Q1. What is demographic transition?

Discuss the role of education and

health in development of country.
A1. Indias demographic transition is the most important factor in understanding
Indias economic growth. It provides the framework for understanding the socioeconomic situation in present day India, and its evolution from what it used to be.
The primary concerns of the demographic transition are to do with mortality and
fertility. Mortality is measured by death rate, and fertility is estimated via use of
Crude Birth Rate (CBR). Indias demographic transition began slightly reluctantly, in
the 1920s and 1930s, with a reduction the in the CDR. This was brought about by
checking the frequency of famines and epidemics both significant contributors
towards the earlier high mortality. As the CBR continued to remain high, at about 45
per 1000, these modest mortality gains were sufficient to raise the population
growth rate to over 1% for the first time. In the late 1940s and early 1950s, life
expectancy thus increased at a rate of 2 years per year. The developments that
underpinned the following sustained mortality improvement may be enumerated as
follows
i)
ii)
iii)
iv)
v)

Control of many infectious and parasitic diseases (like smallpox);

Spread of immunization coverage;
Improved sanitation and water supply;
Rising education levels among the masses; and
Expansion of healthcare facilities.

Female life expectancy has generally done better than that for men, expect only
during 1951-81, when males had a slight advantage. This has been linked to various
factors, such as a fall in fertility with fewer births to give, womens health
improved, increase in the average age of females at the time of marriage, rising
education levels that primarily lead to the usage of contraception which augmented
the first reason i.e. lower fertility. The period of 1950s and 60s saw a rise in
fertility rates which has been said to be caused by increases in coital frequency and
disruptions to traditional breastfeeding practices. Male mortality, especially in adult
males has been persistent in its high levels, a contributing factor to which is the
unchecked use of alcohol and tobacco among the sample population.
Usage of contraception has been instrumental in bringing down the fertility of
women. As reported by the NFHS-3, 49% of married women use modern methods of
contraception, and of these, 75% have undergone sterilization. Hence it may be
said that remote cause of fertility decline has been the mortality decline.
Education has played a critically important role in the development and social
progress of the country. A literate individual is in a better position to tackle daily
challenges compared to an illiterate one. Moreover, economic opportunities vary
directly with a persons educational qualifications, skills, and accomplishments. With
increasing specialization of the production and distribution practices on a national
scale, literacy is a minimum requirement to be considered eligible for even the
lowest positions in an organizations hierarchy.
The Chinese economy has
depended substantially on the abilities of a reasonably educated workforce.
Epidemiological issues are also handled better by a populace that is educated at a
very basic level, considering the immunization programmes tied to school

education, lessons about the importance of sanitation, and preventive measures for
common diseases. While literacy is not a fundamental requirement for an effective
democracy, it enhances the political process drastically given that its members are
well-informed, able to hold discussions and argue with the voice of reason. The
spread of school education and literacy, in addition to sharpening the perception of
human rights, creates an awareness of the existence and usage of legal rights,
thereby enhancing the system of justice.
Educated women are vocal about the issues faced by their gender, and bring into
mainstream discussions the voice of this historically ignored section of society. It
results in strong downward impact on fertility rate and checks high frequency of
childbearing. There is ample evidence linking female literacy levels to increased
chances of child survival in numerous countries. Moreover, it is via the tool of
education that other marginalized sections of society are able to practice their
duties, and assert their rights in a democratic manner. It brings down the sociocultural barriers to economic growth and promotes an equitable society as against a
biased and polarized one.
Over the last two decades, India has enjoyed accelerated economic growth, but
fared poorly in human development indicators and health outcomes. Moreover,
worrisome inequities coincide with the multiple axes of caste, class, gender, and
regional differences (Deaton & Dreze, 2009). The National Family Health Survey
2005-06 (NFHS) reveals sharp regional and socio-economic divides in health
outcomes, with the lower castes, the poor, and less developed states bearing the
mortality burden disproportionately. Taking Under 5 Mortality Rate (U5MR) as an
indicator, it is observed that U5MR is higher among girls than in boys, and higher
among SCs, STs, OBCs as compared to others, and in the rural areas of Uttar
Pradesh (UP) as compared to urban Kerela. There appears to be an inverse relation
between income and mortality rate. These inequalities manifest themselves in the
form of inequities of availability, accessibility, and affordability of health services
across geographical, social and economic groups.
Health security in India needs to become an urgent national and political priority,
not only to accelerate and sustain Indias economic growth, but also due to its
fundamental importance in revamping Indias global image as a nation with
improving standards of living and reduced levels of human deprivation It is critical
for the enhancement of human capabilities and advancing the progress of Indian
society over the next decade.
Q2. Discuss trends in poverty levels over the last two decades.
A2. Indias post independence planners in the 1950s expected better progress
against poverty from the new countrys economic strategy. However, the estimates
made by Ravallion and Dutt (2010) show that slightly more than one person in
every two was officially below the poverty line in India during the 1950s and the
rate did not start falling considerably for some 30 years after independence. By
1990 the proportion had fallen to slightly more than one in three persons. There was
no trend increase or decrease in measured consumption inequality over the period
up to 1990. This was due to the low rate of economic growth, so that the GDP per
capita grew at an annual rate of barely 1% during 1960s and 70s, picking up to
about 3% during 1980s.

