Low responsiveness of poverty reduction to growth in India is a result of two persistent factors: low elasticity of household consumption (from NSS) growth to GDP growth, and growth in household consumption that is insufficiently pro‐poor. The first one is a recurring feature in India, where growth in GDP (and private consumption) in national accounts (NAS) has consistently surpassed that in household consumption from surveys so that the gap between the two series has widened over time. The second factor, that growth in household consumption is not pro‐poor, is reflected by what is seen for the shared prosperity indicator earlier.

Both these factors have shown significant improvements from the past, which resulted in the elasticity of poverty reduction to GDP growth more than tripling from the period 1994‐2005 to 2005‐ 12.<sup>33</sup> Even _within_ the second period, there was an improving trend, with the last two years (2010‐12) showing a much higher elasticity due to a reversal in both the factors: the gap between NAS consumption growth and household consumption growth narrowed and household consumption growth itself became more pro‐poor. If these changes represent a trend and not an aberration, one would expect poverty reduction to become more responsive to GDP growth in the coming years, with encouraging prospects for the achievement of the global goal of “ending” extreme poverty by 2030. The rise in the growth elasticity of poverty in 2005‐12 compared to the previous decade was also accompanied by fundamental shifts in how the composition of growth – between urban and rural and different sectors – affected rural and urban poverty.<sup>34</sup>

# 7. Conclusion

In concluding, it is useful to recap the highlights of the findings. Compared to the 1994 to 2005 period, poverty reduction accelerated during 2005‐2012, falling from 37 percent nationally in 2005 to 22 percent in 2012. The annual rate of reduction was 2.2 percentage points during 2005‐2012, compared to 0.7 percentage point during 1994‐2005. Poverty fell more rapidly in rural areas. But with a rural poverty rate of 26 percent and urban poverty rate of 14 percent, the number of rural poor was still almost quadruple that of urban poor in 2012. Poverty reduction was driven by rapid growth in consumption; consumption inequality (Gini index), after rising between 1994 and 2005, remained almost unchanged. The World Bank Group’s indicator for “shared prosperity”, annualized per capita consumption growth of the bottom 40% of the population, showed significant improvement since 2005 from the earlier period of 1994‐2005.

International comparisons validate the positive poverty reduction trends for India in the decade of the 2000s. After barely keeping up with the developing world as a whole and lagging behind MICs during the 1990s, India accelerated its progress in reducing monetary poverty after 2005 even in comparison to the rapid progress achieved by the developing world as a whole. The rate of reduction of extreme poverty in India, measured by the international poverty line of $1.90/day (2011 PPP), exceeded that of

> 33 Elasticity of poverty headcount rate (international poverty line of $1.90/day at 2011 PPP) to growth in per capita GDP (constant 2011 PPP $) was ‐0.24 during 1994‐2005 and ‐0.93 during 2005‐12. Within the latter period, the elasticity rose from ‐0.49 in 2005‐10 to ‐2.24 during 2010‐12.

> 34 See Datt, Ravallion & Murgai (2016), who analyze in detail the relationship between the composition of growth and pattern of poverty reduction over time in India.

21