The traditional notion that has influenced the development
thinking for almost half a century is that economic growth is
fundamental to the development process, and that the objective of
poverty reduction can only be achieved by allowing the benefits of
growth to ultimately trickle down to the poor. The „primacy of growth‟
paradigm is based on the premise that high growth, through high
investment, would lead to higher employment and higher wages, and
thereby reducing poverty. The „trickle-down‟ paradigm assumes that the
benefits of economic growth would, in the first round, accrue to the
upper income groups, and the ensuing consumption expenditures of these
households would, in subsequent rounds, accrue incomes to relatively
lower income households. Importance of equity consideration in poverty
alleviation efforts has been brought out of the cold and now has
re-entered the mainstream development policy agenda in many developing
countries. This is the consequence of a deep-rooted disillusionment with
the development paradigm which placed exclusive emphasis on the pursuit
of growth. During 1990s, the proliferation of quality data on income
distribution from a number of countries has allowed rigorous empirical
testing of standing debates on the relative importance of growth and
redistribution in poverty reduction. While the debate is still
inconclusive, the majority of development economists emphasised, based
on empirical cross-country data, that an unequal income distribution is
a serious impediment to effective poverty alleviation [Ravallion (1997,
2001)]. Many researchers suggested that growth is, in practice the main
tool for fighting poverty. However, they also reiterated that the
imperative of growth for combating poverty should not be misinterpreted
to mean that “growth is all that matters”. Growth is a necessary
condition for poverty alleviation, no doubt, but inequality also matters
and should also be on the development agenda
Inflation, Growth, and Distribution Nexus in Post-Transition and Emerging Economies of South Asia