Poverty, the Age Old Plague: A Comparison of Trends in India and China (1947 - 2010)
By Anokhi Desai & Aditi Mishra
“Poverty entails more than the lack of income and productive resources to ensure sustainable livelihoods. Its manifestations include hunger and malnutrition, limited access to education and other basic services, social discrimination and exclusion, as well as the lack of participation in decision-making” (United Nations, n.d.).
India and China are two countries similar in composition and origin, but different in eco-political strategies. And since they are both similar and different from each other, we economists draw comparisons. For starters, the two countries span a substantial geographical size, boast the leading population sizes in the world, and gained colonial independence in close proximity to each other (India in 1947, and China in 1949). India and China, thus, entered the new world-era post-WWII as primarily agrarian societies with widespread poverty and a dismantled societal structure.
The two countries, however, embarked on different political paths to pursue development and rebuild themselves from the crossroads: China adopted a revolutionary socialist outlook while India went ahead with a Western-style bourgeois democracy (Weisskopf, 1975). From an economic perspective, China steadily assumed the role of becoming the “workshop” of the world, focusing on expanding its manufacturing production. Meanwhile, India trundled the path of becoming the “office” of the world by domineering its offshoring IT-enabled services to connect with the rest of the world (Ghosh, 2010).
While India and China have come a long way from where they started in the late 1940s, they still are plagued with rampant patterns of poverty. This begs the question, “Are the experiences of poverty in India and China related in some way?” Can the political outlook of a country facilitate or alleviate poverty? Do agrarian countries need to shift from agriculture to non-agriculture? What does globalization mean for poverty in these countries? Let’s explore not only the absolute expanse of poverty here but also the nature of inequality and growth in the two countries. Let’s go!
Baby Steps: The Post-Independence Conditions in India and China
India and China both decided to adopt the Five Year Plan policy: India in 1951, closely followed by China in 1953. At the time, China had shown higher agricultural productivity while India exhibited greater industrial advancement. After gaining independence, China pursued a structural shift from agriculture to manufacturing industries while India focused on improving its agricultural conditions. Between the years 1950-1970, while China experienced about a 4-6% growth in output, India grew by only 2-4% (Weisskopf, 1975). It would appear that China’s structural change initiative and the creation of non-farm jobs had already started to pay off. Underemployment swooped and productivity increased. China had managed twin growth in agriculture as well as in industries leaving India to follow an uncharted dirt terrain.
Meanwhile, India had neglected its manufacturing sector to focus on agriculture. In the 1960s, India witnessed the Green Revolution and saw a significant improvement in its agricultural productivity. Unfortunately, this boon came with the additional costs of disguised unemployment. With its industrial sector lying dormant with not nearly enough attention, the excess labor in India was not transferred across to the industries to create more employment and production capacity. This was the root cause of growth differences in India and China and set India back in the race even further.
Poverty Reduction: Trends, Indicators, and Policies
Income Inequalities
While there had been high aggregate growth in income in China through the 1970s into the 2000s, income inequality had also sneakily been on a rise (UNDP China Human Development Report, 2005). This was true for both the rural and urban Gini coefficients for the country. However, poverty is more multi-faceted than simple inequality. The standard of living in China is different in urban and rural areas. Urban residents enjoy the benefits of subsidies like free healthcare, pensions, and living allowances whereas rural residents have a lower cost of living. This might counterbalance the absolute figures of inequality.
The rural-urban income inequalities in China increased between 1990 and 2007. This was a direct result of the shift in trade structure (Ghosh, 2010). The situation improved in 1997 when agricultural prices rose. Average rural income improved because there are equitable land distribution laws in the country. An interesting factor to note is that while the rural-urban income gap was high, urbanization in China was on the rise as well (China Statistical Abstract, 2008 as cited in Ghosh, 2010). The proportion of people below the poverty line in China fell from 63.8 percent in 1981 to 9.9 percent in 2004 (Bardhan, 2007). Graph 1 shows the rural-urban ratio of per capita income in China, sourced from CASS and UNDP 2008.
Graph 1.
