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INFOCUS|INDIA-CHINA|GROWTH

Recording poverty of India and China India’s poverty and inclusive growth record is much better than China’s, and levels of poverty in the two countries are not very different Surjit Bhalla

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his article attempts to document the record on poverty reduction in both China and India. That China has grown substantially faster than India is a matter of record and great pride for China. That the welfare of the poor in China has also improved at a much faster rate than India is also conventional wisdom as articulated by various scholars at international institutions like the UN, World Bank,

Asian Development Bank, etc, and these findings have been supported and endorsed by Nobel laureates like Amartya Sen, for example, in “Why India Trails China” (New York Times, June 19). There are several household surveys of consumption in India, and such surveys are led by the official National Sample Survey (NSS) conducted every few years. These data are publicly available. Unfortunately, while everyone applauds China’s GDP growth rate, no

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one, with the possible exception of the World Bank, has access to household unit-level data. In other words, we have to take the official government view on household income and consumption growth, etc. Given the very large transparent accumulation of foreign reserves of more than $ 3.5 trillion, there is little doubt that GDP level, and GDP growth, in China is extraordinarily high. The story of how much trickle-down there has been in China is documented below.

There was an important non-government household survey conducted jointly by Texas A&M University, US, and the Southwestern University of Finance and Economics in Chengdu, China, in 2011. The survey results were widely reported in the international press in December 2012. One of the results was that the Gini index of income inequality in China was a high 0.61, much higher than governmentreported results of a Gini of 0.48. Unlike official Chinese household data, the explicit stated policy of the survey organisers was that researchers worldwide could access these data. Somewhat strangely, repeated applications to the website chfsdata.org have not met with success. The results for China reported below are obtained from the World Bank website, iresearch.worldbank.org/PovcalNet/index.htm. The Indian data are based on the NSS consumer and expenditure surveys for the years 1999-2000 and 2011-12 and for China for 1999 and

2010. The table reports the head count ratio of poverty for the World Bank’s poverty line for developing countries like China and India, that is, PPP $1.25 per capita per day, which also just happens to be India’s official (Tendulkar) poverty line. For India, two estimates of poverty are presented (survey details for the China surveys are not known). The two estimates are the standard official measure of consumption (what is called the mixed recall period and referred to as Type I) and the mixed recall period with perishable items like vegetables, fruits, meat, etc measured with a recall period of seven days (referred to as Type II, the recall refers to memory recall of items purchased over the last 7, 30 or 365 days). China’s record: spectacular growth in per capita GDP, per capita consumption, and poverty decline. From a poverty level of 35.6 per cent of the population in 1999, China reduced it to 11.6 per cent in 2010, for an average pace of decline of 2.2 percentage points a year.

Both survey and national accounts (NA) consumption growth in China were near identical during this decade, at 6.7 and 7.3 per cent per annum respectively, that is, the survey-measured consumption growth was higher. If the efficiency of growth is (crudely) defined as the decline in head count ratio per unit of consumption growth, then China’s efficiency for the decade 1999 to 2010 was around -0.3, that is, for each 10 per cent growth, poverty in China was reduced by 3 percentage points. Another term for efficiency could be inclusiveness of growth. The poverty level for India in 1999-2000 and 2011-12 were 42.9 and 21.9 per cent, respectively. This gives an average pace of decline of 1.8 percentage points per annum, somewhat below the 2.2 per cent average recorded in China. But note the low level of household consumption growth observed in India — only 2.8 per cent per annum. This yields an efficiency-inclusive index of

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