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National and Per Capita Income: Patterns, trends, aggregate and sectoral composition and changes therein Broad factors determining National Income and distributionFor the above two (NI, PCI trends and sectoral composition) see own notes (Macro Misc.)Measures of povertyTrends in poverty and inequality?Answers are below; first, a survey of inequality trends (from a paper by Jayati Ghosh):The most popular means of measuring inequality is Gini coefficient. Another popular measure is changes and difference between areas in MPCE (Mean/ monthly per-capita consumption expenditure).Poverty Questions- Chapter 09 (thin book)Which elements affect the magnitude of the poverty ratio? Answer:Nutrition norm (translated into monetary terms) in the base yearPrice deflator used to update the poverty linePro-rata adjustment in the number of households in different expenditure classes to determine the number of households below and above the poverty lineDefine: HDI, HPINote: In HDI, final calculation is cube root of the 3 indicators, not a simple average (Geometric Mean- so that changes in any of the 3 factors do not reflect linearly)What is India’s rank on the HDI as of 2014?Answer: 135/ 187What is ‘IHDI’?Answer: Inequality adjusted HDI; the IHDI is distribution-sensitive average level of HD. Two countries with different distributions of achievements can have the same average HDI value. Under perfect equality the IHDI is equal to the HDI, but falls below the HDI when inequality rises. The difference between the IHDI and HDI is the human development cost of inequality, also termed – the loss to human development due to inequality. The IHDI allows a direct link to inequalities in dimensions, it can inform policies towards inequality reduction, and leads to better understanding of inequalities across population and their contribution to the overall human development cost.What is the Multidimensional Poverty Index?Answer:The?Global Multidimensional Poverty Index?(MPI)?was developed by the?Oxford Poverty & Human Development Initiative?and the?United Nations Development Programme, and uses different factors to determine poverty beyond income-based lists It replaced the previous?Human Poverty IndexIt complements traditional income-based poverty measures by capturing the severe deprivations that each person faces at the same time with respect to education, health and living standards. The MPI assesses poverty at the individual level. If someone is deprived in a third or more of ten (weighted) indicators, the global index identifies them as ‘MPI poor’, and the extent – or intensity – of their poverty is measured by the number of deprivations they are experiencingIndicators:Health: Child mortality, NutritionEducation: Years of schooling, School attendanceLiving Standards: Cooking fuel, Toilet, Water, Electricity, Floor, AssetsCalculation: (incidence x intensity), where intensity = number of indicators that the given household lacksIndia’s rank in 2014: 55How do the MPI and HDI differ?Answer:While both the HDI and MPI use the 3 broad dimensions?health,?education?and?standard of living, HDI uses only single indicators for each dimension of poverty while MPI uses more than one indicator for each one This, amongst other reasons, has led to the MPI only being calculated for just over 100 countries, where data is available for all these diverse indicators, while HDI is calculated for almost all countriesHowever, though HDI is thus more universally applicable, its relative sparsity of indicators also makes it more susceptible to bias. Indeed some studies have found it to be somewhat biased towards GDP per capita, as demonstrated by a high correlation between HDI and the log of GDPpcHence, HDI has been criticized for ignoring other development parametersBoth HDI and MPI have been criticized by economists such as Ratan Lal Basu for not taking "moral/emotional/spiritual dimensions" of poverty into consideration. It has been attempted to capture these additional factors by the "Global Happiness Index" in which a country like Bhutan (which has dismal performance on other indicators) has been ranked no. 1How does India’s poverty ratio compare on MPI as compared to on its national poverty line?Answer:In 2010, India’s poverty ratio according to MPI was over 40% (based on PPP, $1.25/ day), while 29% under national poverty line. The difference in poverty line, thus, widens substantially in case of India when this indicator is used instead of the national poverty line; in some countries, the opposite is trueWhat is the ‘Gender Development Index’?Answer:GDI = (Female HDI/ Male HDI)India’s rank in 2014: 132/ 148What is the ‘Gender Inequality Index’?Answer:Calculated based on 3 indicators:Reproductive health (MMR (200/lakh), Adolescent birth rate (32/1000))Empowerment (Women in parliament (11%), Higher education (27%))Economic activity (Labour force participation- 29% for India)India’s rank in 2014: 127/ 157According the WDR, what are the 4 main culprits that affect human development worldwide?Answer:Climate changeConflictSocial unrestEconomic crisisWhat are the 6 prescriptions