World Energy Outlook 2007

SPOTLIGHT
Will Economic Growth Solve India’s Problem of Rural Poverty?
Poverty remains a huge challenge for India. Rapid economic
development has brought an improvement in average living standards, as
witnessed by higher life expectancy, lower child mortality and expanded
access to clean water. But large numbers of people remain desperately
poor. One important dimension of the income gap is the rural-urban
divide. During the 1990s, in most states, improvements in urban
incomes outpaced those of rural incomes, widening the gulf between
rural and urban India; 230 million farmers in India have been largely
bypassed by the rapid, urban-led economic growth. Low productivity,
public under-investment, inefficient pricing policies, inadequate training
and poor maintenance of irrigation systems and road infrastructure
continue to characterise the Indian farm sector. Moreover, there are poor
regions within otherwise prosperous states. Maharashtra is home to
booming and prosperous Mumbai, but at the same time nearly 50% of
the population in its rural areas is close to or below the poverty line
(World Bank, 2006b).
Economic growth will reduce poverty but needs to be combined with
strong policies targeted on the rural sector, including improved access
to cleaner, more efficient cooking fuels and technologies. In the
2007/08 budget, the government made plans to fund some of the goals
of the Common Minimum Programme, which aims to establish a
social welfare scheme. A National Rural Employment Guarantee
Scheme has been set up and the Bharat Nirman, the Indian
Development Agency, has enjoyed a budget increase of more than half
to 0.6% of GDP. The government is also preparing a financial aid plan
for indebted farmers in the southern states of Andhra Pradesh,
Karnataka and Kerala. Fast and focused implementation of these
programmes and plans will be crucial to raising the living standards of
India’s rural citizens.
The poor quality of education remains a major stumbling block
to poverty alleviation and economic growth. Literacy rates have
improved, especially among the young, but are still very low in rural
areas, at 64% for men and 45% for women. In over one-quarter of rural
households, not a single household member can read or write. At 61%
in 2006, average literacy in India fell short of the rate in China, where
it was 91%.
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Chapter 14 – Political, Economic and Demographic Context 433