1. ECONOMIC WELL BEING AND DEPRIVATIONS Policy Perspective in the India Context R. Radhakrishana Honorary Professor Centre for Economic and Social Studies Hyderabad ISID Foundation Day Lecture Thursday 1 st May, 2008 INSTITUTE FOR STUDIES IN INDUSTRIAL DEVELOPMENT 4, Institutional Area, Vasant Kunj, New Delhi - 110 070 Telephone: +91 11 2689 1111; Fax: +91 11 2612 2448 Email: info@isid.org.in; Website: http://isidev.nic.in or http://isid.org.in ISID

2. INTRODUCTION MAIN THEME: Wellbeing and deprivations Wellbeing and deprivations SUB- THEMES Economic Welfare Social Welfare index Social Welfare index Inequality Inequality Rural- Urban disparity Rural- Urban disparity INCOME POVERTY Statistical Analysis Statistical Analysis Structural Analysis Structural Analysis NUTRITIONAL STATUS Food Energy Intake Food Energy Intake Child Malnutrition Child Malnutrition Adult malnutrition Adult malnutrition CHRONIC POVERTY Incidence Incidence

3. QUESTIONS ADDRESSED i). Is there perceptible improvement in the i). Is there perceptible improvement in the economic welfare over the past three decades? economic welfare over the past three decades? Could it have been better? Could it have been better? ii) How are growth and poverty related? Is growth ii) How are growth and poverty related? Is growth pro-poor? pro-poor? iii) Is poverty becoming social and geographical iii) Is poverty becoming social and geographical phenomenon? phenomenon? iv). What are the deep drivers of malnutrition and iv). What are the deep drivers of malnutrition and chronic poverty? chronic poverty?

4. Measurement of Economic Welfare Social welfare function Social welfare function Per capita real expenditure Per capita real expenditure Measurement of Income Poverty Measurement of pro-poor growth Measurement of pro-poor growth HCR, PGR, FGT HCR, PGR, FGT Decomposition of poverty reduction between 1983 and 1994- 95 Decomposition of poverty reduction between 1983 and 1994- 95 Measurement of Malnutrition Calorie intake Calorie intake Micro-nutrients Micro-nutrients Child Malnutrition (underweight, stunted, wasted) Child Malnutrition (underweight, stunted, wasted) Chronic Energy deficiency (body mass index) Chronic Energy deficiency (body mass index)

5. Trends in Economic Welfare Per capita rural expenditure increased at an annual rate of 1.35 per cent in rural areas and 2.17 per cent in urban areas during 1970-2005 Per capita rural expenditure increased at an annual rate of 1.35 per cent in rural areas and 2.17 per cent in urban areas during 1970-2005 The trend is marked by fluctuations. Attributable to agricultural cycles and market volatility The trend is marked by fluctuations. Attributable to agricultural cycles and market volatility Rural-urban disparity widened since the mid- nineties Rural-urban disparity widened since the mid- nineties There has been significant trend increase in urban inequality. There has been significant trend increase in urban inequality. Widening rural-urban inequality as well as worsening urban inequality might have adversely affected the over all economic welfare. Widening rural-urban inequality as well as worsening urban inequality might have adversely affected the over all economic welfare.

10. Welfare Effect of Food Price Increase in cereal price would hurt the poor the most and would aggregate inequality. Increase in cereal price would hurt the poor the most and would aggregate inequality. Welfare effect of cereal price is larger in magnitude in rural areas than the urban areas. Welfare effect of cereal price is larger in magnitude in rural areas than the urban areas. Welfare effect of non-cereal food price is larger than that of cereal price. Welfare effect of non-cereal food price is larger than that of cereal price. There is justification for stabilization of cereal and non- cereal food prices There is justification for stabilization of cereal and non- cereal food prices

13. Trends in Poverty: 1970-2005 HCR declined at on annual rate of 2.5% in rural areas and 2.9% urban areas during 1970-2005 HCR declined at on annual rate of 2.5% in rural areas and 2.9% urban areas during 1970-2005 The decline in severity of poverty in faster than the extent of poverty The decline in severity of poverty in faster than the extent of poverty Urban areas performed better in poverty reduction during 1990-2005 Urban areas performed better in poverty reduction during 1990-2005 Growth process could hardly lift 23 million persons out of poverty over two decades (1983-2005) and left about 300 million persons in poverty Growth process could hardly lift 23 million persons out of poverty over two decades (1983-2005) and left about 300 million persons in poverty

14. Contd.. Share of rural areas in All India poor was 74% in 2004-05 Share of rural areas in All India poor was 74% in 2004-05 There has been a slow process of urbanization of poverty. There has been a slow process of urbanization of poverty. In rural areas absolute number of poor declined by 31 million between 1983 and 2004- 2005 and in contrast; it increased by 8 million in urban areas In rural areas absolute number of poor declined by 31 million between 1983 and 2004- 2005 and in contrast; it increased by 8 million in urban areas Growth elasticity of poverty in estimated to be in the range of -0.86 to -0.77 Growth elasticity of poverty in estimated to be in the range of -0.86 to -0.77

