inclusion & growth in india: some facts, some conclusions avoiding rashomon: the reality of...

Inclusion & Growth in India: Some Facts, Some Conclusions

Avoiding Rashomon: The Reality of Education, Employment and Earnings in India, 1983-2010

Surjit S BhallaWorkshop on Employment

World Bank - ICRIERNew York,

Sept 27, 2011

Sept 2011Surjit Bhalla 1


Inclusion & Growth in India: Some Facts, Some Conclusions2Surjit Bhalla

Overview

• Work in progress

• Major focus: Inclusion and growth;• Indian experience – lends itself to myriad of explanations –

hence, the Rashomon effect • Official view: Poverty has been declining at only 1

percentage point year, despite a tripling of per capita GDP growth

• To accelerate this decline, government needs to provide both direct subsidies (food, diesel, fertilizer) and large scale “digging” ditches employment program.

• All of these programs were in effect in 1983, and are in effect in equal and greater force today.

Sept 2011



continued…

• Alternate view – the above perspective, and policies, are hugely outdated, most likely wrong, and most likely pernicious for the Indian economy

• Reality – globalization a major force, India benefitted hugely, and is today a transformed place; Poverty less than 10 percent of the population (not 32 percent), middle class close to 50 percent

• Need different employment and poverty reduction policies

Sept 2011


Inclusion & Growth in India: Some Facts, Some Conclusions4Surjit Bhalla Sept 2011

Table 1: Discreet Creep of the World Bank Poverty LinesPoverty Line Ratios in Local Currency

Region PL05/PL93 PL93/PL85 PL05/PL85

Developed Economies 0.67 0.79 0.54

East Asia 1.54 0.86 1.33

China 1.65 0.86 1.42

Russia & Eastern Europe 0.89 0.65 0.56

Latin America 0.95 0.79 0.71

Middle East & North Africa 0.74 0.79 0.6

South Asia 1.43 0.98 1.41

India 1.42 0.91 1.29

Sub-Saharan Africa 1.2 0.83 0.82

Total 1.21 0.86 1.04



Problems in Measurements – Sharp Decline in NSS Estimates

Sept 2011

Survey to National Accounts Ratio in India

Year Survey National Accounts Survey/NA Ratio

1983 123.4 152.9 80.7

1993/94 333.5 539.6 61.8

1999/00 586.9 1057.5 55.5

2004/05 728.8 1472.3 49.5

2007/08 976.6 2068.7 47.2

2009/10 1197 2649 45.2

Notes: The survey and national accounts estimates are in current rupees per capita per month; the NA estimate is for the base year prevailing at the time of the survey.



