Agriculture and poverty reduction in India: An empirical study

Poverty is an important concern for most of the developing countries. Both the agriculture and non-agriculture sector plays an important role in reducing poverty. But in case of agrarian economy like India, the contribution of agriculture in poverty reduction is dominant since the majority of poor people are relied on this sector for their sustenance. Although economic growth leads to poverty reduction but the sector mix of growth matters substantively. It is always a tough job for policy makers to quantify the contribution made by each sector.

It is in this backdrop that the present paper tries to find the relative impact of GDP growth of agriculture and non-agriculture sector on poverty reduction in India. Pooled regression analysis using panel data has been applied for this purpose. The analysis found that the agricultural GDP per worker elasticity of poverty reduction is 0.85 against the 0.08 non-agricultural GDP per worker elasticity of poverty reduction. However, it is suggested that the impact of agriculture on poverty reduction cannot be judged by focusing on this sector alone. Instead, balanced growth between agriculture and manufacturing is required to reap the maximum benefit of forward and backward linkages.