While India has been consistent in liberalizing its economy in the last two decades, it has also kept its attention on the challenge of poverty. Accordingly, India has designed and implemented poverty alleviation programs with varying degrees of success. India’s focus on alleviating poverty as growth program is both effective and prudent given the large numbers -- over 300 million Indians live in poverty (The comparable number for China is about 100 million). China, on the other hand, has focused more on top-down economic trickle down with aggressive tax rebates and other incentives to large firms.
Per recent World Bank Reports (2007 and 2008), a 10 % reduction in poverty would both boost the growth rate by about 1% and increase the foreign direct investment by about 8%. So far India to continue its impressive growth, one of the critical components of the strategy has to be poverty reduction programs that add assets to the society (Prahalad 2004, Sen 1997). And this is where political pluralism has been so advantageous. The relentless focus on the poor and disfranchised by various political parties particularly the Indian socialist and regional parties has been very beneficial for economic growth. The balance that the Indian political and economic policy makers have achieved is now the recommended economic strategy by the recent World Bank Reports (2007, 2008). This policy is a direct result of the wonderful pulls and pushes created by the political democracy.
Overall, political pluralism and democratic polity have proved to be excellent prescription for India’s economy (Huang 2008). Sure there have been many false starts and erroneous policies but there have been no calamitous decisions. The country has not gone through traumatic experiences of Latin America (where many economies collapsed because they followed market-economy without adequate supervisory mechanisms) or other parts of Asia (Asian currency crisis) or East European countries (inflation and stagnant growth). As Sen (2005) has observed, “India's long argumentative tradition and toleration of heterodoxy, going back thousands of years, has greatly helped in making democracy flourish with such ease.” China does not have the benefits of political pluralism.
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Personally, I worked in rural areas and it is favourite topic to argue for the betterment of rural livelihood especially in the backward States in Eastern India. And, more often than not, in this light,we compare Indian poverty with China. To me, it is comparing apple with oranges. Indian civil society being so complex and level of corruption being so high, even investment or 30% of its GDP hardly would evoke desired results. Then, comes the issue of land reform and structural impediments, administrative reforms so on.. Therefore, in India we have larger hardles to cross to improve poverty at the bottom of the pyramid.
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