Allocative inefficiency and rural poverty in India

The magnitude of rural poverty is larger as compared to urban poverty in India. The basic explanation for sectoral poverty differentiates in India is the misallocation of resources and urban‐biased strategy of development. Investment allocation in Indian planning is not strictly based on the consideration of equity and economic efficiency. The rural sector gets the smaller share of investible resources, and therefore rural income, output and employment fall short of the optimum level, and rural poverty intensifies.