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Why poverty declined in India in recent years: Pronab Sen

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Several factors: the growth acceleration certainly was a major factor, but it would not have had this kind of impact if two other developments had not occurred. The first is that there was a terms of trade shift in favour of agriculture, which began in 2004 and continued to gain strength thereafter. Over the period, my rough estimate is that the terms of trade improvement added somewhere between 3 to 4 percentage points annually to real agricultural income growth. The second is that rural wages rose rapidly, indeed faster than agricultural prices, which led to a distributional shift away from landowners towards landless labour. As a result of these two factors, the high gross domestic product (GDP) growth rate “trickled down” to the poor, especially the rural poor, much faster and to a larger extent than would have been the case otherwise. Read More

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