Abstract

This paper empirically examines the relation between economic growth and poverty alleviation for the case of India. We provide evidence that higher growth rates were associated with faster decline in poverty, partly because growth helped increase employment and real wages which contributed to poverty reduction. The increase in government social expenditure is also shown to have contributed significantly to poverty alleviation. However, we also find that higher GDP growth increased government revenues, which enabled the government to increase expenditure on the social sectors. Overall, this evidence suggests that for rapid reduction in poverty, sustaining high growth is the most crucial element.