Poverty and inequality in India: An exploration of undercurrents at the village level

Eliminating poverty and containing the rise of inequality are global objectives enshrined in the Sustainable Development Goals. Monitoring progress is an important task in the pursuit of these goals and is most commonly carried out at the country level. In India, poverty fell significantly in the late 1990s and the first decade of the present century. This occurred at the apparent cost of an upward trend in inequality.

More recently, the picture has become vague, due to a lack of data and as a result of the Covid-19 pandemic. One can ask whether these monitoring efforts at the national, or state, level are enough to properly understand the currents that shape the evolution of poverty and inequality in India. Indeed, it can be shown that most of India’s inequality occurs at the subnational level – the district, block, or village. Similarly, pockets of deep poverty occur far below what conventional household surveys are able to detect. It is thus important to understand better the forces shaping the dynamics of poverty and inequality at the local level. Village studies can offer a means to examine such dynamics. We consider two longitudinal village studies – one in Uttar Pradesh and one in Karnataka – to describe several such processes and to comment also on the impact of Covid-19 on rural wellbeing.

We underscore the important role of structural transformation at the village level, notably diversification out of agriculture. We suggest that the impact of structural transformation on distributional outcomes is nuanced, complex, and influenced by factors that are often highly context specific. Covid-19 has exerted a pronounced impact on both villages – exerting significant upward pressure on both poverty and inequality. While economic activity has now resumed, recovery is not yet complete: incomes and employment patterns are yet to return to pre-Covid levels.

Available at: https://doi.org/10.55158/DEEPWP30