The Rural-Urban Ratio of Per Capita Income in China
Meanwhile, in India too, evidence based on the statistics of NSS surveys reveals that economic inequalities worsened in the period post the 1991 reform. The rural-urban inequality spiked between 1993-94 and 1999-2000 (Deaton and Dreze 2002, CSO 2007 as cited in Ghosh, 2010). However, the reality of the situation also concerns the change in consumption baskets in rural and urban areas with respect to the costs of healthcare, energy, and calorie requirement versus the actual calorie intake (which was the original basis for calculating inequalities). Graph 2 shows a comparison of rural and urban poverty estimates according to the Planning Commission of India.
Graph 2.
Poverty Estimates (percentage of BPL population)
As far as economic inequality is concerned, both countries had problems of unequal societies, income differentials, inadequate health facilities, and unemployment. China had been able to reduce income inequalities post Liberalisation. This was because of its Cultural Revolution which included deliberate efforts to spread the supply of educational, medical, and cultural resources into rural areas (Weisskopf, 1975). India, meanwhile, performed worse due to a failure in effectively directing policies. According to the National Sample Survey data of 2004-05, 42% of the Indian population was below the poverty line (Ravallion, 2008). The Green Revolution benefited only the rich farmers. The benefits did not trickle down to the tenants and poor farmers, for whom the leap would have been the most transformative. This further contributed to the income gap.
Factors Affecting Poverty Trends
Poverty in India has sustained chronically. One reason for this is the inaccessibility of primary education and lopsided provisions of facilities and opportunities to those who can afford it (and those who need it). China has been more efficient at providing primary education to its citizens, in the light of crores of Indians lacking basic education (C H, 2011). While the prospects of higher education in India are much higher, the rich get richer and the poor remain poor. The fruits of development, therefore, are a luxury.
When globalization came knocking, China was keen and ready. It devalued its currency and promoted its exports, capturing the global market. Due to its initial investment in industries, it could now reap the economies of scale. China’s cheaper currency managed to swell the share of its exports to its GDP. It dominated the global market in multiple labor-intensive industries which contributed to surging growth rates and alleviated domestic poverty levels.
India was limited by the frameworks and limitations of its political democracy, but still pursued economic development and public investment policies within its capacity, which may yet emerge to be a strength. China’s operation in its own political framework has given the state relatively more freedom in deciding its investment priorities (Thorat & Fan, 2007).
Policies and their implications
Public investments in human and physical capital, R&D, infrastructure and technology, have been made as an instrument to increase spurt in economic growth and reduce poverty. Moreover, in 1986, an education law of nine years compulsory education was formally issued by China, which improved educational status in the country (Thorat & Fan, 2007).
Conclusion
The policies implemented by India and China suggest that more investments in health, education, and R&D if directed toward rural areas, would yield a higher growth in agriculture and alleviate poverty levels. Efforts that better target the funds at the poor, and reorient investments towards rural education and infrastructure are not only encouraged but are essential for poverty reduction (Thorat & Fan, 2007).
India and China could both benefit from taking a leaf out of each other’s books. India could emulate policies for the growth and expansion of the manufacturing sector. This would create more non-farm employment and reduce disguised unemployment in agriculture. Moreover, Indian land laws could make land more equitably distributed to allow the spread of benefits of technological advancements and reduced inequalities. China could learn from India’s experience of institutions related to marketing, finance, and information and improve offshoring.
References
Bardhan, P. (2007). Poverty and Inequality in China and India: Elusive Link with Globalisation. Economic and Political Weekly, 42(38), 3849–3852. Retrieved from https://www.jstor.org/stable/40276420
C H, H. R. (2011). India and China: A Comparison of the Role of Sociopolitical Factors in Inclusive Growth. Economic and Political Weekly, 46(16), 24–28. Retrieved from https://www.jstor.org/stable/41152100
Ghosh, J., 2010. Poverty reduction in China and India: Policy implications of recent trends. [online] Sa.indiaenvironmentportal.org.in. Available at: <http://sa.indiaenvironmentportal.org.in/files/wp92_2010.pdf> [Accessed 16 August 2021].
