Poverty, Inequality and Inclusive Growth: Cross State Analysis in India

In this paper an attempt has been made to analyze the impact of economic growth and human development index on poverty ratio for 16 Indian states in 2004–05. The other objectives of the paper are - to examine the extent of poverty ratio and inequality (through Gini Coefficients) for 16 Indian states. This is a cross state analysis. The research work extensively depends on the Secondary Data. Simple regression technique is used here. HDI for 2004–05 has been estimated by using Average Annual Compound Growth Rate (ACGR) technique.

The states are divided into three categories depending on their poverty ratio (in 2004–05) very high poverty ratio states (between 30 to less than 50percentage), medium poverty ratio states (between 20 to less than 30 percentage) and lower poverty ratio states (between less than or equal to10 to less than 20 percentage).

Gini coefficient is increasing for all the states between 1993–94 and 2004–05 except Bihar, Karnataka, Madhya Pradesh and Rajasthan. The states are also divided into three categories depending on their Gini coefficients.

The impact of Per capita NSDP on poverty ratio is negative and significant at less than 5% level for 16 Indian states. R square (0.431) shows that 43.1% changes in poverty Ratio is explained by changes in Per capita NSDP.

The impact of HDI on poverty ratio is negative and significant at greater than 10% level for 16 Indian states. R square (0.346) shows that, only 34.6% changes in poverty Ratio is explained by changes in HDI.

Therefore, it can be concluded that, when per capita NSDP and HDI increases, poverty ratio decreases in the states.