India

1 Introduction and background

1.1 Key demographic and economic data

India is the largest country in South Asia covering an area of some 3.288 million square kilometres. Southern India is surrounded by the Arabian Sea and Indian Ocean, whereas the northern part shares borders with Pakistan, China, Nepal, Bhutan, Myanmar and Bangladesh. With a population of 929.4 million in 1995, it is the second most populated country in the world. It accounts for around 60 per cent of the total population of the nine countries in this study and 16 per cent of the world’s population. The population density is 283 people per square kilometre, the second highest of the nine countries included in this study, although it has only one third the population density of Bangladesh. Population growth has slowed considerably in recent years, averaging 1.8 per cent per year between 1990 and 1995. Nevertheless, the total fertility rate at 3.2 births per woman in 1995 remains well above replacement.

Income per capita stood at $340 in 1995, above Bangladesh and Nepal but well below the other countries included in the study. After relatively slow growth over much of the period since 1950, India has achieved respectable economic growth in recent years, with income per capita increasing by 3.2 per cent per year between 1985 and 1995. This is the highest growth rate in South Asia but well below the dynamic Southeast Asian countries of Indonesia, Malaysia and Thailand. The structure of production has changed somewhat with economic growth, with the share of agriculture in GDP falling from 38 per cent in 1980 to 29 per cent in 1995, and the shares of industry and services increasing modestly.

Social indicators of development also remain poor, with India classified as a low human development country by UNDP. In 1995 life expectancy at birth was 62 years and the infant mortality rate was 68 per 1,000 live births, similar to the average for all low-income countries. Only 52 per cent of adults were literate. Moreover, there is a significant gender gap with respect to many indicators, particularly those relating to education and employment.

Poverty reduction has been a major concern of the government since independence, and India has one of the longest series of national household surveys for tracking the living conditions of the poor. Official estimates of poverty are produced by the Planning Commission, based on regular surveys of household consumption expenditure carried out by the National Sample Survey Organisation. A recent World Bank research project (World Bank 1997) assembled and analysed 35 rounds of the survey, covering the period from 1951 to 1993–94.

The official poverty line has been established on the basis of consumption data from the 1973–74 household survey. It is based on a daily calorie intake of 2,400 calories per capita in rural areas, and 2,100 calories per capita in urban areas. The poverty line was set equal to the level of total expenditure, on both food and non-food items, at which this daily minimum was just met. Since 1973–74, the poverty lines so derived have been indexed by movements in the consumer price index, disaggregated by rural and urban sectors.

In 1993, the Planning Commission established the Expert Group on Estimation of Proportion and Number of Poor, which recommended two broad sets of changes to the methodology used for estimating the number of people in poverty. First, it recommended that the poverty line should be adjusted to take account of differences in the cost of living in each state. Second, it noted there has long been a discrepancy between the estimates of consumption in the household survey and in the national accounts, with the national accounts consistently showing a higher level of consumption. Moreover, the gap has been increasing over time. In the past, when estimating the incidence of poverty, the Planning Commission would adjust upwards the estimates of consumption in the household survey proportionately for all consumption classes, so that total consumption was consistent with the national accounts estimate. Using this method, it was estimated that only 16.8 per cent of the population was below the poverty line in 1993–94. The Expert Group found that this adjustment was arbitrary and led to poverty being significantly understated, and recommended that it be discontinued.

The Planning Commission has recently adopted the Expert Group’s recommendations. Based on the new methodology, it is estimated that 35.0 per cent of the population was below the poverty line in 1993–94. The incidence of poverty was slightly higher in the rural areas (36.7 per cent) than in the urban areas (30.5 per cent).

The percentage incidence of poverty has declined significantly since the 1950s. The World Bank (1997) notes three phases in the evolution of poverty: