Government Spending on Rural Poverty

I wanted to learn more about government involvement in India, and the way that they are working to offset the problem of poverty in India. I searched through JSTOR, and found an article called, “Government Spending, Growth, and Poverty in Rural India,” which briefly describes the role that government is playing in poverty throughout the country.

Even since the 1960s, poverty has declined significantly, from 50-65% to just around 1/3 of the population living in poverty. The article explains this recent decline in rural poverty, and how government spending has had both direct and indirect impacts on the issue. Says the article, “Government expenditure has not only contributed to agricultural growth and hence indirectly to poverty alleviation, but it has directly created rural non-farm jobs and increased wages.” It seems that even the trickle-down affects of government spending have successfully put money into the pockets of rural farm workers, and by doing so, has helped to decrease the abject poverty that once existed.

One area that is often overlooked when looking into government spending is in terms of the indirect assistance that, in India, could be seen in terms of investments in roads, irrigation, health, etc. While these improvements do not necessarily change rural poverty, they do put the proper building blocks in place to help farmers and rural workers improve their conditions. The article says that by putting money towards education and healthcare, the government has successfully put money in place to improve conditions. “Current and past values of government expenditures on different investments, such as R&D [research and development], irrigation, roads, power, and education, were included in the equations for productivity, technology, infrastructure and education.” These modifications from government can be seen in the improvement of conditions throughout the country, from rural areas to industrialized ones.

In his analysis, from calculations and equations it has been shown that by the government investing an extra 1,000,000 rupees (about 21,000 USD) in eduation, there are 41 people that can be lifted above the poverty line. Government has recently used these findings, and invested more money and dedication into improving education conditions. While it might be assumed that education and health care are two of the biggest contributors to the decline in rural poverty, it is actually government expenditures on roads and R&D that have had the largest impacts on development. By enabling rural farms to be able to travel into the larger cities opens up vast opportunity for trade, and in doing so, many rural workers are able to finally be free from such poverty.