16. What do recent data reveal? There is no acceleration in the pace of poverty reduction in the states with high levels of poverty There is no acceleration in the pace of poverty reduction in the states with high levels of poverty The performance of Bihar Madhya Pradesh, Orissa and Uttar Pradesh in poverty reduction has been worst The performance of Bihar Madhya Pradesh, Orissa and Uttar Pradesh in poverty reduction has been worst The share of Bihar, Madhya Pradesh, Orissa and Uttar Pradesh in All India poor increased from 46% in 1983 to 55% in 2004-05 The share of Bihar, Madhya Pradesh, Orissa and Uttar Pradesh in All India poor increased from 46% in 1983 to 55% in 2004-05 Between 1983 and 2004-2005, absolute number of poor increased by 6.5 million in UP, 6.3 million in MP and 3.5 million in Maharastra, it declined by 11.9 million in Tamil Nadu, 9.8 million in West Bengal and 5.5 million in Kerala Between 1983 and 2004-2005, absolute number of poor increased by 6.5 million in UP, 6.3 million in MP and 3.5 million in Maharastra, it declined by 11.9 million in Tamil Nadu, 9.8 million in West Bengal and 5.5 million in Kerala

17. Contd… Despite high growth, poverty reduction has been slow in Maharastra and Karnataka Despite high growth, poverty reduction has been slow in Maharastra and Karnataka Inter state inequality in the incidence of poverty worsened between 1993-94 and 2004-05 Inter state inequality in the incidence of poverty worsened between 1993-94 and 2004-05 The worsening inequality in the poverty incidence could be due to worsening inter- state disparities in per capita GSDP. The worsening inequality in the poverty incidence could be due to worsening inter- state disparities in per capita GSDP.

22. Measurement of Pro-Poor Growth Growth is defined as pro-poor if poverty falls more than it would have if growth were distribution neutral Growth is defined as pro-poor if poverty falls more than it would have if growth were distribution neutral

28. FOOD INTAKE The per capita cereal expenditure at constant prices declined in both rural and urban areas The per capita cereal expenditure at constant prices declined in both rural and urban areas Per capita food expenditure stagnated during 1990-2005; if this persists, it may lead to demand deficiency for food products. Per capita food expenditure stagnated during 1990-2005; if this persists, it may lead to demand deficiency for food products. Per capita calorie intake leveled off at about 2150 k.cal/day in both rural and urban areas. Per capita calorie intake leveled off at about 2150 k.cal/day in both rural and urban areas. In the case of bottom 30 per cent of the population, calorie intake is low at 1600-1700 k.cal/day In the case of bottom 30 per cent of the population, calorie intake is low at 1600-1700 k.cal/day What is worse, intra-family distribution of food is inequitable in the poor households. What is worse, intra-family distribution of food is inequitable in the poor households. 79 per cent of children aged 6-35 months are anemic 79 per cent of children aged 6-35 months are anemic 58 per cent of pregnant women are anemic 58 per cent of pregnant women are anemic

31. NNMB data show that in rural areas, the incidence of child malnutrition declined slowly from 61.5% in 1975-79 to 47.7% in 2000-01 NNMB data show that in rural areas, the incidence of child malnutrition declined slowly from 61.5% in 1975-79 to 47.7% in 2000-01 NFHS data show that child malnutrition (too thin for age) declined form 52% in 1992-93 to 47% in 1998-99 and further to 46% in 2005-2006 NFHS data show that child malnutrition (too thin for age) declined form 52% in 1992-93 to 47% in 1998-99 and further to 46% in 2005-2006 The lowest incidence of child malnutrition is not in the richest states but in the middle income states with progressive social policy The lowest incidence of child malnutrition is not in the richest states but in the middle income states with progressive social policy NNMB data show that 37.4% of rural adult males and 39.4% rural of adult females suffered from chronic energy deficiency in 2000-01 NNMB data show that 37.4% of rural adult males and 39.4% rural of adult females suffered from chronic energy deficiency in 2000-01

32. Inter-state variations reveal weak correlation between food energy intake and nutritional status Inter-state variations reveal weak correlation between food energy intake and nutritional status Levels of education, health care, access to safe drinking water, environmental sanitation and personal hygiene intervene between food intake and nutritional status Levels of education, health care, access to safe drinking water, environmental sanitation and personal hygiene intervene between food intake and nutritional status The probability of a child falling into malnutrition decreases with improvement in mother’s nutritional status, mothers education, and household income and increases with household size. The probability of a child falling into malnutrition decreases with improvement in mother’s nutritional status, mothers education, and household income and increases with household size. North-eastern states other than Assam and Tripura performed better. Some of them outperformed Kerala North-eastern states other than Assam and Tripura performed better. Some of them outperformed Kerala

34. The percentage of chronic poor households is estimated to be about 14% in both rural and urban areas The percentage of chronic poor households is estimated to be about 14% in both rural and urban areas The percentage of chronic poor was higher in West Bengal, Orissa, Madhya Pradesh and Bihar in Rural areas. The percentage of chronic poor was higher in West Bengal, Orissa, Madhya Pradesh and Bihar in Rural areas. In urban areas, the incidence of chronic poverty was higher in Orissa, Bihar, Madhya Pradesh and Uttar Pradesh In urban areas, the incidence of chronic poverty was higher in Orissa, Bihar, Madhya Pradesh and Uttar Pradesh Among social groups, CP was higher for scheduled castes Among social groups, CP was higher for scheduled castes Among occupational groups, CP was higher for rural and urban casual labour and urban self employed households Among occupational groups, CP was higher for rural and urban casual labour and urban self employed households

36. Thanks