| The relationship between economic growth and poverty has long been a focal point of academic inquiry and policy-making,constituting an enduring theme in development economics.For a considerable period after World War II,most development economists staunchly believed that economic growth was a panacea for alleviating poverty,with national development strategies targeting growth seen as automatically overcoming poverty and benefiting the masses.However,empirical evidence has shown that economic growth is a necessary condition rather than a sufficient one for poverty alleviation.Exploring the relationship between growth and poverty requires a unified framework that integrates the two rather than treating them separately.Since the late 1970s,with the continuous enrichment and improvement of domestic and international data compiled by various countries and international institutions,evidence of the actual impact of economic growth on poverty reduction has accumulated,directly driving the formation of various action foundations.Setting aside the appropriateness of the development plans formulated thereby,the key issue lies in determining what kind of growth contributes to alleviating poverty in which aspects.This issue directly points to two more specific aspects: delving into the scale,nature,and structure of growth,as well as defining the connotation of poverty.It is worth mentioning that these two specific dimensions are not entirely independent but exhibit evident internal correlations.Poverty is commonly understood as a lack of income,as people generally believe that income largely determines one’s material standard of living.However,income poverty is only part of the problem.The essence of poverty reduction lies in promoting substantial improvements in human well-being,thereby enhancing people’s ability to pursue and have reasons to value substantive freedoms,including access to education,adequate nutrition,protection against preventable diseases,and access to safe drinking water and improved sanitation,among others.The theoretical framework based on the capability approach reshapes the concept of poverty and links it to broader discussions of human development.Just as human development encompasses dimensions beyond income,poverty should also be seen as having multidimensional attributes.In this sense,we need to measure monetary poverty traditionally with a multidimensional poverty measurement standard grounded in human development.However,there is no necessary connection between economic growth and human development.The correlation between the two depends not only on the scale of economic growth but also on its nature and structure.The growth process should be inclusive,and by narrowing the vast disparities in income and assets,strengthening human capital accumulation and employment opportunities,a country can provide a solid social safety net for vulnerable groups in society.The structure and patterns of growth are also crucial.Indeed,certain growth patterns may be more effective than others.Thus,this paper aims to provide a fresh perspective,investigating the impact of the scale,nature,and structure of economic growth on multidimensional poverty,with a particular emphasis on the role of inclusive growth and sectoral output composition.In contrast to the extensive research on the impact of economic growth on poverty,limited attention has been paid until recently to the reverse causal chain from poverty to economic growth.In fact,poverty itself can hinder sustained economic growth through various channels.In a broader sense,poverty represents a deprivation of capabilities,and capabilities not only constitute the goal of human development but also play an essential instrumental role in enhancing economic well-being.There is ample evidence that individuals with higher levels of education,better health,and adequate nutrition are more likely to drive economic growth.Therefore,this paper,building on evaluating the multidimensional poverty alleviation effects of economic growth,further examines the impact of mitigating multidimensional poverty on future economic growth,thereby elucidating the bidirectional interaction mechanism between growth and multidimensional poverty within a comprehensive framework and using India as a case study.Over the 15 years before the global pandemic,India achieved remarkable economic success and emerged as a driver of the global economy.According to the recently released “World Economic Situation and Prospects 2024” report,India is the fastest-growing major economy in the world,with its economy expected to grow by 6.2% in 2024,surpassing the East Asia region’s 4.6% and China’s 4.7%.However,in stark contrast,its performance in key social indicators lags behind that of many other developing countries and even falls behind sub-Saharan African countries.Data shows that between 2019 and 2021,19% and 36% of children under the age of five in India were respectively stunted and underweight.Meanwhile,about 40% of Indian households still use solid fuels for cooking and lighting,leading to severe negative impacts on health and education.History has shown that no country with rapid economic growth and slow human development can sustain rapid economic growth.Therefore,in the context of a developing giant like India,fully understanding the inherent connection between economic growth and human development,identifying potential barriers leading to imbalance between the two,not only helps clarify policy priorities and achieve a virtuous cycle of growth and poverty reduction but also provides valuable references for policy debates to accelerate the