Montalvo, J. and Ravallion, M., 2009. The Pattern of Growth and Poverty Reduction in China. [online] Openknowledge.worldbank.org. Available at: <https://openknowledge.worldbank.org/bitstream/handle/10986/4260/WPS5069.pdf?sequence=1> [Accessed 16 August 2021].
Ravallion, M. (2008). A Global Perspective on Poverty in India. Economic and Political Weekly, 43(43), 33–37. Retrieved from https://www.jstor.org/stable/40278099
Ravallion, M., 2009. A Comparative Perspective on Poverty Reduction in Brazil, China and India. [online] Openknowledge.worldbank.org. Available at: <https://openknowledge.worldbank.org/bitstream/handle/10986/4333/WPS5080.pdf> [Accessed 16 August 2021].
Swanson, B., 2006. Extension Strategies for Poverty Alleviation: Lessons from China and India: The Journal of Agricultural Education and Extension: Vol 12, No 4. [online] Tandfonline.com. Available at: <https://www.tandfonline.com/doi/pdf/10.1080/13892240601062488?casa_token=O374sHkTERsAAAAA:X4bvpJrEYix94iV2PwUlSzJDQzxfWQDB7F4hY0xsFEa5tb10Yly4UMXUb5F0gcH5nqq5MvCQmX0nmSA>.
Thorat, S., & Fan, S. (2007). Public Investment and Poverty Reduction: Lessons from China and India. Economic and Political Weekly, 42(8), 704–710. Retrieved from http://www.jstor.com/stable/4419287
United Nations. (n.d.). Ending Poverty. Retrieved August 16, 2021, from
Weisskopf, T. E. (1975). China and India: A Comparative Survey of Performance in Economic Development. Economic and Political Weekly, 10(5/7), 175–194. Retrieved from https://www.jstor.org/stable/4536852
Group 5 (S Dhanush & Pooja Srihari)
ReplyDeleteThe GIFs put in is captivating to suggest the race to development between India and China. The highlights on inequality and poverty put across is comprehensive and a reader can understand it in one go.
Thank you for the appreciation! :)
DeleteGroup 5 (S Dhanush & Pooja Srihari)
ReplyDeleteBy bring to light that without absorbing surplus labour to manufacturing sector, India's manufacturing sector did not take off- Doesn't that suggest that we deviated from the Lewis two sector model of development?
It is a good point that you have highlighted Pooja. India tried to generate more employment and improve the agricultural sector first. It did not focus much on the industrial sector with the commencement of the Five Year Plans. Gradually, India shifted its labour from agriculture to the service sector and is yet to tap more into the manufacturing sector. This is also one of the reasons for slow growth in the country and disguised unemployment in the traditional sector.
DeleteGroup 5 (S Dhanush & Pooja Srihari)
DeleteWould you agree that by devaiting from manufacturing sector India's essentailly hampered it growth propects? Smoother transition to manufacturing sector would have been recommended to absorb surplus labour effectiviely and increase the economic pie for redistributuion thereby reducing inequality gap?
Yes, by paying less attention to the manufacturing sector, India missed the fast pace potential growth it could have achieved. Transfer of surplus labour to the manufacturing sector would definitely increase their income and take one step towards equal distribution of the economic pie. This would also decrease disguised unemployment in the agricultural sector.
DeleteGroup 5 (S Dhanush & Pooja Srihari)
ReplyDeleteThe conclusion wraps up the whole thing up aptly and keeps the reader to research more on what policy reform can be undertaken. If you can highlight on which inequality has had the greatest impact on India and China-since inequality is multidimensional or which two inequalities are related strongly to the economic growth of the two nations, it might give a better picture to create a specific policy reform for each country.
Overall it was a job well done and it has kept the reader engaged until the very end.
As mentioned under the sub-heading of 'Income Inequalities' in the blog, the multi-faceted inequality we are talking about is standard of living, healthcare, pension and living allowances. We describe the differences in the provision of the above mentioned services in urban and rural areas. To answer your question, the inequalities that have had the greatest impact on India and China are income inequalities and inequality in the provision of education.