Poverty – Sharp Decline

Sept 2011

Poverty and poverty gap in states of India, 1983 - 2009/10

Poverty - Tendulkar line Poverty gap

Social category Percentage of population Percentage distance from line

19831993/

942004/

05 2007/08 2009/10 1983 1993 2004 2007 2009

Dis-privileged 72.1 62.4 50.6 38.7 38.2 32.8 26.6 23.6 19.9 21.5

- SC 72.6 63.7 51 39.9 38.8 33.9 26.8 23.1 20.2 21.5

- ST 80.6 68.9 62.7 45.3 44.0 36.3 28 26.5 19.7 23.1

- SCST 75.2 65.3 54.1 41.5 40.4 34.8 27.2 24 19.9 22.1

- Muslims 64.8 55.6 43.6 32.6 33.2 28.4 25.4 22.9 20.3 20.2

Privileged 51.9 39.8 29.3 20.4 20.3 27.8 22.3 19.9 16.8 18.9

All groups 58.5 47.8 37.1 27.9 32.5 29.8 24.1 21.5 18.5 20.3



Poverty – MDG reached a decade earlier

Sept 2011

Poverty and poverty gap in states of India, 1983 - 2009/10

Poverty - Official line Poverty gap

Social category Percentage of population Percentage distance from line

19831993/

942004/

05 2007/08 2009/10 19831993/

94 2004/05 2007/08 2009/10

Dis-privileged 55.6 43 31.7 21.9 22.1 28.8 23.6 23.9 20.5 18.9

- SC 56.1 43 30.6 22.5 22.4 29.5 24.2 23.3 20.5 18.4

- ST 62.8 46.3 39 23.4 23.9 30.5 23.7 25.3 19.5 20.4

- SCST 58.3 44 32.8 22.8 22.8 29.9 24 23.8 20 19

- Muslims 49.2 40.7 29.5 19.6 20.3 26.4 22.8 24.4 21.9 18.7

Privileged 34.7 23.5 16 9.8 10.5 24.7 21.4 21 18.6 17.1

All groups 41.6 30.4 21.8 14.8 15.3 26.5 22.4 22.3 19.7 18.2



With perfect targeting only 0.4% of GDP needed for Zero Absolute Poverty (Tendulkar Line)

Cost of Poverty Removal

Sept 2011

Cost of poverty removal in India, 1983 - 2011/12

1983/84 1993/94 2004/5 2007/8 2009/10 2011/12

Population (in mil) 723 892 1089 1138 1190 1200

Percentage poor (Tendulkar line) 58.5 47.8 37.1 27.9 27.5 19

Poor Population (in mil) 423 426 404 318 327 228

Poverty line (Rs. Per month) 114 271 488 591 727 886

Percent poor gap 29.8 24.1 21.5 18.5 20.3 16

Cost of removal of poverty with perfect targeting (000 cr) 17 33 51 42 57 39

Nominal GDP (000 cr) 221 866 3130 4700 6039 8974

Perfect targeting (% of GDP) 7.80 3.86 1.63 0.89 0.90 0.43

Notes: All data for 2011 are estimates



Consumption Inequality – Increase in last five years

Sept 2011

NSS Consumption Inequality (Gini) in India 1983-2009/10

Year 1983 1993/94 1999/00 2004/05 2007-08 2009-10

Measure,Nominal

Uniform Recall (30 days) 32.6 32.7 32.3 36.8

Mixed Recall (30/365 days) 30.4 30.3 32.3 35.1 34.8 36.4

Modified Mixed Recall (7/30/365) 35.4

Adjusted to National Accts 36 37.8 36.5 43.4 42.4 46.6

Measure,Real

Uniform Recall (30 days) 31.9 30.4 29 32.8

Mixed Recall (30/365 days) 29.5 27.8 29 30.8 30.7 32.8

Modified Mixed Recall (7/30/365) 32.0

Adjusted to National Accts 35.4 35.5 33.2 39.8 37.8 42.8



Income Inequality

Sept 2011

Income Inequality in India - 1983-2009

YearWage Income Per

PersonWage Income Per

Household

Nominal Real Nominal Real

1983 0.53 0.53 0.50 0.50

1993 0.51 0.49 0.48 0.46

1999 0.55 0.53 0.51 0.49

2004 0.56 0.53 0.53 0.50

2007 0.54 0.50 0.52 0.49

2009 0.53 0.50 0.52 0.49

% change 1983/09 0 -5.6 4 -2

Source: NSSO employment-unemployment data, different yearsAvoiding Rashomon: The Reality of Education, Employment and Earnings in India, 1983-2010


Real Consumption Growth, by percentiles, 1983-2009/10

Sept 2011

30.0

40.0

50.0

60.0

70.0

zp

09

83

k

0 20 40 60 80 100ptile



Real Consumption Growth, Difference percentiles, 1983-2009/10

Sept 2011

Notes: Each percentile represents the difference in growth rates of the poor and rich percentile e.g. the first percentile represents the difference in growth of the 1st and 100th percentile; second the difference in growth of the 2nd and 99th etc.

-3.0

-2.0

-1.0

0.0

1.0

zd

09

83

k

0 10 20 30 40 50ptile



Real Wage Income Per Person Growth, by percentiles, 1983-2009/10

Sept 2011

60.0

80.0

100

.01

20

.01

40

.0zp

09

83

pp

0 20 40 60 80 100ptile



Real Wage Income Per Person Growth, Difference percentiles, 1983-2009/10

Sept 2011

Notes: Each percentile represents the difference in growth rates of the poor and rich percentile e.g. the first percentile represents the difference in growth of the 1st and 100th percentile; second the difference in growth of the 2nd and 99th etc.

