Economic Reforms Gdp Growth and Poverty Alleviation

Topics: Poverty, Poverty threshold, Poverty in the United States Pages: 18 (5815 words) Published: September 11, 2008
The economic reforms started in 1991 ushered in a new era in Indian Economy. From a protected economy it became an open globalised economy which was supposed to be integrated well to the world economy. Some Macroeconomic Indicators existing at the onset of economic reforms. IndicatorsParticulars

Population BPL36.8%
Per Capita Income growth3.3%
GDP Growth Rate5%

The Planning Commission estimates the population below the poverty line using the expenditure distribution of NSS. In India the poverty line is estimated on the basis of calorie intake. If an Urban resident consumes less than 2000 calories per day & a rural resident consumes less than 2600 calories per day, than he comes under the category of below poverty line. According to the norms set by the World Bank a person earning less than $1 per day is assumed to be below the poverty line. The cut-off expenditure is adjusted for inflation for successive years, and these levels are used to derive time series estimates of population below poverty line.

Objective of study
The group is focused on studying the impacts of Economic reforms on Poverty and has identified the following objectives for the study Finding & Analyzing the correlation between economic reforms & Poverty alleviation. Interpreting the correlation.

Studying to what extent the economic reforms have proved to be beneficial when it comes to poverty reduction.

Methodology of study
To analyze the data relating to the GDP growth, employment & BPL population the group relied on the secondary data, sourced mainly from NSSO & CSO’s website. Tools like correlation etc. were used to analyze the relationship between these variables. The Group also went through various articles & reports (e.g Ahluwalia report & Rural poverty reduction) on economic reforms, Poverty, Inclusive growth etc to form an opinion of its own regarding the topic. The basic reason for choosing this particular methodology was that the data regarding the variables available on the websites of NSSO & CSO is reliable source as they are govt. organizations. Also literature survey tends to give one a stand because and what the experts like Montek Singh Ahluwalia say on Indian Economy really offers substantial insights into the working of the economy.

GDP Growth, Economic reforms & Poverty
India undertook economic reforms in mid 1991 when it was going through balance of payment (BOP) crisis. The main reason of resorting to economic reforms was to restore the adverse balance of payment. But apart from this immediate objective, there were some large terms issues in mind. These included among others employment generation, poverty reduction, industrial development etc. The adjoining figure shows us the poverty situation of the country before the economic reforms actually began.

The exhibit 3 shows the GDP growth rate and below poverty line people since 1991 till now. Herein we can see that though the GDP growth rate has been variable, the BPL population has been steadily coming down. What can be the reason of it? Is it the GDP growth or some other factors? For it correlation analysis of these variables become important.

The Correlation Co-efficient
Correlation between GDP Growth rate & % population BPL, R1 = -0.51402 R12 = 0.2642
YearGDP grth %% BPL% Growth in PCI
The bi-variate correlation coefficient between GDP growth & BPL population shows a negative correlation signifying thereby that as the GDP growth rate has increased during reforms period the BPL population has reduced & vice-versa. R12, that is the coefficient of determination is merely 0.2642 which implies that...
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