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ReplyDeleteGroup 6 (Surbhit and Aditya)
ReplyDelete“India went ahead with a Western-style bourgeois democracy” Don't you think this claim is a little misleading, because India in its early stages was heavily influenced by Jawaharlal Nehru's ideologies, which were further influenced by socialism. He proposed economic plans in the Indian National Congress that stressed the importance of centrally planning in the economy, and it wasn't until the 1990s that policies like license raj were abolished.
Thank you for the question. We (Group 7, Aditi and Anokhi) are very happy to elaborate more on the political background of the bourgeois democracy.
DeleteYou raise a very valid point about how India's initial inclination was more towards socialism than a capitalistic ideology. This is why we have to look into the socialist ideology to understand why, as we claim in our article, "India went ahead with a Western-style bourgeois democracy".
"Bourgeois democracy" is a term used in Marxist theory for a social revolution aiming to destroy a feudal system and all its vestiges, and create a bourgeois state. In colonized countries, these revolutions often take the form gaining national independence (as was the case with India and the British Raj).
Coming to why India followed the path of a bourgeois democracy when it believed in more socialistic ideologies: at the time of the Russian Revolution, the socialists asserted that a revolution led by bourgeoisie is necessary to modernize society, establish basic freedoms, and overcome feudalism, which would establish the conditions necessary for socialism (which India was aiming for). While they believe in the values of socialism, they do not disregard the structural integrity that are the benefits of capitalism.
Karl Marx is credited with giving the two-stage political theory which claims that underdeveloped countries must first pass through a stage of capitalism before moving to a socialist stage. It is our belief that this is what the political outlook of India was, during the initial decades after gaining independence, and as such, we have used the term in the same sense to reflect the same in our blog.
It is another matter that with the passage of time, it was discovered that those policies were unsustainable in the context of India and by the 1990s, India diverged from the path it had originally set out on.
We hope this helped clarify our intended meaning behind the claim!
Group 6 (Surbhit and Aditya)
ReplyDeleteBoth countries' populations have increased dramatically since their independence.
Do you believe that rising population has played a significant role in increasing poverty? If yes. Was it not a factor worth adding in your analysis?
Another good point!
DeleteWe accept that the extremely large populations of the two countries would definitely have a role in their projected levels of poverty. And we do admit that it is one of the many reasons we decided to compare India and China (as we mention in our introduction). However, there are two reasons that we do not include the population factor in or analysis:
1. The density of population is spread very unevenly across the two countries. While we have absolute data of the countries to compare the population and poverty variables, we think that it would be an unfair surface analysis given how different regions have different population and income distributions.
2. One of our main objectives of doing this study was to do policy and factor analysis to explain our observations. Now, there are highly complicated policies in both the countries relating to population control that are beyond the scope of this study.
While China did have the (in)famous One Child Policy in the country, its implementation was highly skewed, and the constant revisions are difficult to trace with respect to poverty trends. The policy was implemented unevenly across the land and was even resisted in a majority of rural areas. This also led to an increase in female foeticide and the gender ratio at birth became dismal. There were also issues of the disproportionate elderly population to the youth. Now these are highly delicate issues that deserve an analysis of their own and are beyond the scope of this blog article in order to justifiably analyze the issue.
India, too, meanwhile, has had many population control policies, but none as strong and strict as China's. There hasn't been a blanket policy for the entire country, and most initiatives have been voluntary. Moreover, the approach that India took was to focus more on increasing literacy and access to education and employment rather than extreme birth control measures (such as sterilization, as China reportedly also dabbled in). There have also been ideological clashes about how big a concern the large population is for the country, which led to policy leaders ignoring the issue in the first few decades post-independence.
This illustrates how, even though both the countries are plagued by a similar issue of overpopulation and poverty, it is difficult to analyze it in the light of policy actions taken. Moreover, the nature of overpopulation also differs, with China having a large number of senior population, while India has a booming population of youths.
We agree that population is definitely a factor contributing to income and poverty, but these reasons are why we preferred to focus on other more simplistically analyze-able factors in our study rather than dedicate the whole blog disproportionately to one factor.
Group 5 (S Dhanush & Pooja Srihari)
DeleteThe point on poulation talked by your group is very insightful especially the policy measures taken by each nation and its divergence that leads to limited compatibility for comparision.
Thank you for the appreciation!
Delete