ABSTRACT
How trade promotes growth and how growth helps to reduce poverty has achieved some attention in the literature. Export-oriented growth strategy has transformed several East Asian countries including South Korea, Taiwan, Singapore and Hong Kong within the 30 years between 1960 and 1990. This process is picking up in South Asia with India’s impressive economic growth rates achieved after the successful liberalization of trade and industrial structure that started in 1990. Kuznets (1955) studied the role of trade and growth in the structure of income inequality
and poverty among the lowest quintiles in the UK, Germany and the US and compared the data with those of developing countries including India, Ceylon and Peurto Rico. Sen (1976) and Atkinson (1987) discussed methods of measuring poverty. Bhagwati and Srinivasan (2002) argued that freer trade would help poor countries to raise their export of labour intensive goods and hence reduce poverty. For them trade is essential for growth as no country close to autarky has managed to grow, and integration to the world economy creates more opportunity than posing threats. Dollar and Kraay (2002, 2004), however, did not find strong evidence for poverty-reducing effect of trade in cross section and time series data-based studies for 24 OECD and 72 developing countries. They concluded that the income of poor groups rises generally with the growth rate of the economy but the share of bottom quintiles tend to remain constant. Trade liberalization generally leads to a higher economic growth and thus also results in higher income of the poorest, although it does not directly reduce poverty in a relative sense. The World Bank’s Development Research Group has made good contributions in international comparisons and in measurement of poverty (Chen and Ravallion, 2008) that can be used to study possible links between trade and poverty. The Asian Development Bank (ADB, 2010) reports several studies on measurement and analysis of poverty and income distribution among its members. Myrdal (1968) and Adams (2001) account how cultural factors have influenced the evolution of the South Asian economies. Jha et al. (2008) analyse impacts of rural public works and the public distribution system on poverty among states in India. Studies on poverty-reduction programmes in India are relevant for understanding the tradegrowth-poverty relation of South Asia not only because India accounts for around 80 per cent of South Asian GDP and is the home of 75 per cent of 1.5 billion people in the region (see Table 17.1) but also because recent economic dynamics of the region has started from India.