implementation of the 2030 Agenda for Sustainable Development.Utilizing data from four rounds of the National Family Health Survey(NFHS)conducted in India from 1998 to 2021,this paper first selects ten indicators under the dimensions of education,health,and living standards based on the A-F method with dual thresholds to measure and outline India’s multidimensional poverty index and its trend of change.At the same time,based on a review of India’s economic growth process since independence,the theoretical mechanism of interaction between economic growth and multidimensional poverty is elucidated,and the research hypotheses of this paper are proposed.In terms of empirical analysis,this paper mainly employs tools such as elasticity and semi-elasticity analysis,instrumental variable framework,counterfactual analysis,and inference without an excluded instrument to thoroughly analyse to what extent total economic growth,inclusive growth,and sectoral output growth at the state level in India over the past two decades have alleviated multidimensional poverty and how effectively the reduction in multidimensional poverty has been transformed into future economic growth.Through theoretical analysis and empirical testing,this paper draws four main conclusions:Firstly,by constructing state-level panel data,this study finds that the improvement in per capita real income significantly reduces multidimensional poverty.Instrumental variable regression results show that the response of the multidimensional poverty index to growth is elastic,at approximately-1.45.However,the improvement in deprivation across all ten indicators has varied responses to growth.Among them,growth has strongly alleviated electricity and attendance deprivation,improved the nutritional deficiencies of the multidimensionally poor,and reduced the proportion of those using solid fuels for cooking.In contrast,the effect of increased per capita income on reducing child mortality and ensuring access to safe drinking water is disappointing.To fully leverage the poverty-reducing effects of economic growth,governments should prioritize reducing child mortality and the interventions for safe drinking water.Secondly,overall and gender-differentiated inclusive growth can effectively reduce both the overall multidimensional poverty index and the overall poverty incidence rate,with the effect from the female population appearing to be larger.However,the results of categorical regression show that the impact of female-inclusive growth on poverty reduction among female and male members within households is at best weak,with a greater magnitude of impact observed among male household members.Moreover,male-inclusive growth also significantly promotes poverty reduction among males to a greater extent.These conclusions highlight the “noninclusiveness” of Indian inclusive growth between genders,with the efficacy of poverty reduction for women being less than expected.This result has clear policy implications,underscoring the necessity of empowering women during the economic growth process.Thirdly,sectoral output growth has significantly heterogeneous impacts on multidimensional poverty reduction.Compared to increases in per capita real value added in agriculture,agricultural land productivity,and agricultural labor productivity,the upliftment of per capita real value added in manufacturing and services has significantly reduced both overall and rural multidimensional poverty.Further decomposition shows that the poverty reduction effects of banking and insurance sectors within services are significant,while the real estate sector contributes to overall poverty reduction but has no significant effect on rural poverty reduction.This implies that boosting manufacturing and services,especially banking and insurance within services,can provide strong impetus for poverty reduction.Additionally,mechanism analysis suggests that manufacturing output can mitigate multidimensional poverty by reducing the child dependency ratio and improving gender income disparities.Specifically,with the relative increase in female income,there has been a significant improvement in the education and nutrition status of children in multidimensionally poor households and a reduction in education inequality within households.lastly,unlike the elastic response of multidimensional poverty to growth,the feedback from growth to multidimensional poverty reduction lacks elasticity.Specifically,a 10% decrease in the multidimensional poverty index leads to an increase in per capita real income of approximately 3% to 4%,primarily driven by the incidence of multidimensional poverty.Heterogeneity analysis results show that the impact of growth is most significant on the depth of poverty.Meanwhile,the alleviation of education and nutritional deficiencies contributes more to raising per capita real income levels than other indicators.However,the positive effects of improvements in indicators on growth weaken with the exacerbation of economic inequality.This result has high policy relevance.Firstly,this paper advocates for transformative measures and refined strategies to enhance basic capabilities of individuals,especially those in deep poverty.Secondly,policymakers should prioritize allocating more resources to addressing problems of education and malnutrition,aligning with urgent tasks of rebuilding the education system and ensuring food security after the pandemic.Finally,implementing comprehensive policies to optimize income distribution will strengthen the effectiveness of social sector investments that promote growth. |
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