Friday, August 19

Services Sector in India: Does It Contribute to Population Movement and Poverty Reduction?

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By Arup Mitra

Working Paper No- 401

Based on the cross-sectional data this study examines the role of the services sector in the context of migration from the rural to the urban areas. The dominance of the services sector in the urban setup seems to be working as a pull factor.While industrialisation is seen to encourage migration, the three-equation-recursive model estimated in our study clearly brings out the positive role of the services sector in explaining the variations in the migration rate and enhancing the per capita consumption expenditure in the urban areas. Further, our findings confirm that average consumption expenditure reduces urban poverty significantly. The popular belief is that migration transfers rural poverty into the urban domain, polluting the quality of city life. But our results bring out the positive role that migration plays in reducing poverty. This is indeed an important and cost-effective mechanism compared to the direct cash-transfer and employment guarantee programmes adopted in the rural context. At the heart of this entire argument there lies, however, the crucial role that the services sector plays in encouraging migration and reducing poverty

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