to combat these culprits?Answer:Universal basic service: health, education, water supply, sanitation and public safety (policing)A person is most vulnerable at 3 stages in life; government must protect here: First 1000 days after birth; when Entering workforce; when leaving workforce (due to retirement or disability). Otherwise, setback at these three stages can be particularly difficult to overcome and may have prolonged impacts. e.g. malnutrition => low skilled=> less social security at retirementSocial protection (80% of world lacks). Lack of social security = people sell their assets, takeout children from school & sent them to child laborFull employment (50% world informal jobs). Unemployment = crime, suicides; children education, health also suffersInclusion of women, disabled and minorities in developmentDisaster preparedness. Because natural disasters worsen the existing vulnerabilities, such as poverty, inequality, environmental degradation and weak governanceWhat % of its GDP does India need to spend to ensure a social security net? What should it entail?Answer:4%; this social security net should include NREGA, universal primary health coverage, old age and disabled pensions and child benefitsHas poverty declined post reforms?Answer:Despite high GDP growth, poverty has declined very slowly- only around 0.81 percentage points per year according to Tendulkar estimates. Newer Rangarajan estimates are not available for years that long ago, but it is likely that they will show an even worse situationExplain: Lakdawala, Tendulkar, and Rangarajan methods for constructing poverty line.Answer:Lakdawala: 2,400 calories in rural areas, 2,100 in urban areas, base year: 1973Tendulkar: 2005 Tendulkar Committee improved upon the Lakdawala committee methodology, but didn’t really change anything. Just the bundle of consumption (which was based on 1973 consumption patterns in Lakdawala) was updated to a 2003 bundle, to reflect changes in consumption patterns. Differences in estimates arise from the 2 different committees, but the extent of poverty decline is roughly similar in percentage point termsRangarajan: There were complaints that Tendulkar committee had no new normative content, and was still relying on old methodology of consumption basket only (based on calorific value). The Rangarajan Committee (2014) extended the line to consider (calories + proteins + fat), and also include expenditure on basic items such as clothing, education, rent, conveyance etc.State Lakdawala estimates for 1993 and 2004.Total: 36, 27Rural: 37, 28Urban: 32, 25Compare poverty ratio in India in 1993, 2004, and 2011 according to Tendulkar methodology (total, urban, and rural).Answer:Total: 45, 37, 22Rural: 50, 42, 26Urban: 32, 26, 14What are the Rangarajan estimates for 2011-12? How do they differ from Tendulkar’s?Answer:Total: 30, Rural: 31, Urban: 26Thus, compared to Tendulkar, rural poverty is similar, but urban nearly doubles. Overall poverty estimates also go up significantly.What has been the state-level performance in poverty reduction:Answer:The four southern states (AP, TN, Kerala, Karnataka) report impressive reduction in poverty; as do Maharashtra, Odisha (still 46%), MP, and HPNo improvement in UP (41%) and Bihar (55%)Very little improvement in West BengalDeterioration in AssamPunjab and Haryana had relatively lower poverty rates to begin with, but do not seem to have improved their position (around 20%)What is the ‘Washington Consensus’ view on poverty reduction?Answer: Government-directed anti-poverty programmes are useless; only market-led reforms can create the growth that is required for the ‘trickle-down’ effect to work. This will automatically eradicate povertyHow important has growth been in India’s poverty reduction?Answer:Until 1977, estimates show that rural and urban poverty proportion fluctuated with no downward trend, remaining at around 51% in 1977. It is no coincidence that significant reduction in poverty since 1980 were associated with a near tripling of per-capita GDP growth to an average of around 4% p.a. during 1980-1990, compared to 1.25% during 1950-1980According to Dev and Ravi, if inequality had not increased between 1993 and 2004, what would have ben the effect on poverty reduction?Answer:Poverty reduction could have been higher by 4 percentage points (12% instead of 8%)What are the 2004 NFHS numbers on:Answer:Malnutritioned children below 6 years of age: 49%Children not fully immunized: 56%Non-institutional deliveries: 60%Lack of electricity: 32%No piped drinking water: 58%Thus, the incidence of non-income poverty is much more alarming than that of income povertyInequality QuestionsWhat is Gini Coefficient?Answer:Measures the extent to which the distribution of income or consumption among individuals deviates from equal distribution. A high value denotes more unequal distributionWhat was the value for India in 2010?Answer: 37; some countries that are ranked higher in HDI (SA, Brazil, China, Malaysia etc.) have higher inequalityWhat are the two measures of inequality used in HDR?Answer:Income Gini Coefficient, and the Quintile Income Ratio (measure of average