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Economic Growth A Must for Poverty Reduction says Montek Ahluwalia


Regardless of the assessment method, poverty in India has declined over the past two decades. However, this has not led to equal access to opportunities. Therefore, ‘inclusion’ requires a multi-pronged response,” said Montek Singh Ahluwalia, vice chairman of the Planning Commission. He added that there is higher economic growth in all states, but within states, inequality is a concern. He stressed that for inclusive growth, concerted efforts are needed in four areas: Energy, Agriculture, Urbanization, Water and Land.
He was speaking at the release of a book titled “Growth and Poverty – The Great Debate” and a well-attended panel discussion organized by CUTS International in New Delhi today. The book is the outcome of an e-forum debate at CUTS triggered by a lecture delivered by noted economist Professor Jagdish Bhagwati in Parliament last December. Other speakers at the event included Bibek Debroy, Ashok Chawla, Nirmala Sitharaman, Jean Pierre Lehmann and Shekhar Shah.

Pradeep Mehta, secretary general of CUTS, introduced the theme as chairman of the event and said that without the economic growth of the last two decades, poverty reduction would not have been possible. However, to improve the effectiveness of economic growth, further efforts are needed to improve “access to opportunities” for disadvantaged communities to overcome the poverty trap.

“As Prof. Bhagwati said in his famous lecture, we now need to start the second phase of reforms to address the social deficit, namely education and health care,” Mehta said. “If you look at the success of many Southeast and East Asian countries, social issues have been addressed in conjunction with economic liberalization, and the results are clearly visible.

Bibek Debroy of the Centre for Policy Research raised a fundamental question regarding inequality between areas: Why is poverty and inequality concentrated in a few districts in India, and why have we failed to address it? Ashok Chawla, former finance minister, said that in addition to growth, it is also important to improve government resources in the form of taxes as a percentage of GDP. This will free up more funds for direct government action.

Nirmala Sitharaman, national spokesperson for the Bhartiya Janata Party, stressed that institutions lacked willingness to face the challenges of liberalization. She added that we are distributing subsidies instead of creating jobs. The current framework discourages entrepreneurs and microenterprises, which is detrimental to both growth and poverty reduction.

Jean Pierre Lehmann of IMD Lausanne pointed out that India has a bright future as many countries are demographically disadvantaged.

Shekhar Shah, director general of the National Council for Applied Economic Research, reinforced the idea that growth provides the resources that in turn ensure “equal access to opportunity.” He referred to the history of economic growth, which shows that many countries that achieved a growth rate of seven percent or more within twenty-five years disappeared thereafter. He added that the only countries that survived were those that developed “institutional endowments” that helped them sustain growth.

In response to the discussions, Sitharaman said that the huge deficit in governance will undo all efforts to reduce poverty. In conclusion, Mehta said that the next CUTS e-fora debate will address governance and institutional reform issues to address India’s poverty reduction agenda.

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