upon agriculture and the impact this has had on household expenditures.
In 2004-05, of the 150 million households in rural India, nearly 62% were dependent upon agriculture in one form or another; they were either cultivating their own land or were working as agriculture labourers. These households were spending R32,635 per year in 2004-05 and R68,750 in 2011-12, based on the National Sample Survey data for each year. This was not a small achievement and while 45.2% of such households were below the poverty line in 2004-05, just 28.2% were below the poverty line in 2011-12.
By far the greater change has been that in occupation patterns. While 38.3% of households were in the non-farm sector in rural areas in 2004-05, this rose dramatically to 44.7% in 2011-12—an increase of nearly 20 million households and 110 million people in a short span of just 7 years and incredible by any stretch of the imagination. For this group, annual household expenditure rose from R36,082 in 2004-05 to R74,020 in 2011-12. Given the 7.6% higher expenditure levels for the segment, the shift was more than enough to get a larger number people out from under the poverty line—the “distance-to-poverty-line” is lower in rural areas.
What are these households working on if not on agriculture? It is worth keeping in mind, while 96% of households engaged in agriculture in India are to be found in rural areas, over 45% of households working in the industrial sector are also to be found here. The figure is a higher 56% in the case of ‘traditional services’ and a reasonably high 44% for ‘modern services’.
With households moving away from agriculture—there was a fall of 2.5 million households who worked as agricultural labour between 2004-05 and 2011-12—wages have risen in the sector and that is a big reason why poverty levels have fallen even for those still dependent upon agriculture.
The much bigger shift has been the over 40% increase in the number of households engaged in ‘casual labour’, either in public works like MGNREGA but more likely in industrial or service sector areas. How much higher the earnings here are can be seen from the fact that while 38.3% of households engaged in ‘agriculture labour’ are poor, the figure is a lower 33.5% for casual labour.
For the salaried class, where there has been a jump of over 55%, household expenditure are even higher. Even in 2004-05, just 21.2% of the households in this category were below the poverty line versus 34.1% for agriculturist households, 62.8% for agriculture labour and 41.8% for the entire rural sector. By 2011-12, just 13.1% of such households were below the poverty line in comparison with 22.9% for agriculturist households, 38.3% for agriculture labour households and 25.7% for the entire rural sector.
When you look at the disaggregated data in terms of education levels, they show what is intuitively obvious, that those with a higher education tend to be less poor. While increasing agriculture productivity is obviously a good thing to reduce poverty levels, a far greater kick will be got from increasing the penetration of industry and modern services.
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