CHAPTER \11 SUMMARY OF FINDINGS, CONCLUSION AND SUGGESTION Income distribution in India shows remarkable stability over four and a half decades. Income distribution, as reflected in the distribution of household consumption expenditure, has a close relationship with economic development of nations. The equitable distribution of income among the individuals and households is essential to a nation's welfare' At very low levels of income, inequitable income distribution would be an indicator of wide prevalence of absolute misery and poverty. Even if there is a good income distributions at very low levels of income, poverty may coexist along with income inequality. Hence, good income distribution at higher levels of income can only ensure a higher social development and alleviate poverty. The present study is an attempt to analyse income distribution pattern, income inequality and levels of poverty in rural and urban areas of Tirunelveli district. l'he present study entirely depends on primary data due to non-availability of secondary source of direct data on income and N.S.S. consumer expenditure at district level. Multistage random sampling technique was adopted to select 725 households comprising of 500 from rural areas and 225 samples from urban areas in Tirunelveli district. Personal interview was conducted with a well designed and pretested schedule -,e... - to collect. primary. data relating to annual household income, income,....... -..-. -... LAdelrnan and C.T. Moths, "Economic Groh and Social Equity in - De'eloping Countries", Stanford University Press, California, 1973, p 11 r -.----..-.-.=--- --
191 related household characteristics, difference sources of income and other particulars related to measure poverty. In the foregoing chapters, pattern of income distribution and income I nequality, sources of income, household head characteristics and income inequality and household income and poverty have been discussed. The major findings along With conclusions and suggestions are now presented in this chapter. 7.1 FINDINGS 1. Pattern of Income Distribution The analysis of pattern of income distribution and income inequality in Chapter IV have brought out the following important facts: It is found from the distribution of annual household income that the mean value of income is greater than median value which is also greater than mode in urban, rural and Tirunelveli district. It indicates that the households in the upper end of the distribution pull the mean towards right. Thus it may he concluded from the analysis that the distribution of annual household income in urban, rural and the whole district are positively skewed. The fitting of income distribution models namely log-normal and Pareto functions has resulted in the following important findings.
192 The expected frequencies of log-normal and Pareto fit indicates that Pareto fit shows a better performance than log normal fit for urban area and Tirunelveli district. The expected frequencies fitted with the help of Pareto are closer to observed frequencies of the income distribution. On the other hand the log-normal fit provides the better fit for the distribution of income in the rural area of Tirunelveli district. Thus, it may be concluded from the analysis that the distribution of annual household income follows Pareto Law of income distribution in the urban area and Tiruneveli district. The log-normal is the best fit for rural areas. 2. Degree of Income Equality The extent of income inequality in urban, rural and the district as a whole has been analysed by comparison of income shares of different decile groups of households, Disparity ratio, Centile ratio and Lorenz curves. The decile concentration of households in the urban area shows a wide gap between the top and bottom of the income level. A gradual rise in the income share from the first decile to nineth decile and more than a three fold increase from mneth to tenth decile are found in rural area. It indicates a wide disparity in income distribution in rural area. In the district as a whole, more concentration of income at the upper end of distribution is found. Thus it is inferred from the analysis of decile
193 groups that the inequality in the distribution of income is found similar in urban, rural and the district. The disparity ratios 30:1, 3. ;1 and 1 for urban, rural and the district respectively indicates that the mean income of the wealthiest decile is as high as 30, 32 and 39 times that of poorest decile in urban, rural and district respectively. The measures of centile ratios indicates that the distribution of income in urban area is more unequal in the upper half of the distribution. Whereas in rural area, the inequality in income is found in the upper than in lower end. In the district as a whole, the inequality is found more in the income ranges above the median than in the ranges below the median income. The Lorenz curves drawn for the distribution of income in urban, rural and the district significantly deviates from the line of equal distribution. Thus, it may be concluded that there is a significant degree of income inequality in urban, rural and Tirunelveli district. The comparative analysis of the values of the inequality measures reveals the fact that the inequality is found higher in urban area than in rural area. Gini ratios and Lorenz Curve also clearly spell out the same inference.
