Indian population as a whole (3.7 percent) was more than a percentage point higher than the median of the corresponding growth rate for MICs. As a result, India ranked 16<sup>th</sup> among 51 MICs in consumption growth of overall population, but only 27<sup>th</sup> in consumption growth of the bottom 40%.

The lower rank on inclusiveness of growth also implies that even as India outperformed the majority of developing countries and its MIC peers in poverty reduction, the rate of reduction was below par for the average consumption growth that India experienced. Poverty reduction in India, in relation to growth was lower still if overall expansion of the economy (GDP growth) is taken into account. The elasticity of poverty reduction to per capita GDP growth in India is estimated to be approximately ‐0.9 for the period 2005‐12, which puts India near the bottom third (75<sup>th</sup> out of 116 countries) among developing countries for this period.<sup>29</sup> As a point of reference, the top 10 countries (out of 116) in terms of elasticity of poverty to per capita GDP growth during this period had elasticities between ‐6 and ‐18, while the median elasticity was ‐1.3. The relatively low elasticity in India was the reason why for the period 2005‐2012, with per capita GDP growth that was in the top 10 percent among developing countries, India was just above the 60<sup>th</sup> percentile of developing countries in the rate of poverty reduction.<sup>30</sup> Given the size of India and the extent of variation in income levels across states, the challenge of inclusive growth has an important spatial dimension, for which the state level snapshots in Section 4 are useful to revisit briefly. The wide variation in the growth elasticity of poverty reduction across states highlighted in Section 4 demonstrates the complexity of the challenge. Two important trends identified there – the strongly positive association between state level growth and the pace of poverty reduction, and the rise in the responsiveness of poverty reduction to growth from 1994‐2005 to 2005‐2012 in most states – suggest encouraging prospects for inclusive growth nationally. On the flip side, the comparatively lower elasticity in most LIS poses a challenge to inclusiveness of growth, given the rising share of these states in India’s poor and bottom 40 percent. The second challenge, that of growth being less efficient in lifting people above the higher “vulnerability” standard of twice the poverty line than out of poverty, is symptomatic of the constraints to middle‐class expansion in India – and not just in LIS, but almost everywhere including the most economically developed states of the country.

# India has made mixed progress in non‐monetary dimensions of welfare compared to its peers

While key non‐monetary indicators of welfare have improved steadily in India over the last two decades, improvements on some key dimensions do not stand out in comparison with countries that had indicators at a comparable level in the early 1990s. Child and infant mortality rates fell faster in countries like Nepal, Bangladesh and Cambodia, where mortality rates were higher than India’s in 1994 but fell below India’s in 2014. The reduction in mortality rates in India was sufficient to close the gap significantly with countries like Vietnam and Nicaragua between 1994 and 2014. However, the gaps in

> 29 To ensure comparability across countries, these elasticities are estimated for the period 2005‐2012 for all countries (116 for which estimates are possible), using interpolated estimates of poverty rates for countries where survey years do not match the exact period.

> 30 Rankings based on 116 developing countries for which growth elasticity of poverty reduction could be estimated. It is important to note, however, that these elasticity estimates might be affected by the aforementioned divergence between NSS consumption series and NAS, although it is difficult to assign the direction of the bias.

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