income of the richest 20% of population to that of poorest 20%)In 2011, what was the MPCE for rural and urban areas in India?Answer:Rs. 1300 for rural, Rs. 2400 for urban; this shows high rural-urban income disparityWhat has been happening to the share of the richest 1% of the population?Answer:There were no $-billionaires in India in 2000; today there are over 100. Inequality among the rich is also increasing, with the share of the topmost 1% in the income distribution rising steadily since the 1990s (top 1% have 50% wealth; 10% have 75%)What is the traditional view on the impact of rising income inequality on future growth?Answer:Traditional view is that rising income inequality fosters higher growth by generating greater incentives to save and invest; this has largely been discredited, because higher inequality also leads to social conflict, and in any case, imperfect credit markets, underinvestment in human and physical capital etc. are associated with inequality, and these lead to lower growthWhat has been the impact of reforms on state-level inequality?Answer:States that have grown faster have also experienced higher increases in inequality. However, this is largely because richer states have grown faster than the poorer states, in an environment where the poorer states have also been growing. It is expected that even with this, due to migration, prosperity resulting from higher growth will ‘diffuse’ to slow-growth, poorer regionsWhat has been the impact of reforms on urban inequality?Answer:Gini coefficient for urban areas was 34% in 1993; rose to 39% in 2009What has been the impact of reforms on SCs and STs?Answer:Studies show that wages of SCs and STs have been converging with those of non-SCs since 1983Patterns, trends, aggregate and sectoral composition and changes therein in National and Per Capita IncomeRates of economic growth in India during the 20th century (CSO data):1950-20041960s1970s1980s1990s2000s2002-07 (X)2007-12 (XI)Agriculture2.52.51.34.43.22.52.43.3Industry5.36.33.65.95.77.79.26.7Services5.44.84.46.57.38.68.89.9GDP4.2435.65.87.27.67.9GDP per capita*2.11.80.93.73.35.5* The growth rate of per capita income roughly equals the difference between the growth rate of income and the growth rate of populationTrends of sectoral shares in GDP: Sector1951196119711981199120012013Primary53484236302414Secondary17212426282726Manufacturing (part of secondary)13.514.515.4Tertiary30313438425060Into what broad phases can the Indian growth experience be divided? Mention salient features of each, along with growth rate of GDP, and GFCF percentage.See page 137-139 of the thin bookWhat explains India’s growth turnaround in 1980s?Answer:Growth turnaround in 1980s was puzzling, because it happened before any large-scale macroeconomic reforms (trade policy actually became more restrictive, and there was very little product or labour market reform). Also, growth was not driven by manufactured exports (unlike the East Asian Tigers). It was, instead, the services sector that led the growth charge. Growth turnaround can be attributed to:Pro-business tilt (not pro-market- see difference on page 141)These small shifts elicited a large productivity responseExpansionary macroeconomic policies stimulated aggregate demandSignificant increase in public investment (15% in 1970s; 20% in 1980s) helped alleviate supply constraintsLiberalization of import of capital goodsInstitutional capacities created during the preceding 30 years helped: legal framework, higher education, science and technology, managerial capabilities etc.How would you characterize the ‘boom’ seen in the Indian economy in 2003-2008?Answer:Some call it the ‘best’ phase in India’s growth history:Annual average growth rate was about 8.5%This was an episode of export-led growth, with export-to-GDP ratio going up by 9 percentage points in the 5 yearsHowever, it was a debt-led boom, leading to rapid monetary policy expansion, inflationary pressures, real exchange rate appreciation, and widening current account deficits Expansion of bank credit, topped by a flood of foreign private capital (FDI rose from 0.6% of GDP in 2003 to 2.8% in 2007) enabled the expansion of aggregate supplyCorporate debt burden resulting from the boom years has now turned onerous, in turn swelling the NPAs of the banking sectorMost of the FDI seen contributed little by way of technology or to the economy’s long-term growth potentialRoughly, what is the % of GFCF in India’s GDP? How much of this is public, private corporate, and household? What does this show?Answer:Total is around 35%; Public: 8%; Corporate: 9%: Household: 15% (due to huge acquisition of valuables, including gold). Thus, though the GFCF % might look high, a major portion of it comes from non-productive investments such as valuables. Moreover, post-2008, there has been a sharp slowdown in corporate investment, which is the source of future supply, and of future growth potentialRoughly, what is the domestic savings rate?Answer: 30% (historic high in 2007 was 37%)See statewise growth experience since reforms, Page 178 or so. ................
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