Developing Countries And Its Effects On Economic Growth

1436 Words Mar 8th, 2015 6 Pages
Common research in developing countries consistently shows evidence that sustained growth is the most important way to reduce poverty. Estimates of these studies are that a 10 percent increase in a country’s average income will reduce the poverty rate by 20 to 30 percent. Specific studies done in 14 separate countries in the 1990s showed that poverty fell in 11 countries that experienced significant economic growth and rose in the 3 countries with stagnant growth. For these countries, on average a 1 percent increase in per capita income reduced poverty by 1.7 percent. India has experienced economic growth over the last two decades of approximately 7 percent. Over 2004-2010 poverty has only declined by 1.5 percent, which was double the rate of the previous decade. Although India’s economy has grown, poverty is getting reduced at a slower rate. This can mainly be attributed to inequality in income, education, health or gender. The government needs to focus on targeting the poor with budgetary spending and public policies. However, there are schools of thought that find the government should instead focus on other aspects of the economy, such as the financial or trade sectors, which will in turn alleviate poverty. Gupta, an Indian economist found weak links between economic growth and poverty reduction when taking into account socio-economics and demographics. Gupta concluded that no macroeconomic policy for market-led growth would successfully deal with poverty or…
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