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POVERTY REDUCTION STRATEGY TN

The contrast, with

The contrast, with countries where the relative income gap is large, i.e., more than twice the average per capita income, is sharp. In the poorest quintile, workers are virtually disconnected from the national economy. The elasticity of connection rises sharply by income class and exceeds one for the top quintile. These theoretical and empirical insights are useful in analyzing the impact of growth on poverty reduction in Tamil Nadu. c. Human Development and Poverty The classical economists including Adam Smith argued that education could well enhance the labour-productivity and hence the living standards of the poor. Public and/or subsidised “mass” basic education was strongly advocated by the classical economists (Himmelfarb, 1984), partly because it was expected to reduce total fertility rates. However, more recently, human development is being visualised in a wider context. Human development in a broad sense is defined as “enlarging people’s choices in a way that enables them to lead longer, healthier and fuller lives” (Ranis and Stewart, 2000). In a narrower sense, it relates to the health and education of the people. Poverty and human development have a strong inter-face. First, lack of human development in itself is poverty. Thus, illiteracy, poor health, and lack of education below a certain threshold are constituents of poverty, as discussed earlier in this Chapter. Second, with human development, i.e., through proper education and health, choices regarding income opportunities widen, and productivity is more augmented than what would generally be available to an uneducated person or a person in ill-health. Third, focus on human development is a potent means of fiscal intervention to reduce poverty in a country. Public expenditure on education and health, especially elementary education and primary health can lead to sustained reduction in poverty levels. Positive productivity effects are also generated from human infrastructure development, particularly basic health and education as noted by Schultz (1988), and Behrman and Deolalikar (1988). 2.2 Tamil Nadu: Growth and Structural Changes a. Structure of GSDP The structure of gross state domestic product (GSDP) in many states, but prominently in Tamil Nadu, has been shifting away from agriculture towards manufacturing and particularly towards services. As indicated in Table 2.1, in Tamil Nadu, the share of agriculture in GSDP measured at constant (1999-00) prices has fallen from 20.4 percent in 1993-94 to about 12 percent in 2006-07. The share of the secondary sector has also fallen but by a small margin from 29.8 percent in 1993-94 to 28 percent in 2006-07. The 30

share of the tertiary sector in Tamil Nadu has grown from 45.7 percent in 1993-94 to 58.4 percent in 2006-07. Table 2.1: Structural Changes in Tamil Nadu Economy: Share of GSDP at 1999-00 Prices (Percent) Sectors 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 Primary of which 23.55 23.28 19.67 18.59 18.64 19.40 17.41 Agriculture 20.42 20.27 16.92 15.93 16.17 16.90 15.03 Secondary of which 29.78 30.61 32.20 31.29 29.47 28.32 29.57 Manufacturing 21.62 22.21 23.71 22.67 20.66 19.09 19.78 Tertiary 45.65 44.94 47.13 49.52 51.71 52.27 53.02 Sectors 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 Primary of which 17.32 17.24 13.80 12.91 13.60 14.01 13.63 Agriculture 15.00 14.80 11.37 10.54 11.42 11.59 11.46 Secondary of which 29.85 27.03 29.16 29.43 28.50 28.15 28.03 Manufacturing 20.10 18.58 18.94 20.01 19.25 19.45 19.88 Tertiary 52.83 55.73 57.04 57.67 57.90 57.84 58.35 Source (Basic Data): Government of India, Central Statistical Organisation, various issues. These structural shifts of the state economy have significant implications on the employment and poverty reduction strategies. Comparing the share of workforce in different sectors with those in GSDP, it is noted that the primary sector has a share in employment (41.5 percent in 2004-05) that is far exceeding its share in output (13.6 percent in 2004-05). Correspondingly, the services sector employs far less than its share in GSDP. It is only the secondary sector that contributes to a share in employment at 27.7 percent in 2004-05 and is comparable with its share in GSDP in 2004-05 at 28.5 percent. Table 2.2: Composition and Growth of Sectoral Employment Sectors 1993-94 1999-00 2004-05 Composition of Work Force (in Lakh) Primary 154.81 145.65 127.42 Secondary 62.43 68.53 84.87 Tertiary 68.36 75.56 94.37 Total 285.6 289.74 306.66 Sectoral Shares (percent) Primary 54.21 50.27 41.55 Secondary 21.86 23.65 27.68 Tertiary 23.94 26.08 30.77 Total 100.00 100.00 100.00 Growth Rates (percent) Primary -5.92 -12.52 Secondary 9.77 23.84 Tertiary 10.53 24.89 Total 1.45 5.84 Source: Government of Tamil Nadu (2007), Eleventh Five Year Plan 2007-2012. 31

World Comparative Economic And Social Data
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PDF: 1.0MB - Population Reference Bureau