Adjustment and Distribution: The Indian Experience

Publication | June 1998

This paper attempts to assess the distributive impact of the economic adjustment program in India. It begins by discussing the analytical complexities of disentangling the impact of reforms from that of other autonomous developments in the economy. It then goes on to isolate and analyze the main cause-effect linkages between adjustment and distribution. The paper points out that there has been a distinct increase in poverty incidence in the post-adjustment period, but that this cannot be automatically attributed to adjustment period, but that this cannot be automatically attributed to adjustment.

The natural growth of the work force, combined with the slowdown in growth on account of stabilization, led to some increase in unemployment. However, the paper argues that this alone could not account for the increase in poverty incidence. The latter is mainly attributable to a sharp increase in administered food prices, a political decision which had little to do with reforms. The adjustment program could have made a greater effort to protect the poor through antipoverty programs etc., but the paper suggests that the distributional impact of the adjustment program is on the whole quite limited.

It concludes that the main concern about India's adjustment program is not so much its adverse impact on distribution but the fact that it remains incomplete. In the future, much will depend on the nature and stability of the ruling political formation that emerges.

Contents 

  • Foreword
  • Introduction
  • Adjustment and Distribution: Preliminary Remarks
  • Recent Trends in Inequality and Poverty
  • Unemployment and the Wage Rate
  • The Price of Food
  • Fiscal Policy and Public Social Expenditure
  • The Regional Impact of Adjustment
  • Conclusion: The Political Economy of Adjustment
  • References