0.0

20.0

40.0

60.0

80.0

zd

09

83

pp

0 10 20 30 40 50ptile



Sharp Decline in Education Inequality

Sept 2011

Education Inequality in India - 1983-2009

Year India Rural Urban Female Male

1983 0.71 0.76 0.56 0.79 0.63

1993/94 0.66 0.69 0.53 0.73 0.59

2004/05 0.58 0.62 0.47 0.64 0.52

2007/08 0.52 0.54 0.42 0.58 0.46

2009/10 0.49 0.52 0.41 0.55 0.43

% change 1983/09 -31 -31.6 -26.8 -30.4 -31.7

Source: NSSO employment-unemployment data, different years



Education – Girl Catch-up

Sept 2011

Progress of Youth Education in India, 1983 - 2009/10

Years of Education (ages 8-24) Literacy (% of population of age 8-24)

State 1983 2009 % changeFemale/

Male 1983 2009 % change Female/Male

Andhra Pradesh 3 7.1 136 90 51 91 78 94

Bihar 2.6 5.1 96 78 43 80 86 85

HP 4.7 7.8 66 104 78 99 27 99Madhya Pradesh 2.9 6.2 114 89 52 89 71 91

Maharashtra 4.6 7.8 69 97 73 97 33 98

Orissa 3 6.7 123 93 54 92 70 94

Rajasthan 2.6 6.1 135 78 45 97 115 86

Tamil Nadu 4.4 8.1 84 101 73 99 36 99

Uttar Pradesh 3.1 6 93 92 51 87 70 91

West Bengal 3.7 6.3 70 97 63 93 48 97

All India 3.6 6.7 86 93 60 91 52 94Bimaru states 2.9 5.9 103 87 49 87 78 90

Small states 5.1 7.4 45 98 77 98 27 98

North East 4.5 7 55 100 78 99 15 99

Notes: Bimaru states refers to the aggregate of the poor states - Bihar, Madhya Pradesh, Rajasthan and UP.Literacy is defined as greater than or equal to two years of education



Education – the Poor Catch-up

Sept 2011

Youth Educational Attainment, 1983 - 2009/10

Social category Average years of schooling Relative female/male education (in %)

19831993/

942004/

05 2007/08 2009/10 1983 1993/94 2004/05 2007/08 2009/10

Dis-privileged 2.5 3.4 5.4 5.5 6.0 51.9 64.7 82.8 88.1 90.3

- SC 2.5 3.4 5.5 5.7 6.1 46.5 60.4 80.8 88.3 89

- ST 2 3 4.9 5.3 5.8 43.6 57.5 79 80.8 84.1

- SCST 2.3 3.3 5.3 5.6 6.0 45.4 59.4 80.2 86 88.9

- Muslims 2.9 3.7 5.4 5.4 5.9 64.4 75.8 88.9 92.2 91.8

Privileged 4.3 5.2 6.9 6.8 7.2 66.8 77.2 87.6 92.7 94.6

All groups 3.6 4.5 6.3 6.3 6.7 62.8 73.4 85.8 90.8 92.7

Notes: Youth defined as those between 8 and 24 years.



Evolution of Middle Class in India, 1980 – 2010

Sept 2011

01

02

03

04

05

0

Sh

are

of M

idd

le C

lass in P

opu

lation

(in

%)

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

Notes: Middle Class line defined to be the poverty line in developed economies - PPP $8.2 per capita per day 1996 prices or PPP$ 4000 in 2010 prices. In 2010 rupees, the middle class line for India is Rs. 3840 per capita per month or for a family of four, Rs. 1.8 lakhs a year. On a per capita per day basis, the Tendulkar poverty line in 2010 would be approximately Rs. 25; the middle class line, Rs. 121



LFPR for age group 15-59 declined from 62.1% to 56.6%

However if we take school/college going into account, LFPR(adj)

decline from 71.2% to 68.9%

Thus some decline can be explained by movement from labor force

into education

Most of the decline in LFPR is contributed by females in age 25-59

(43.6% to 34.4%), especially rural females (50.7% to 39.9%)

