New Directions in Theory and Policy
Edited by Phillip Arestis, Michelle Baddeley and John S.L. McCombie
Chapter 16: Is Growth Alone Sufficient to Reduce Poverty? In Search of the Trickle Down Effect in Rural India
16. Is growth alone suﬃcient to reduce poverty? In search of the trickle down eﬀect in rural India Santonu Basu and Sushanta Mallick* 1. INTRODUCTION In this paper we examine whether the trickle down eﬀect has ever taken place in rural India.1 One of the important sources of poverty is the existence of unemployment and seasonal unemployment in the rural areas of developing countries. The argument that growth alone will take care of poverty, referred to as the trickle down eﬀect, appears to rest on the assumption that owing to the existence of a very large surplus labour supply, the initial rise in the growth of employment is unlikely to be accompanied by a rise in the wage rate. This assumption eliminates the possibility of the emergence of capital–labour substitution in the foreseeable future. Hence the argument can be made that growth will take care of poverty. In the case of India we know that in the past the government has changed its agricultural policy in a major way at least three times. This raises the question whether the trickle down eﬀect ever took place in the rural areas. If not, the question is, why not? This is the subject matter of this paper. In order to investigate this issue, the remainder of the paper has been divided into three sections. Section 2 examines why, if the trickle down eﬀect was taking place in India, did the government intervene three times in the...
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