By the 1990s the situation became better with the countrys economic reforms
which were believed to put Indias poor on a new trajectory of more rapidly rising
standard of living. Supporters of this belief have argued that the reforms would
allow India to better exploit its comparative advantage in the production of labourintensive goods and services, directly impacting the countrys poor. This argument
is based on the logic that the bias against unskilled labour stemming from policy
emphasis on capital intensive industrialization in a largely closed economy would be
overcome once the liberalization took place. However, critics have questioned
whether this new policy environment would succeed in generating more labour
intensive growth.
Greater openness to international trade has been accompanied by sufficient
productivity growth in the domestic economy to assure a higher growth rate of
national output. Economic growth has accelerated since the reforms started. GDP
per capita grew at an annual rate of 4.5% after 1991. However, there are signs that
the labour intensive growth process in a poor open economy need not reduce
inequality, and may well increase it, given how the growth process interacts with
the antecedent inequalities in other dimensions, particularly in human capital,
which can mean that the poorest are still left behind. This is evident from the fact
that low adult literacy rates were far greater in India at the outset of its reform
period than most other reforming developing countries including China. The
disappointing outcomes for the poor from the non-farm growth can be traced back
to Indias antecedent socio-economic inequalities in access to schooling, among
other factors.
The post reform process of economic growth does not appear to have favoured the
rural sector and there are signs of geographic and sectoral divergence in Indias
growth process. There are reasonably clear signs of rising inequality with both
relative and absolute consumption gap between the rich and the poor widening in
the post-reform period.
The data used to measure poverty Is the distributional data from all available
rounds of the National Sample Survey (NSS) carried out by National Sample Survey
Organisation. It has been argues that the overall weight of food in the consumer
price index for agricultural labourers is too large, such that a slight rise (or fall) in
the relative food prices would lead to an overestimation (or underestimation) of the
rate of inflation. Hence Ravallion and Dutt have reweighted the CPI for agricultural
labourers as well as industrial workers. They have found little sign of sustained
progress against poverty until mid-1970s, but observed a trend decline in poverty
since then. Progress slowed somewhat in the early 1990s due to macroeconomic
difficulties of that period but since then it appears to have regained momentum.
The number of poor has declined since the early 2990s coming primarily from falling
number of poor in rural areas.
The annual percentage point reduction in the headcount index which had been
about 0.5 percentage point per year during 1958-91 increased to nearly 0.8
percentage point per year during 1991-2006. Thus the proportionate rate of
progress against poverty is higher in the post reform period. Unlike pre-1991 period,
higher trend rate of poverty reduction in the period after 1991 is sufficient to bring
down the number of poor. Rural poverty measures have historically been higher
than urban ones, but as Indias population has urbanised, rural poverty measures

declines and a rising share of poor people came to live in urban areas. As in most
other developing countries, there has been an urbanisation of poverty, which is
consistent with falling overall poverty (Ravallion 2007). Even then, a far greater size
of the rural population, it remains that over 70% of Indias poor still live in rural
areas.
On the pre-reform period, urban growth reduced urban poverty and total growth
reduced rural poverty. Even though same was observed post-1991, there was much
stronger evidence of positive feedback from urban economic growth to rural poverty
reduction than was found in the pre-1991 data. This is happening essentially
through improvements in rural distribution. The urban growth process is starting to
help reduce inequalities within rural India. This is also evident if we focus directly on
rural inequality as measured by the Gini index.
Nonetheless, poverty is still a huge problem for India, with over 450 million people
living below $1.25 a day in 2005. The relatively weak performance of the
agricultural sector, the widening disparities between urban and rural areas and the
lagging poor and underdeveloped areas remain important concerns along with
longstanding problems of public service delivery.
Q3. How is inequality measured? Explain the trends in inequality and
growth over last few years.
A3. Inequality has been the key theme in the research agenda for many economists
primarily due to two reasons
I)
II)

The intrinsic ethical attractions of the concept of equality; &

The significant implications of inequality for many macroeconomic
variables like growth and poverty.