194 3. Per Capita Income Inequality Analysis of inequality in the per capita income distribution, shows that the shares of the bottom 10 per cent of the households in rural, urban and the whole of Tirunelveli district in their incomes are 1 18 per cent, 1.08 per cent and 1. 11 per cent respectively. The income shares of the top 10 per cent of households in rural, urban and the district as a whole are 38.87 per cent, 33.61 per cent and 36.42 per cent respectively. The disparity ratios and the Gini coefficient values indicates that there is a considerable degree of inequality in the urban, rural areas as well as in the district as a whole. The urban inequality is higher compared to rural inequality in per capita income distribution. 4. Sources of Income and Income Inequality In order to decompose the total inequality according to different sources of income of households, Pseudo Gini coefficient formula has been used. The various findings of this analysis are summarise as follows: The highest percentage of share in total income is found in respect of salary (43.61 per cent) in urban area followed by non-agricultural income (24.50 per cent). In rural area, the share of agricultural income in total income is found to be high (26.79 per cent) followed by agricultural wages (25.05 per cent). In the district as a
195 whole, the contribution of salary is greater (27.42 per cent) in total income followed by non-agricultural income. The contribution of other sources are negligible. The results of Pseudo analysis reveals that in the urban area, salary makes a very high contribution (21.15 per cent) to the overall inequality followed by nonagricultural income (13.16 per cent). All other sources do not have any significant contribution to the urban inequality. In the rural area, agricultural income makes 18.42 per cent contribution to the total inequality followed by agricultural wages (14.70 per cent). Non-agricultural wages and transfer of income makes a negative contribution of 0.82 per cent and 0.38 per cent respectively in total inequality. In the district as a whole, non-agricultural income contributes 17.85 per cent of the total inequality in Tirunelveli district. The contribution of salary and nonagricultural wages are 15.76 per cent and 11.11 per cent. The agricultural wages and transfer income make negative contribution to the total inequality. Non-agricultural income has a disequalising effect. (le non-agricultural income differences are more in the study area. These differences may be reduced through proper fiscal measures (le direct taxation measures). Agriculture income and transfer income make negative contribution It implies that they are having equalising effect on income distribution.
196 Thus it may be concluded from the analysis that salary in urban area, agricultural income in rural and non-agricultural income, salary and non-agricultural wages in the overall district have a high degree of influencing the disequalizing impact on the distribution of household income. In order to analyse the contribution of household head characteristics to total income inequality in urban rural and the district as a whole, Theil's decomposition analysis has been adopted For this, four characteristics of the heads of households namely age, education, occupation and sector of activity have been chosen. The estimated results of Theil's decomposition indicates that the four characteristics explain 29.27 per cent and 30.74 per cent of the total income inequality for rural and urban area respectively. Occupation difference makes the largest contribution to total inequality followed by difference in sector activity for both rural and urban. Regarding the interaction between two factors, the highest value is found between occupation and activity for both urban and rural area of Tirunelveli district It is also found, that the interaction between age and education, and age and occupation are insignificant Thus, it is concluded from the analysis regarding the direct effect of each of the four factors, occupation influences the most part of the inequality in Tirunelveli district. The two factors interaction namely education and sector activity, shows the highest impact on total inequality. In the case of interaction among these factors, the highest interaction is found among age, education and sector activity.
197 5. Poverty Level in Study Area An analysis of households income and poverty, reveals that in rural area, 68 households are below the poverty line and in urban area, 27 households are below the poverty line. The measures of poverty like Head Count ratio and Income Gap ratio indicates that not much variation is found among rural and urban households. Sen's Poverty measure 'P' is estimated to be 0.1073 for the rural households, 0.1147 for the urban households. The per capita income of the urban households below poverty line is found to be much higher than the per capita income of the rural households living below poverty line. The proportion of households below the poverty line works out to around 12 per cent and 14 per cent in urban and rural households respectively. Income differences among poor households in the urban areas of Tirunelveli district is more than the income differences of poor households in the rural areas of Tirunelveli district. However on the average the income level of the poor households in urban area is better than that in the rural area and also the proportion of the people suffering from poverty in the urban area is smaller than that in the rural area. So policies and programmes are to be aimed at uplifting the poor in the rural areas of the district. A study of the level of poverty with the score range awarded according to poverty index and break even analysis shows that the existence of four rings namely (i) the 'destitutes' with annual family income between Re. I and Rs. 1000 for rural and urban,
198 (ii) the 'very very poor' with annual income between Rs. 1000-1500 for rural and Rs. 1000-2000 for urban, (iii) the 'very poor' with annual flimily income between Rs.1500-2(W and Rs.2000-300() for rural and urban respectively and (iv) the 'riches' among the poor with annual income between Rs.2000-2370 for rural and Rs.3000-4583 for urban. The score ranges below 4, 5-9, 10-14, 15-18 and above 18 have been classified as destitutes, very very poor, very poor and non-poor, in rural areas. In urban, the score values for destilutes, very very poor, very poor and non-poor varies ranges as below 7, 8-11, 12-14, 15-18 and above 18 respectively. The analysis indicates thai 0.9 per cent of the urban and 2.0 per cent of the rural households below the poverty line may be classified as 'very very poor'. 10.2 per cent and 12.0 per cent are 'poor' in rural and urban households respectively. The non-poor forms 83 per cent and 84.4 per cent of the total number of sample households and 17 per cent and 15.6 per cent are below poverty line in rural and urban areas respectively. The comparative analysis of poverty shows that 68 households are below poverty line based on income-based poverty and 85 households are below poverty line based on Index-based analysis. The results of Chi-square test show that the income based poverty line and the index-based poverty lines differ significantly at 5 per cent level. Further, it is inferred that 15 per cent of urban households are living below the poverty line while the incomebased poverty line shows 12 per cent of the sample urban households as living below the poverty line.
