Rural poverty and relative prices in India

Abstract

This paper begins with the observation that there has been a trend decline, albeit small, in rural poverty during 1956-83, but this is obscured by the substantial short-run fluctuations around the trend. It argues that while the trend is attributable to redistributive policies, the short-run fluctuations are adequately explained by the fluctuations in agricultural output and in relative prices of agricultural products vis-a-vis manufactures. In view of the finding that rising relative agricultural prices increase rural poverty, the paper goes on to analyze the process of determination of relative prices. This analysis highlights the characteristics of the inflationary process and the role of agricultural price policy in the Indian economy. Copyright 1989 by Oxford University Press.