An autonomous research institute under the Ministry of Finance


India: Fiscal Reform for Poverty Reduction

Publication date

Mar, 2004


Report submitted to the Canadian International Development Agency (CIDA)


D. K. Srivastava, S.K. Sanyal, C.Bhujanga Rao, Pinaki Chakraborty


The study aimed at creating and promoting sustained reduction in poverty levels in India by improving the efficacy of fiscal policies in the provision of vital social and economic services, in terms of their impact on poverty reduction. In this study, poverty has been viewed in a comprehensive sense, involving not only income or nutritional thresholds but also issues of access to services like education, health, water, and security. With increasing globalization of the Indian economy, and greater reliance on market forces, fiscal intervention becomes critical for combating trends towards increasing spatial concentration of poverty. The study has examined poverty issues in India focusing on four high poverty-incidence states, viz., Uttar Pradesh, Madhya Pradesh, Uttaranchal, and Chhattisgarh, where an extensive primary survey was undertaken canvassing household level and village level questionnaires. Although the incidence of poverty in India, measured by the head count ratio, has fallen by about 30 percentage points during the last 30 years, it has become regionally more concentrated and urbanized, and in all the four states studied, more than 40 percent of the poor were found to be below 18 years of age. Gender discrimination, in terms of sex ratio and female literacy rate, is significant and in some cases rises as the incomes of the poor increase. New policy initiatives are needed to address this problem. The system of centrally sponsored schemes needs to be overhauled and involvement of Panchayati Raj Institutions in implementing these schemes should increase substantially. The study calls for focus on employment generation schemes, better targeted fiscal intervention, and emphasis on health and education as long term antidotes to poverty.

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