Sharp decline in rural women of age 25-59 self-employed in

agriculture (27.2% to 18%)

The poor show a larger decline, but result preliminary

Employment Trends 2004/5-2009/10

Sept 2011Avoiding Rashomon: The Reality of Education, Employment and Earnings in India, 1983-2010


15-24 25-59 15-59

Total Male Female Total Male Female Total Male Female

1983 50.3 72.2 27.7 66.0 94.3 37.0 60.7 86.8 33.8

1993/94 48.4 66 29 68.7 95.1 41.6 62.1 85.4 37.6

2004/05 46.0 63.2 27.2 69.5 95.3 43.3 62.1 84.9 38.4

2009/10 36.3 51.8 18.8 65.5 96.3 34.4 56.6 82.2 29.8

Labor Force Participation Rates in India, 1983-2010



Decline for females, 25-59

15-24 25-59 15-59


1983 66.5 95.2 36.7 66.2 94.5 37.1 66.3 94.8 36.9

1993/94 71.1 95.0 45.0 68.9 95.4 41.7 69.6 95.2 42.8

2004/05 74.1 95.8 50.5 69.8 95.6 43.5 71.2 95.7 45.7

2009/10 75.7 96.2 52.6 66.0 96.8 34.7 68.9 96.6 40.0

Adjusted for Education: Labor Force Participation Rates

*Adjusted labor force includes persons reporting to attend educational institution



Consumption Percentiles Male Female

0-20 20-40 40-60 60-80 80-100 0-20 20-40 40-60 60-80 80-100

2004/05 17.2 20.6 22.1 22.5 17.6 20.4 21.7 21.7 21 15.3

2009/10 19.7 21.2 21.8 20.7 16.4 21.3 22 19.6 20.6 16.1

Labor Force Participation Rate by Consumption Levels



Male Female

0-20 20-40 40-60 60-80 80-100 0-20 20-40 40-60 60-80 80-100

2004/05 16.4 18.3 19.6 21.3 24.2 19.7 20.4 20.4 20.6 18.8

2009/10 16.8 18.4 19.7 21.5 23.5 18.6 18.9 20.6 21.6 20.2

Labor Force Participation Rates (25-59 years)



Real Wage per day per person

Overall Regular Salaried Casual Labor


1983 46 54 26 77 80 55 28 32 20

1993/94 58 67 36 103 108 77 36 41 27

1999/00 76 87 48 141 147 114 44 50 32

2004/05 83 94 53 138 146 101 49 55 35

2007/08 86 97 53 155 163 117 46 52 32

2009/10 104 114 73 177 185 140 63 69 48

Growth 1983-1993 26% 24% 38% 34% 35% 40% 28% 28% 35%

Growth 1993-2010 79% 70% 102% 72% 71% 82% 75% 68% 77%

Real Wage

*Wage was deflated using rural price index of 2004/05 as deflator



Real Monthly Per Capita Wage

Income

Real Monthly Per Capita Consumption of those reporting

wage incomeOverall Real Monthly Per Capita

Consumption

Total Rural Urban Total Rural Urban Total Rural Urban

1983 1221 876 2166 503 414 746 486 442 642

1993/94 1561 1159 2563 554 474 757 546 497 698

1999/00 2075 1476 3466 554 465 761 540 482 693

2004/05 2261 1625 3547 719 602 958 703 618 911

2007/08 2571 1826 4075 659 539 902 636 554 831

2009/10 2927 2080 4517 724 585 985 700 602 910

Growth 1983-1993 28 32 18 10 14 1 12 12 9

Growth 1993-2009 87 79 76 30 23 30 28 21 30

Wage Income Vs Consumption




Real Monthly Per Capita Wage

Income

Real Monthly Per Capita Consumption of those reporting

wage incomeOverall Real Monthly Per Capita

Consumption

Total Rural Urban Total Rural Urban Total Rural Urban

1983 1221 876 2166 503 414 746 486 442 642

1993/94 1561 1159 2563 554 474 757 546 497 698

2004/05 2261 1625 3547 719 602 958 703 618 911

2009/10 2927 2080 4517 724 585 985 700 602 910

Growth 1983-1993 2.3% 2.6% 1.6% 0.9% 1.2 0.09 1.1 1.1 0.8

Growth 1993-2009 3.9% 3.6% 3.5% 1.6 1.3 1.6 1.5 1.2 1.6

Wage Income Vs Consumption




Casual Worker workdays in a week

(Mn)Total Workdays in a week

(Mn) Ratio (a/b)

