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Himachal Pradesh, growing to prosper

By Priyambada Vyas

There is ample evidence from across the world to show the positive impact of economic growth on Poverty reduction. (Dollar and Kraay, 2002; McKay and Sumner, 2008; Roemer and Gugerty, 1997). In this essay I am going to show this relationship between growth and poverty reduction through a case study of the North-Indian hilly state of Himachal Pradesh (HP). From the early 2000s, HP has achieved steady and consistent rates of economic growth. At the same time, it has achieved a significant reduction in the percentage of people living below the poverty line. In this essay, I will show that this reduction has been possible due to heavy investments on three key social indicators by the Government of HP (GoHP) i.e. education, health and food-security. Further, I will show HP’s outcomes on these indicators are significantly better than other economically developed states in India.

The case of Himachal Pradesh: Reduction in poverty through economic growth

Himachal Pradesh has achieved consistently high rates of growth since the 1990s, higher than its prosperous neighbouring state, Punjab (Planning Commission, 2014). Economic growth in HP has been supplemented by remarkable progress in social and human development outcomes. Both economic and human development indicators have exceeded the rest of India, mainly as a result of government investments in public service delivery (Sanan, 2008; World Bank, 2007).

The main success of HP has been to move people out of poverty through social inclusion. HP is primarily a rural state. Between 1993-94 and 2011, rural poverty declined from 36.8 per cent to 8.5 per cent (World Bank, 2007). As a result of the high levels of economic growth, HP witnessed a drastic reduction in poverty. This was achieved because of large investments on social development indicators like education, health and food-security, amongst others. For the purpose of this paper, I am going to focus primarily on the impact of education, health and food security on reducing poverty.

Graph showing Economic Growth of HP from 2004-05 to 2011-12. Source: Planning Commission, 2014

As is observed from Fig. 1, the economic growth of HP increased from 25,000 Crores (250 Billion) in 2004-05 to 65,000 (650 Billion) in 2011-12. At the same time, there was a three-fold reduction in poverty, as is observed in Fig. 2. In 2004-05, the percentage of population living below poverty line was 23 which reduced to 8 in 2011-12.

Graph showing reduction in people living below poverty line in HP. Source: Reserve Bank of India 2015


At the time of India’s independence, HP’s literacy was similar to that of Bihar and Uttar Pradesh (Dreze and Sen, 2012).Though HP started its journey on improving educational achievement much later than Kerala, which is the highest performing state in India, it caught up much faster (Das, Kapoor-Mehta, Tas and Žumbytė, 2015). HP focussed on a policy to universalise the provision of government education, which Sen and Dreze have referred to as the ‘schooling revolution’ (Dreze and Sen, 2012). HP made extensive progress in improving the primary and secondary education attainments during 1993-94 to 2004-05. For the post-secondary educational attainment category, HP was successful in making it double for all social groups (Das et al., 2015).

Graph showing percentage of Gross State Domestic Product (GSDP) spent on education by HP, Haryana, Punjab, Tamil Nadu and Maharashtra. Source: CGBA and CRY, 2016.

Fig. 3 above shows a breakup of the percentage of Gross State Domestic Product (GSDP), spent on education by the mentioned states. A comparison has been made between the states HP, Haryana, Punjab, Tamil Nadu and Maharashtra, as they are amongst the ten richest states in India (Niti Aayog, 2015). It is evident from the graph that HP spends close to double that of other economically developed states in India. This is consistent across all four years.

Poverty reduction is closely linked to social inclusion (Dugarova, 2015; Mkandawire and United Nations Research Institute for Social Development, 2005). Educational attainment in HP is testament of the government’s efforts to foster social inclusion. The growth in HP’s educational attainments over the past twenty years has been almost consistent across all classes including Scheduled Tribes (STs), Scheduled Castes (SCs) and Other Backward Castes (OBCs) (Das et al., 2015).

Graph showing drop-out rates of Scheduled Castes (SCs) from school between Classes I-VIII in HP, Haryana, Maharashtra, Karnataka and Gujarat. Source: MHRD, 2010.

Fig. 4 compares the drop-out rates of scheduled caste children across 5 economically developed states of India- HP, Haryana, Maharashtra, Karnataka (instead of Tamil Nadu) and Gujarat (instead of Punjab. HP is clearly well ahead in its social inclusion efforts as evidenced by its 8.3 per cent drop-out rate, which is less than half of Maharashtra, the richest state in India (Niti Aayog, 2015).

The Government of HP prioritised access to remote areas and delegated responsibility to district officers for improving achievement in their respective districts. These factors have ensured that educational attainment in HP has been far more equitable across regions and class compared to its neighbours, Haryana and Punjab (Das et al., 2015). There is ample research to show that when educational attainment is inclusive, it has a significant impact on poverty reduction, as has been the case in HP (Stubbs, 2008).

State % of students in Class-V who can read Class-II text
Himachal Pradesh 75.2
Haryana 68.1
Punjab 66.5
Tamil Nadu 46.9
Maharashtra 53.5

Table showing the percentage of students in Class-V who can read Class-II text in the states of HP, Haryana, Punjab, Tamil Nadu and Maharashtra. Source: ASER, 2014.