It is first and foremost necessary to decide how inequality is to be measured before

embarking on a detailed analysis of the same. As it is impractical to measure the
incomes of every member of a large population, summary statistics are used to get
a clear and representative idea of the trends in society. To this end, several
statisticians have proposed several measures, such as range, mean deviations,
Kuznets ratios, Gini coefficient etc. Of these the Gini coefficient is a remarkably
balanced and well representative statistic of the inequality in the society. It
measures the extent to which the distribution of income or consumption deviates
from an absolutely equal distribution. A high Gini coefficient indicates greater
disparity of incomes. In a population of N individuals with incomes Y 1, Y2,, YN it is
possible to plot percentage of cumulative total income received by percentages of
cumulative total population starting from the poorest. This will result in the Lorenz
curve, such that for equal incomes, X% of the population will always enjoy X% of the
total income. Gini coefficient captures the gap between the line of equality (where
everyone has equal incomes) and the actual Lorenz curve. Mathematically, it may
N

2 N 2 Y |Y iY j|
be represented as

i=1 j =1

G=

Where Y* is the mean income and |Yi - Yj| is the absolute difference between incomes
of individuals i and j.
In the Indian context, consumption expenditure surveys (NSS) constitute the most
basic source of inequality measurement. They are conducted on a large sample of
households on a regular basis. Historically, inequality levels have been quite high in
India during the 1950s. During the 1950s and 1960s though, the Gini index
registered a steady decline reflecting the lower consumption of the top 1% and the
rise in consumption of the bottom 20%. The improvement has been attributed to
the socialist policies pursued by the government during this period.
Inequality measures remained fairly stable during the 1970s and 80s, and there is
no evidence of a clear increasing or decreasing trend. However, the income share of
the top 1% did a turnaround in the 1980s after falling steadily for three decades.
This increase coincides with the beginning of the more business-oriented policies of
the country and accompanying higher growth rates.
As per data from the two major rounds of the NSS (50 th and 55th) in the 90s, there
has been no significant increase in inequality. However, it has been pointed out that
these two rounds are not comparable in the strictest sense considering the wide
variance in the recall periods in both surveys. The 50 th round used the standard 30
day recall period for all types of consumption expenditures, whereas the 55 th round
increased the recall period significantly to a 365 day period for consumer durables.
Consequently many households that may have earlier reported no expenditure in
the past one month in this category ended up reporting some expenditure over the
past year. It is highly likely that this happened as the recall period was for consumer
durables that do last for long durations of time. Therefore after adjusting the basic
recorded data of the 55th round, Deaton and Dreze (2002) find evidence of marked
increase in inequality over these 6 years. Recent analysis records that inequality
increased to 36.8 by 2004.
Inequality seems to have risen on several fronts. Broad trends in income distribution
in India have been reflected in regional inequality, and particularly in the case of
inter-state inequality. Although the gap between states has been widening, the
composition of states in the best and worst groups has changed. Instead of Punjab
and Haryana, it is now Maharashtra and Gujarat which have highest growth rates.
While Bihar and Orissa continue to remain at the bottom, other initially poor states
like Rajasthan and West Bengal have been able to significantly increase the pace of
their growth.
There is a widening gap between urban and rural areas on an all-India level. Rural
inequality has remained more or less constant, while urban inequality has increased
considerably. This can be due to rising levels of urbanisation, among other factors.
There have been wider gaps in wages as measured by wage-inequality, not just in
case of hourly wages of regular workers, but across occupations as well. Agricultural
labourers have higher real wages by 2.5%, whereas the corresponding growth rate
for public sector employees is almost double.
As per Kuznets hypothesis, inequality should follow an inverse-U shape curve along
the path of the development process. The early phase of development is
characterised by greater urbanisation and industrialisation resulting in greater

income inequality. However as a large proportion of the labour force is absorbed into
the industrial sector over time, inequality tends to fall. However, this hypothesis has
not enjoyed immense support in terms of empirical evidence. Moreover, the sectoral
shift in the Indian context took place in the 1980s, and the rising inequality may not
be attributed to it.
If the growth process remains highly uneven so that only a small section benefit
from it, there can be serious consequences for poverty reduction and further
economic growth. From the perspective of political economics, higher inequality
leads to social conflicts and greater demands for redistribution. These effects
outweigh the potential incentive benefits arising out of inequality and the end result
may be lower growth.
In terms of adult schooling, India has a Gini coefficient of 0.56, which is higher than
Chinas 0.37 and Brazils 0.39 for the year 2000. Furthermore, land inequality in
rural India was 0.73 in 2003. Given the importance of both physical and human
capital in the growth process, these inequalities may well act as severe bottlenecks
for future growth.