Question

how the Urban population contribute to poverty reduction in India​

Answer 1

Answer:

We find that the urbanization process stimulates the transition from farm to non-farm activities in rural areas. More specifically, urbanization tends to reduce farm income and increase wages and non-farm income in rural households.

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Answer 2

Answer:

Driven by the rapid growth of urban population in developing countries, the world had become more urban than rural by 2007. This trend is expected to continue in the years ahead. Almost all of the future growth in the world population will be concentrated in the urban areas of developing countries. The United Nations projects that developing countries will almost double their urban population by 2050, adding a further 2.4 billion urban dwellers (figure 1).

While the urbanization of the world’s population has been accompanied by an “urbanization of global poverty” (Ravallion et al., 2007), poverty continues to be overwhelmingly concentrated in rural areas. According to the World Development Indicators, almost two third of the poor globally are still rural. Thus understanding the implications of urban growth for rural poverty in developing countries is crucial for any global poverty reduction strategy. That is what Carlo Menon and I try to do in a recent paper, examining the extent to which the growth in urban areas reduced poverty in surrounding rural areas in India (Calì and Menon, 2013). The focus on India is particularly relevant, as it is the country with the largest number of both rural and urban poor and with the largest expected absolute growth in urban population between now and 2050 (figure 2).

Figure 1: Urban and rural populations (in mln) by development group, 1950-2050

Source: World Urbanization Prospects, the 2011 Revision

Using data on Indian districts from 1983 to 1999, we find that urbanization has a significant poverty-reducing effect in the surrounding rural areas. We use a variety of instrumental variable estimations to show that this effect is causal and in fact failure to control for causality downwardly biases the poverty reducing effect of urbanization. On average an increase in the urban population by 200,000 determines a decrease in rural poverty in the same district of between 1.3 and 2.6 percentage points. According to these figures, urbanization was responsible for between 13 percent and 25 percent of the overall reduction in rural poverty in India over the period. This is a substantial contribution, which is higher for example than that of an important rural policy in post-independence India, i.e. land reform, which explains approximately one-tenth of the rural poverty reduction between 1958 and 1992