Property rights, efficiency and poverty reduction strategy: a study of some sectors of Indian economy

Abstract

There was a paradigm shift in normative thinking and instruments of developments and poverty in the 1990s. It was recognized that strong institutions and good governance could reduce poverty. Property rights and collective action could enhance anti-poverty effectiveness of growth provided social and civil order was established. They could be used as an integrated set of choices to reduce poverty. Earlier strategies in India were based on institutional change and trickle down theory. They could not achieve economic development with social justice. Inequalities increased over time. It was believed that property rights, access to finance, human capital, regulation and political accountability could lead to poverty reduction and growth. The protagonists of non-market institutional economics believed that when efficient institutional framework for regulation of production system, business process and labour market was designed, assignment of property rights was ensured provided people had the capacity to protect rights. Also formal and informal collective actions were essential. The clear property rights and their enforcement incentivize investment; enhance productivity by efficient allocation of resources. This leads to poverty reduction. To prove this, a comparative study of two states of Bihar and Karnataka with different social cultural environment was undertaken and framework of institutional analysis development of Monica Di Gregorio was used. According to it, people were poor due to their poor asset base; exposure to risks, shocks and vulnerabilities; legal structure and power relations. They provided them action resources, situations which were limited by social norms. The patterns of interaction resulted in structural and direct outcomes of poverty. Analysis of data proved the hypothesis that defined property rights lead to credit access and investment provided constraints to investments and production, and transaction costs were removed. Public goods were provided to support and enhance income of the poor. The policy recommendations were suggested using right-based and result-based approaches in the sectors of land, water, forest, housing and credit was related to all.