New Delhi: India’s urban-rural divide got wider during 2004-07, judging from an analysis of incomes in the cities and villages as the economy boomed to become Asia’s third largest. The findings suggest the rural poor haven’t reaped their fair share of the dividend from India’s economic growth.
The proportion of urban earners in the highest income bracket rose to 4.2% in 2007, from just 0.5% in 2004, according to a report by research firm IIMS Dataworks.
Average income in the highest bracket improved to Rs489,376 from Rs413,817 in the period.
Among rural earners, the proportion of those in the highest income bracket barely budged to 3.8% from 2.9%. Income at the highest level in the villages reached Rs138,751 — a third of that in the cities — in 2007 from Rs117,328 in 2004.
“A large income improvement among earners in the highest income bracket (in urban India) is perhaps reflective of India’s growth story,” said the report, which added that during the same period the rural population “appears to have struggled to maintain 2004 income levels.”
The findings would probably bring little solace to city dwellers groaning under inflation that has moved into double digits and touched a 13-year high, led by soaring fuel and food prices, and tumbling financial markets.
They would also offer no cheer for the Congress-led United Progressive Alliance (UPA), which came to power in May 2004 on the plank of improving the lives of the poor, especially in the villages that are home to two-thirds of India’s 1.1 billion people.
Since assuming office, the coalition has put rural India at the forefront through programmes such as the National Rural Employee Guarantee Scheme (NREGS) and Bharat Nirman, aimed at boosting employment and infrastructure in the villages, and prodded state-owned banks to boost lending to farmers, who this year received a massive Rs71,680 crore debt write-off.
“Most programmes by the UPA...have addressed poverty at the policy level,” said N.R. Bhanumurthy, associate professor at the New Delhi-based Institute of Economic Growth. “Implementation of these programmes is another matter. It also appears from the data that the gains are more urban-centric.”
Historically, the implementation of poverty alleviation programmes in India has been poor, said Alankh N. Sharma, professor and director, Institute of Human Development “I expect better results on poverty alleviation front in the next two-three years,” he said.
At an all-India level, the proportion of people in the highest income category rose to 2.9% in 2007, from 0.7% in 2004, and those in the lowest income fell to 88.8% from 91.3%. The fact that improvement was so modest was due to the dominance of the rural population in India’s overall workforce.
“The over 100% increase in the proportion of earners in the highest income levels is almost enitrely driven by earners in urban India,” IIMS Dataworks said.
To see Income trends in India: 2004-04 to 2006-07, click here