In addition to its education outcomes being equitable, Himachal’s overall learning outcomes are also superior to other developed states in India. This is shown in Table 1 above. There is evidence to show a positive relationship between education and economic growth in India. Better learning outcomes lead to greater labour market participation and thereby, higher economic growth. An increase in the educational level is found to have significantly rising effects on the Net State Domestic Product, a proxy for the economic development (Mathur and Mamgain, 2004). Evidence also shows the positive relationship between literacy and poverty reduction in India (Das et al. 2015; Tilak, 2007).

Public Distribution System

HP has a well-functioning PDS which provides food-grains, pulses and oil, to both Below Poverty Line (BPL) and Above Poverty Line (APL) families. A majority of households in HP rely on the food received through the PDS in order to fulfil their food requirements (Das et al., 2015; Dreze and Khera, 2012). Literature shows that PDS has had a positive impact on poverty alleviation and advancing food security (Dreze and Khera, 2013; Himanshu and Sen, 2013; Tritah, 2003). Food security in HP has also ensured lower malnutrition levels, higher productivity and therefore, greater labour market participation (Das et al., 2015).

Graph showing PDS subsidy provided per person in HP, Haryana, Punjab, Tamil Nadu and Maharashtra. Adapted from Kumar, Parappurathu, Bantilan and Joshi.

Fig. 5 above shows a year-wise break-up of the PDS subsidy provided per person in HP, Haryana, Punjab, Tamil Nadu and Maharashtra. HP and Tamil Nadu clearly out-perform other states in the provision of per-capita subsidy.


Evidence shows a cyclical relationship between ill-health and poverty. It is observed that ill health leads to poverty, which in turn leads to ill health. People’s health deteriorates when they do not have access to healthcare, which in turn results in loss of income, leading to poverty. A causal relationship is observed between lack of financial resources and accessing healthcare (Peters, Garg, Bloom, Walker, Brieger and Rahman, 2008).

A well-functioning public health system has a significant impact on poverty reduction by reducing massive health shock expenditures (Alam and Mahal, 2014).Steady progress is exhibited by the health indicators in HP and is witness to the state’s commitment to providing a well-organised and functioning public health system. HP’s large investments in health infrastructure has made it the best in India in terms of per capita availability. As an outcome, it achieved immunisation for almost 75 per cent children a decade back, an extraordinary achievement when compared to the Indian average which stands at less than 50 per cent (Das et al., 2015).

Data from National Family Health Survey, India, 2005-06 indicates that nearly 83 per cent of people in HP use government health facilities when they are sick, as compared to only 34 per cent of people in India (Ministry of Health and Family Welfare, India, 2008). This is clear evidence of user satisfaction with the public health system in the state. The reasons can be attributed to the large per-capita expenditure on health by HP, as evidenced in the graph below (Choudhury and Nath, 2012).

Graph showing state-wise per-capita expenditure on health in HP, Haryana, Punjab, Tamil Nadu and Maharashtra. Adapted from Choudhury and Nath, 2012.

Fig. 6 above shows per-capita expenditure on health by HP, Haryana, Punjab, Tamil Nadu and Maharashtra from the years 2006-07 to 2008-09. As is observed here, HP has made the largest per-capita expenditure, which is more than double of its closest competitor, Tamil Nadu. Literature suggests that state policies involving governance of public services like food security has significant effect on reducing poverty (Himanshu, 2013).

Evidence suggests an intergenerational cycle of poverty and malnutrition. Firstly, children suffering from malnutrition face greater health risks and adults. This has a negative impact on their productivity, which is directly linked to poverty. Secondly, malnourished mothers pass on their deficiencies to their children, leading to a cycle (Hunt, 2005).

HP has taken steps to reduce malnutrition in the state through the Integrated Child Development Services (ICDS) scheme. The GoHP has spent significantly more funds than that were allocated by the central government towards the nutrition component under the ICDS scheme (CAG, 2013). The supplementary ICDS scheme of providing nutrition and pre-school education to children is fully functional in HP and absenteeism amongst health workers is relatively low (Das et al., 2015). Fig. 7 below shows that spending on the ICDS scheme has been the most in HP. This has led to a reduction in malnutrition and hence, a reduction in poverty (Himanshu, 2013).

Graph showing spending on ICDS programme per underweight child in HP, Haryana, Punjab, Tamil Nadu and Maharashtra. Adapted from Lokshin, Das Gupta, Gragnolati and Ivaschenko (2005).


Himachal Pradesh has had close to two decades of consistent economic growth. At the same time, it has achieved a significant reduction in the percentage of people living below the poverty line. This has been made possible due to the government’s commitment of improving public education, health and food security. The commitment is evidenced by the state’s consistently large investments on these indicators.

Though, HP started off with poor social indicators, which matched the poorest states in India like Bihar and Uttar Pradesh, it achieved very high improvements overtime. Many economists have cited the case of HP as a success model for the rest of India to emulate. HP is a suitable model to show economic growth leading to poverty reduction through investments in social indicators.

Priyambada Vyas is a scholar at Institute of Development Studies, University of Sussex.
Featured Image Courtesy: Concept Travel

This post first appeared on The Indian Economist | For The Curious Mind, please read the originial post: here

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Himachal Pradesh, growing to prosper


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