40 Years Ago...and now: Much water has flowed...

Forty years ago, India was in the throes of the infamous licence raj. The economy was dominated by the public sector, with private enterprise almost relegated to the margins. But the reforms implemented in the early 90s, carried out against the backdrop of a balance of payments crisis transformed the scenario, with the state ceding space for greater private sector engagement.

In the years prior to the reforms, from 1973-74 to 1990-91, annual growth averaged 4.7 per cent. However, in the post-reform period, from 1992-93 to 2013-14, there was an acceleration, with growth averaging 6.8 per cent. According to the latest International Comparison Program (ICP) estimates, India is now the third-largest economy, accounting for 6.4 per cent of world GDP. This acceleration in growth translates to a fourfold rise in the per capita net national product which, measured at 2004-05 prices, rose from Rs 9,792 in 1973-74 to Rs 39,904 in 2013-14. It is this acceleration in growth that has resulted in a sharp fall in the 'contentious' poverty estimates.

According to the Lakdawala methodology, the percentage of poor fell from 55 per cent in 1973-74 to 27.5 per cent in 2004-05.

Based on the Tendulkar methodology, poverty declined from 37.2 per cent in 2004-05 to 21.9 per cent in 2011-12, leading to the inevitable conclusion that, whichever definition one may choose to adopt, there has been a remarkable acceleration in the pace of poverty reduction and a substantial rise in the living standards of households.