GLOBALIZATION INDICES IN INDIA AND EFFECTS ON POVERTY

Shouvik Ganguly Y9558Prashant Khokhar Y9427Shayandev Sinha Y9546Ashish Dewaker Y9143

ECO434TERM PAPER

Globalization and Poverty epitomize two of the most pressing issues in India’s growth issues.

Globalization and opening up of indian economy has certainly spurred indian economic growth.

Unfortunately this growth does not show as evenly and effective in poverty estimates.

Our approach was to relate poverty index with growth to determine how much the fruits of growth actually reach the poor.

We also studied how the poor and destitute benefit from globalization in specific indian states.

Introduction

One view which significantly influenced policy decisions in this direction is that the poor benefit from economic growth only indirectly and, therefore, the proportional benefits of growth going to them compared to the rich are always less.

Economic growth brings in either an increase or a decrease in inequality; hence, if inequality increases with economic growth, the benefits accruing to the poor would be less than those to the non-poor.

Background

if growth is accompanied by a decline in inequality, benefits received by the poor would be more than those by the non-poor, and under this particular situation growth is said to be pro-poor.

in India since 1991, growth has been accompanied by reduction in poverty on a scale, which on an average is seen to be larger than the corresponding decline in the eighties (Sundaram and Tendulkar, 2003).

Poverty Growth Correlation(1983-2000)

Following are the objectives which we set to adress in this paper.

Poverty measures(Headcount etc.) PEGR and measures of PEGR. To define new measures of PEGR. Define globalization indices. To demonstrate GR & PEGR for india (pre 90,90s & 2008-09

recession). Finding PEGR correlation with globalization for indian state

specific data.

Targets

Deprevation suffered by household is given by

Where, is per capita household poverty line is the per capita consumption of household.

Now, the average deprivation suffered by the society is

represents incidence of poverty in the society and called ‘headcount ratio’.

Additively decomposable poverty measures

But headcount ratio does not take into account the intensity of deprivation suffered by the poor. We now define absolute deprivation

Thus the degree of poverty can be measured by average deprivation, which is

Which gives the estimates of foster-greenbecke-thorbecke poverty measures

α=0, headcount ratioα=1,poverty gap ratio

α=2,severity of poverty index

Poverty reduction largely depends on two parameters-economic growth rate and inequality. We inculcate these two parameters

η=poverty elasticity w.r.t growthδ=pure growth effecy=tε=inequality effect

Thus the pro-poor growth can be measured by an index(Kalkwani and Pernia 2000). Benefits of growth

Poverty Equivalent Growth Rate

Thus we find proportional change in poverty reduction

We get PEGR the growth rate that will result in the same level of poverty reduction . Obviously,

We then get the PEGR as we used

Globalization in Relation between and for India

For the - relation, we plot for the following graph for the growth of indian economy () different values of .

pro poor growth0 < <1 trickle down growth < 0 anti poor growth

Globalization index and relation

Poverty equivalent growth vs. net growth

How different states perform in PEGR stats.

Data: www.rbi.org.in www.imf.org Web.worldbank.org www.adb.org www.mospi.nic.in www.odi.org.uk/resources/download/2008.pdf Pant and patra.”Rural poverty in an era of economic reforms”

Papers The ‘bird of gold’:the rise of india’s consumer market-mckinsey

global institute Bhanumurthy,mitra. ”Declining poverty in india” Reddy,pogge. ”How not to count the poor”

Sources