Economic growth and the state of poverty in India: sectoral and provincial perspectives

This study undertakes a sector-by-sector account of economic growth, historically since the inception of economic planning, and analyses the spatiotemporal patterns of both rural and urban poverty in India. The services sector bypassed the successful completion of industrialization and prematurely emerged as the dominant driver and key lever of economic growth. The supremacy of services sector strengthened the resilience of the economy to the exogenous shocks of weather aberrations affecting agriculture. The regional disparities have tended to increase over time. The study finds support for unconditional divergence, rather than convergence, in the level of per capita real income across states. The cross-sectional and panel data models estimated for a comprehensive set of 24 states—separately for the rural, urban, and combined rural–urban sectors—provide strong support to the poverty-reducing effects of economic growth. The income-elasticity of poverty hovers around − 2 for the number of persons living below the poverty line. The gains of economic growth are distributed unevenly across states and shared asymmetrically between rural and urban sectors. The economy witnessed a mixed picture of decline in rural–urban poverty, rise in regional disparities, and surge in income inequality.