Measuring efficiency of Indian states for reducing poverty using data envelopment analysis

Abstract

AbstractSustainable development goals adopted by the United Nations in 2015 emphasize on poverty reduction and inclusive growth. In India, development policies focusing on poverty reduction have been implemented since independence. However, there is evidence of rising inequality and slowing down of the rate of poverty reduction, after the introduction of economic reforms. The state governments in India have an important role to play in poverty alleviation. Thus, it is necessary to measure the performance of the states in respect of the same. Data envelopment analysis is used by considering input variables, namely, growth, development expenditure, irrigation, and government performance. Percentage of non‐poor is used as an output variable. This paper measures efficiency with which poverty has been alleviated in 19 states covering 90% population, for the years 2006, 2010, and 2014. Resource‐rich states are found to be inefficient, whereas states with resource scarcity use them efficiently. Moreover, poor states with lower per capita gross domestic product (GDP) are found to be more efficient as compared to those with higher per capita GDP. The states with high incidence of poverty are found to be catching up with states with low incidence of poverty. It is found that inequality and high indebtedness adversely impact the efficiency of states.