How Important to India's Poor Is the Sectoral Composition of Economic Growth?

TLDR

The study assesses how India's poor have shared in the country’s economic growth over forty years using new consumption‑based poverty measures, accounting for urban‑rural and output composition. It employs a consistent, consumption‑based poverty metric across four decades to evaluate the impact of sectoral and demographic composition on poverty. Rural consumption growth reduced poverty in both rural and urban areas, urban growth benefited only the urban poor, rural‑to‑urban migration had no effect, and only primary and tertiary sector growth lowered poverty while secondary sector growth had no impact.

Abstract

Using a new series of consistent, consumption-based poverty measures spanning forty years, we assess how much India's poor shared in the country's economic growth, taking into account its urban-rural and output composition. Rural consumption growth reduced poverty in both rural and urban areas. Urban growth brought some benefits to the urban poor, but had no impact on rural poverty. And rural-to-urban population shifts had no significant impact on poverty. Decomposing growth by output sectors, we found that output growth in the primary and tertiary sectors reduced poverty in both urban and rural areas but that secondary sector growth did not reduce poverty in either.