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This paper provides an overview of poverty and well-being trends in India since the mid-1990s. Poverty reduction since 2005 has been much faster than the earlier decade, as a result of broad-based growth across most geographic areas. Underlying this is a pattern of high mobility in economic status that has led to an emerging middle class. Still, a vast (and rising) share of the population faces significant risk of slipping back into poverty. India's poor are increasingly concentrated in low-income states with historically lower rates of economic progress. Even as India has reduced poverty faster than the developing world as a whole, the degree of poverty reduction associated with growth has been substantially lower than in some of its middle-income peers. India faces important challenges in nonmonetary dimensions of welfare as well. Despite success on important fronts, such as infant and child mortality and secondary education, progress has been slow in others, such as sanitation and nutrition, and lags behind some other countries that are at a similar stage of development.

Growth --- Inequality --- Poverty --- Shared Prosperity

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This paper assembles data at the all-India level and for the village of Palanpur, Uttar Pradesh, to document the growing importance, and influence, of the non-farm sector in the rural economy between the early 1980s and late 2000s. The suggestion from the combined National Sample Survey and Palanpur data is of a slow process of non-farm diversification, whose distributional incidence, on the margin, is increasingly pro-poor. The village-level analysis documents that the non-farm sector is not only increasing incomes and reducing poverty, but appears as well to be breaking down long-standing barriers to mobility among the poorest segments of rural society. Efforts by the government of India to accelerate the process of diversification could thus yield significant returns in terms of declining poverty and increased income mobility. The evidence from Palanpur also shows, however, that at the village-level a significant increase in income inequality has accompanied diversification away from the farm. A growing literature argues that such a rise in inequality could affect the fabric of village society, the way in which village institutions function and evolve, and the scope for collective action at the village level. Failure to keep such inequalities in check could thus undermine the pro-poor impacts from the process of structural transformation currently underway in rural India.

Income inequality --- Income mobility --- Inequality --- Labor Markets --- Non-farm employment --- Poverty --- Poverty Reduction --- Regional Economic Development --- Rural diversification --- Rural Poverty Reduction --- Village study

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The recent decline in India's rural female labor force participation is generally attributed to higher rural incomes in a patriarchal society. Together with the growing share of the urban population, where female participation rates are lower, this alleged income effect does not bode well for the empowerment of women as India develops. This paper argues that a traditional supply-side interpretation is insufficient to account for the decline in female participation rates, and the transformation of the demand for labor at local levels needs to be taken into account as well. A salient trait of this period is the collapse in the number of farming jobs without a parallel emergence of other employment opportunities considered suitable for women. The paper develops a novel approach to capture the structure of employment at the village or town level, and allow for differences along six ranks in the rural-urban gradation. It also considers the possible misclassification of urban areas as rural, as a result of household surveys lagging behind India's rapid urbanization process. The results show that the place of residence along the rural-urban gradation loses relevance as an explanation of female labor force participation once local job opportunities are taken into account. Robustness checks confirm that the main findings hold even when taking into account the possibility of spurious correlation and endogeneity. They also hold under alternative definitions of labor force participation and when sub-samples of women are considered. Simulations suggest that for India to reverse the decline in female labor force participation rates it needs to boost job creation.

Communities & Human Settlements --- Education --- Health, Nutrition and Population --- Social Protections and Labor

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Workfare schemes impose work requirements on beneficiaries. This has seemed an attractive idea for self-targeting transfers to poor people. This incentive argument does not imply, however, that workfare is more cost-effective against poverty than even poorly-targeted options, given hidden costs of participation. In particular, even poor workfare participants in a labor-surplus economy can be expected to have some forgone income when they take up such a scheme. A survey-based method is used to assess the cost-effectiveness of India's Employment Guarantee Scheme in Bihar. Participants are found to have forgone earnings, although these fall well short of market wages on average. Factoring in these hidden costs, the paper finds that for the same budget, workfare has less impact on poverty than either a basic-income scheme (providing the same transfer to all) or uniform transfers based on the government's below-poverty-line ration cards. For workfare to dominate other options, it would have to work better in practice. Reforms would need to reduce the substantial unmet demand for work, close the gap between stipulated wages and wages received, and ensure that workfare is productive-that the assets created are of value to poor people. Cost-effectiveness would need to be reassessed at the implied higher levels of funding.

Banks & Banking Reform --- Forgone Income --- Income --- Labor Markets --- Labor Policies --- Macroeconomics and Economic Growth --- Poverty --- Public Sector Development --- Public Works --- Rural Poverty Reduction --- Wages --- Workfare --- Bihar --- India --- Nrega

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This paper uses panel data to analyze factors that contributed to the rapid decline in poverty in India between 2005 and 2012. The analysis employs a nonparametric decomposition method that measures the relative contributions of different components of household livelihoods to observed changes in poverty. The results show that poverty decline is associated with a significant increase in labor earnings, explained in turn by a steep rise in wages for unskilled labor, and diversification from farm to nonfarm sources of income in rural areas. Transfers, in the form of remittances and social programs, have contributed but are not the primary drivers of poverty ecline over this period. The pattern of changes is consistent with processes associated with structural transformation, which add up to a highly pro-poor pattern of income growth over the initial distribution of income and consumption. However, certain social groups (Adivasis and alits) are found to be more likely to stay in or fall into poverty and less likely to move out of poverty. And even as poverty has reduced dramatically, the share of vulnerable population has not.

Dependency Ratios. --- Inequality. --- Labor Income. --- Nonparametric Decomposition. --- Poverty Reduction. --- Poverty. --- Pro-Poor Growth. --- Remittances. --- Rural Poverty Reduction. --- Services and Transfers to Poor.