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Development Comparison in India, China and

Assignment Submitted In the Partial Fulfillment of the Requirements for the
Fourth Semester
M.Sc. Economics
(2014 - 2015)

By: Mrunal Dubey (13060242024)

Sagar Jagdale (13060242032)
Rajlaxmi Bhat (13060242030)
Under guidance of:
Dr. Savita Kulkarni

Economic growth is about the changes in aggregate or average incomes. This is a
good measure of countrys development, but it is far from being only the one.
Economic growth that spreads its benefits equitably among the population is always
welcome; growth that is distributed unequally needs to be evaluated not simply on the
basis of overall change, but on the grounds of equity.

There are two reasons to be interested in the inequality of income. First, there is no
reason why individuals should be treated differently in terms of their access to
lifetime economic resources. Second, even if we are uninterested about the problems
of inequality at the intrinsic level, there is still good reason to worry about it.
Ultimately, economic inequality is the fundamental disparity that permits one
individual certain material choices, while denying another individual those very same

Poverty strikes not only at the core of ongoing existence, but by effectively taking
away the rights of a human being to live in good health, to obtain education, and to
enjoy adequate nutrition, poverty destroys aspirations, hopes and enjoyment of future
as well. Just as in the case of inequality, poverty is both intrinsic and functional
significance. Removal of poverty is the fundamental goal of the economic
development. Hence the patterns of poverty depict the approach of economy to
eradicate poverty from the grass roots level.

In this paper, we have tried to show cross country comparison fro inequality and
poverty patterns, covering one country from the highest income level, one country
from upper middle level, one country from the lower middle level and one country
from the lower income level.

High economic inequality might retard economic growth by setting up the political
demands for redistribution. A policy might aim to redistribute existing wealth among
the broader population. Social welfare programmes can improve the work benefits.
Direct benefit transfers may be well suited to reduce inequality. Addressing inequality
in terms of education is also of paramount importance as it can infuse human capital
and drive the countrys growth.

The paper furnishes the trends in poverty and inequality in the recent years (19902010)

Trends in Inequality and Poverty

The country is developing into a free-market economy. The country has taken various
liberalization measures such as privatization of public enterprises, industrial
deregulation and relaxed control on international trade. These measures have helped
India to accelerate its growth rate.

The countrys diverse economy has modern industries, wide range of service
industries, modern agriculture and prevalent rural agriculture. Though the service
sector is growing rapidly in the country and contributes around two-third of the
output, nearly half of Indias labor force is still in traditional agriculture.
Manufacturing sector in India has not picked as much as the Service sector. The
countrys high growth rate due to the liberalization measures had been affected by the
low investments due to high interest rates and high inflation in the country. But the
Government bought in additional reforms like deficit reduction policies and attracting
the Foreign Direct Investment.

The situation in the current year (2014) has improved but still the country faces many
socio-economic challenges. The country has low education ratio, high level of
poverty, inequality, corruption, violence, and discrimination against women. The
measures taken to eradicate the problems are either inadequate or poorly targeted.

The following statistics give us a picture about the poverty in India

The above graph represents the income held by various income groups. The share of
higher income group has increased from 41.27 percent to 42.58 percent in late 2000s.
The bottom level income groups share of income has decreased from 8.71 to 8.59
percent. The share of middle income group has also decreased from 16.21 to 15.75
percent. This points out to increase in inequality in the late 2000s.

Poverty Head-count Ratio

The poverty headcount ratio at the national poverty line defines the percentage of
population living under the nationally defined poverty line. The graph shows a sharp
decline in the headcount from 45 percent in 1996 to around 22 percent in 2010. The

various schemes by the Government such as such as the Jawahar Rozgar Yojana in
1990s, Jawahar Gram Samriddhi Yojana in 2000s, Pension schemes and employment
guarantee schemes like NREGA (2006) have helped the country to reduce the

Poverty Gap at $2 a day PPP (%population) measured in 2005 prices.

The poverty gap measures the average shortfall of the total population from the
poverty line. It signifies the intensity of poverty in a country. The above graph shows
that the poverty gap has been decreasing gradually since 1990s.

GINI coefficient

The inequality in the country is represented using the GINI coefficient, which is the
most commonly used inequality measure. The lower values of the coefficient
represent lower inequality. The following statistics suggest that there is high level of
inequality in India. Though the inequality sharply 1990s, it again has increased after

Life Expectancy

Though India has shown drastic improvement in life expectancy it still lag sbehind
China and Bangladesh. But this improvement is significant and the life expectancy is
slowly rising. Since the time of Independence, famine has reduced dramatically in our
country and people have a decent supply of nutrition.

Human Development in India

Indias human development index has improved very slightly but remains among the
median countries in terms of human development. The country also does poorly on
many indicators of inequality, in both absolute as well as relative terms.