Total (a) Rural Urban Total (b) Rural Urban

1983 390 344 46 1546 1255 291 0.25

1993/94 587 507 80 2150 1648 502 0.27

1999/00 645 555 90 2253 1693 560 0.29

2004/05 645 558 87 2751 2046 705 0.23

2007/08 944 802 142 3000 2176 824 0.31

2009/10 812 684 128 2757 1923 834 0.29

Workdays: Casual Vs Total



LFPR 15-24 25-59 15-59


1983 50.3 72.2 27.7 66.0 94.3 37.0 60.7 86.8 33.8

1993/94 48.4 66 29 68.7 95.1 41.6 62.1 85.4 37.6

1999/00 44.6 62.2 25.6 67.5 94.6 39.8 60.2 84 35.3

2004/05 46.0 63.2 27.2 69.5 95.3 43.3 62.1 84.9 38.4

2007/08 40.8 59.6 20.4 66.4 95.8 37.0 58.5 84.3 32.0

2009/10 36.3 51.8 18.8 65.5 96.3 34.4 56.6 82.2 29.8

Labor Force Participation Rate



LFPR Adj

15-24 25-59 15-59


1983 66.5 95.2 36.7 66.2 94.5 37.1 66.3 94.8 36.9

1993/94 71.1 95.0 45.0 68.9 95.4 41.7 69.6 95.2 42.8

1999/00 70.3 93.3 45.5 67.8 94.9 40.0 68.6 94.4 41.7

2004/05 74.1 95.8 50.5 69.8 95.6 43.5 71.2 95.7 45.7

2007/08 73.4 96.1 48.6 66.7 96.1 37.2 68.8 96.1 40.7

2009/10 75.7 96.2 52.6 66.0 96.8 34.7 68.9 96.6 40.0

Adjusted Labor Force Participation Rate

*Adjusted labor force includes persons reporting to attend educational institution



Education, Wages and Per Capita Income, India - China, 1993 - 2010India China

1993 2007 2010 1993 2007 2010Education (Mean Years)Males 4.9 6.1 6.3 6.9 8.9 9.3Females 2.6 4.1 4.4 6.3 8.1 8.4Average 3.8 5.1 5.4 6.6 8.5 8.9

Wages (Monthly, PPP $)NH Survey (urban areas only)Male 75 194 65 247Female 59 148 55 184All 73 186 61 220

Economist Intelligence Unit, EIU (Monthly, US $)

115 375 453 49 273 449

Per Capita Income (PCI):US $ 26 82 97 43 169 347PPP $ 139 404 504 193 726 1152

Relative Education Based Wages - China:India (in %)Average 100 100 100 133.6 140.8 142

Relative Wages - China:India (in %)

NH Survey 100 100 83.6 118.3EIU 100 100 100 42.6 72.8 99.1PCI US $ 100 100 100 165.4 206.1 357.7PCI PPP $ 100 100 100 138.8 179.7 228.6

Notes: NH Survey - National Household Survey; Survey wages are for wage and salaried workers in urban areas; Economist Intelligence Unit (Monthly, US $) wage data for India and China are for the Manufacturing/Business Sector; Wages PPP $ are with a 2000 base; Per Capita Income PPP $ are with a 1996 base; For every 1 year of education, wages increase by 12%. Therefore, relative education based wages are calculated as - (mean education years for China - mean education years for India)*12

Sources: India - NSS Surveys 1993/94 , 2007/08 and 2009/10; China - Urban Household Survey, 1992 & 2006 see Bargain et al.(2008); Economist Intelligence Unit (EIU);; Education data from Barro - Lee Dataset, 2010.


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