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Inequality and Growth: Conflict or Convergence?  139


             4.18  Experimental  evidence suggests that the maximin  principle  is not how people in the
             “original position” would choose. In experiments in which five or so participants are placed
             in a situation approximating Rawls’ “original position,” most participants do not choose based
             on this distributive principle. Instead, they choose a principle in which the average income
             is maximized with a floor under the incomes of those at the bottom (Frohlich, Oppenheimer,
             and Eavey, 1987). In this view, as long as the poor have “adequate” incomes, an increase in
             the incomes of the rich need not benefit the poor to be considered just. The results of such
             experiments suggest that (absolute) poverty should be of greater concern than inequality.

             4.19  Of course, it is possible that if the incomes of the rich pull too far away from the rest of
             society, growing frustration may lead to rising crime, withdrawal from civic engagement, and
             loss of social cohesion (Krugman 2002). In this context, the evidence provided in Section 2
             above against the conflict between inequality and income per capita among the Indian states
             suggests that at the level of development that India is currently in, the focus on poverty alleviation
             through growth must be central to India’s economic strategy.

             RELATIVE IMPACT OF ECONOMIC GROWTH AND INEQUALITY
             ON POVERTY IN INDIA

             4.20  Given the  above  discussion, which highlights  that  poverty  alleviation  through growth
             must remain the economic focus for India, this section examines whether income per capita
             or inequality impacts poverty the most in India. The correlations between income and poverty
             and inequality and poverty in the Indian states is estimated. To analyse the relationship between
             income and poverty, per capita NSDP (actual series and spliced series) and the official head
             count ratio are plotted (Figure 15-16). The data for four years (1993, 1999, 2004 and 2011)
             suggests an overall strong negative relationship, implying that the states with greater income or
             high per capita NSDP experienced low rates of poverty and vice versa. However, such strong

                       Figure 15: Relationship between income (NSDP per capita at constant prices,
                         non-spliced series (INR)) and poverty (Head count ratio) in Indian states

                        70
                        60
                        50
                      Head Count Ratio  30
                        40

                        20
                        10
                        0
                       -10
                       -20
                          0         20       40        60       80       100       120       140
                                     NSDP per capita at constant prices, non-spliced series (₹, '000)
                                 1993            1999             2004             2011
                    Source: Survey calculations based on MoSPI data on NSDP and official poverty estimates of erstwhile
                    Planning Commission.
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