7.2 CONCLUSION The present study comes to the following broad conclusions based on its findings. The distribution of income in Tirunelveli district as well as in the rural and urban areas follow Pareto law Various measures of income inequality used in the study namely Decile ratios, Disparity ratios, Centile ratios, Gini Coefficient and Lorenz Curve indicates that there is a significant degree of income inequality in the district as well as in its rural - urban components. Analysis of the per capita income inequality indicates that there is a considerable degree of inequality in the district as well as in rural and urban areas. The urban inequality is higher compared to rural inequality in per capita income distribution. Sources of income and income inequality reveals that salary is the major disequalizing factor in the district as well as in the urban areas. Agriculture income source is the disequalising factor in the rural area. Of the four characteristics of households, occupation influences the most part of the inequality in Tirunelveli district. Occupation difference makes the largest
FM contribution to total inequality followed by difference in sector activity for both rural and urban areas. An analysis of household income and poverty reveals that in Tiruneveli district 12.69 per cent of the population are below poverty line. The corresponding figures for the percentage of population below poverty line as per Planning Commission estimates(1999-2000) fir all India and Tamil Nadu are 26.10 and 21.12 respectively. So compared to the All India and Tamil Nadu figures the percentage of population below poverty line is less in Tirunelveli district. The percentage of population below poverty line in rural and urban areas of Tirunelveli district are 13.6 and 12 respectively. Whereas at the national level 27.09 per cent were below poverty line in rural areas and 23.62 per cent in urban areas in 1999-2000. The incidence of poverty is low in rural and urban areas of Tirunelveli district compared to all India and Tamil Nadu level. 7.3 SUGGESTIONS Any effort aiming at reduction of inequality should be two-pronged with ruralurban discrimination. Emphasis on agricultural development and food security, peasant farming, land distribution and land reforms, support to small and marginal farmers and a large informal sector participating in productive activities and even in exports and human development should be given to reduce income inequality in
201 Tirunelveli distirct. Moreover, subsidies should be doled out to the rural sector to create infrastructure and employment in the country side to reduce inequalities. The solution to the problem of poverty lies in modifying the character of growth, so that it benefits the poor winch is possible by inproving their education, health and nutritional status which are essential to improve their productivity and thereby get higher wages. Growth should be directed along a path so that it generates employment at rising levels of income for the poor, who have nothing else except to sell their labour. In the rural areas, where most of the poor reside, priority has to be given to the development of agriculture which is labour intensive sector. Non-fan" activities in the rural areas need to be expanded.. Further they also provide work to many. The only solution for urban poor is employment with reasonable income. Such employment are to be found only in the informal sector. All efforts are needed to integrate the informal activities in urban areas, providing space and facilities for such activities as well as efforts to upgrade the productivity in the informal sector. Governments' policies and programmes should be oriented towards Human Resource Development virich in turn includes education, health care, nutrition, reduction in infant and maternal mortality rates and social, educational and economic empowerment of women..
202 For improving the living conditions of the people, health insurance.. scheme can be introduced, as the development of such a scheme represents a huge potential for generating the resources necessary to expand the health sector. Access of the poor to housing finance must be enhanced by ensuring that the housing finance are physically accessible to poorer sections of the society. For alleviating rural poverty the service of committed non-governmental organisations and social activities could also be used V