Liberalisation of Rural Poverty: The Indian Experience

A price rise signifies a fall in purchasing power, if there is no commensurate increase in income. Thus the pertinent question in the face of the phenomenal rise during the 1990s in the prices of the food articles, which account for a major chunk of the total expenditure of the poor, is whether there has been a corresponding increase in the incomes of the poor. The present paper is a modest attempt at analysing the answer to this question. Our focus is on the agricultural workers, for whom wages constitute the principal source of income and the important channel affecting poverty. There is evidence that rural poverty at the all-India level and across several States increased significantly especially during the first 18 months of the reform period. It is argued that the phenomenal administered price inflation of food articles, thanks to liberalisation measures, has had much to do with this situation. [CDS Working Paper 356, March 2004]