India's strategy of eradicating poverty by "growing the pie rather than slicing it", and fuelling the country's growth with market-based policies holds lessons for other developing countries, suggest two leading Indian-American economists.
In a new book, Jagdish Bhagwati senior fellow at Council on Foreign Relations (CFR) and Arvind Panagariya, Columbia University professor, demonstrate how growth was the strategy successfully deployed to reduce poverty in India.
However, further reforms in labour and land markets are essential to translate growth into more employment, they argue in the new CFR book, "Why Growth Matters: How Economic Growth in India Reduced Poverty and the Lessons for Other Developing Countries".
Official poverty estimates provided by India's Planning Commission show the proportion of the population below the poverty line in India decreased 17 percent in two decades, from 44.5 percent in 1983 to 27.5 percent in 2004-2005, they note.
"We cannot emphasize enough that our analysis, while it is addressed to India's development experience and underlines the centrality of growth in reducing poverty, has clear lessons for aid and development agencies, as well as NGOs that continually work to affect poverty all over the world," Bhagwati and Panagariya concluded.
And while growth generates revenues to provide health and education, "Doors need to be opened wider to the private sector in higher education as well, to permit better access for the massive population of the young," they said.
However, India's strong 8.2 percent growth in the last decade can in part be attributed to the country's poverty-reduction reforms, the authors said.
Thus only one strategy will help the poor to any significant effect: economic growth, led by markets overseen and encouraged by liberal state policies, Bhagwati and Panagariya argued.