Bangladesh has experienced a 6% economic growth rate in spite of political
instability, very low infrastructure, corruption and low slow implementation of
economic reforms. More than half of Bangladeshis are employed in the agriculture
sector. Garment sector is the most important industry in Bangladesh. The sector
contributes 80% to the total exports and 18% to the countrys GDP. The country has
high levels of poverty and equally high inequality.

The statistics for the poverty and inequality are provided below:

Income Share

The income share data shows that the share of high income group has increased from
40.63 percent to around 42 percent in the late 2000s whereas for both middle and low
level groups the share has decreased. This shows that the inequality has increased in
the country.

Poverty headcount Ratio

The poverty headcount ration measured by the national poverty line shows that there
is gradual decrease in the poverty. The percentage of population living under the
nationally defined poverty line was around 57 percent in 1990, which in 2010 came
down to 31 percent.

Poverty Gap at $2 a day PPP (%population) measured in 2005 prices.

The poverty shows us the intensity of the poverty. The Poverty Gap ratio in 2010
stands at 30.35 % down from 44% in 1990.

GINI Index

The GINI coefficient shows the inequality in the country. In Bangladesh the
inequality has remained at the same level i.e around 33%, throughout 1990s and

Life Expectancy at Birth

The graph shows gradual increase in Life expectancy. The statistics are better than
India (66.4) but lesser than China (73.7). The primary reason for this success is the
availability of affordable healthcare in most villages. The widespread availability of
nutritious food at an affordable price, changes in food habits and the expansion of the
social safety net have largely benefited the poorer segment of the population.

Human Development Index

Bangladesh is among few countries globally who has shown extraordinary progress in
terms of HDI. Bangladesh has risen in ranking to 142 (among 187 countries),
graduating from last years position of 143, thanks to its better performance in the
health, education and gender issues. Bangladesh outshines India, Pakistan and Nepal
in terms of inequality-adjusted HDI.

China has moved from a closed, centrally planned system to a more market-oriented
one. China became the world's largest exporter in the year 2010. Reforms began with
the phasing out of collectivized agriculture, and expanded to include the gradual
liberalization of prices, fiscal decentralization, increased autonomy for state
enterprises, growth of the private sector, development of stock markets and a modern
banking system, and opening to foreign trade and investment.
The country has the highest population and it has taken vast measures to utilize its
man power. China has set a good example in poverty alleviation. The following
statistics prove that the country has managed to bring down the poverty. But the
inequality has increased in the recent years.

Income Share

The income share data suggests that the inequality in the country has risen in recent
years. The income share of the high income group has increased from around 40
percent to 48 percent in the late 2000s. The share of middle income group has not
decreased much but the share of low income group in the national income has
decreased highly, it has come down from 8 percent to around 5 percent in the late

Poverty headcount ratio

The above graph shows that the poverty headcount has increased drastically from
around 85 percent to just 27 percent (though still large figure for a country with
worlds highest population)

Poverty Gap Ratio at PPP

The poverty gap ratio also shows a drastic decreased. The shortfall from the poverty
line in the year 1990 was 41 percent but it has come down to just 9 percent in 2010.

GINI Coefficient

Even though the country shows decrease in the poverty level, the inequality has
actually risen in recent years. The GINI ratio or coefficient was around 32 percent in
the year 1990. It reached at its highest in recent years i.e. 43 in the year 2005. In 2010
it came down to 42.

Life Expectancy at Birth

China has comparatively better life expectancy than both India and Bangladesh. The
Governments targeted policies towards bettering the Human development indicators
have helped the country to achieve it.

Human Development Index

China's 0.699 on the HDI represents a remarkable increase of 72 percent from the
0.407 it registered on this scale in 1980, or an average year-on-year growth of 1.7
percent. China's achievement can be attributed to investment in agriculture,
establishing special economic zones, creating access to high-quality education,
promoting social cohesion, enhancing equity and providing access to high-quality

The problems of poverty and inequality are affecting many countries in the world.
Many countries have managed to reduce poverty. But the inequality in most of the
countries has remained constant or has increased in some cases. At Indias present
rate of progress on human development, it may take some 15 years for India to get to
where China is today. China, in other words, already led India on these fronts when it
commenced economic liberalization in the late 70s. And because China has boomed
alongside India and at a faster clip, in some cases Chinas lead has widened over the
past two decades.
In case of the countries mentioned in the report, Only China has efficiently managed
to reduce the poverty level. India has reduced the poverty but not inequality. The
inequality has increased steeply in recent years. On other hand Bangladesh has not
succeeded much in reducing poverty and inequality. The poverty has been reduced
only a little whereas the inequality has remained at the same level.