There are two interesting results which emerge from this exercise. First, as Chart 8 shows, the share of rural in total incomes has fallen quite sharply. This is also true for the years for which the figures with 1993-94 as base have been computed. This fall in rural incomes is, however, not just because the share of agricultural incomes in national income have fallen. The second interesting trend is that, the share of non-agricultural incomes in total rural incomes which rose sharply between 1977-78 and 1990-91 has stagnated since then (Chart 9). One reason why rural poverty declined during the 1970s and 1980s was that income earning opportunities in the rural non-agricultural sector, expanded substantially, driven mainly by a large expansion of government expenditure in the rural areas. The reduction in such expenditure during the years of reform has affected that expansion adversely. (Macroscan, February 2000).

Chart 9 >> Click to Enlarge

Chart 10 >> Click to Enlarge

In the event, as Chart 10 shows, the exercise suggests a very sharp slowdown in the growth of per capita rural real output and incomes during the nineties. Such incomes can be measured in two ways: either using the implicit NAS deflators for the composition of rural produced goods and services or by deflating nominal income with the CPIAL as in the poverty calculations. The first method based on the NAS 1980-81 shows a decline in growth rate from 3.1 per cent per annum during the triennium ending (TE) 1980-81 to TE 1990-91 to 1.8 per cent per annum during TE 1990-91 to TE 1997-98. The second method, also based NAS 1980-81 shows an even larger decline, from 3.9 to 1.4 per cent per annum, and indeed shows negligible growth after 1990-91. The pattern is almost identical to that observed for rural real consumption from NSS, as plotted in Chart 2, and thus serves to remove much of the poverty puzzle.
 
Shifting to NAS with base 1993-94 shows higher incomes and higher growth, but, if this is spliced backward to the old series, the result is still a decline in per capita rural income (CPIAL deflated) from 3.9 to 1.5 per cent. An interesting aspect of the revision of CSO National accounts is that the NAS with 1993-94 as base, places the GDP at factor cost in agriculture at Rs. 223148 crore as opposed to Rs. 206322 crore in the old series with 1980-81 as base. In its elaboration of the factors underlying this Rs. 16826 crore increase, the CSO attributes Rs. 13905 crore to an increase in the value of output of fruits, vegetables and floriculture, as a result of a shift in the data source from Directorate of Economics and Statistics, Ministry of Agriculture to the National Horticulture Board. This has obviously meant that the weight of fruits and vegetables in total GDP has changed quite substantially, and this also contributes significantly to the higher estimate of private consumption in the new series.
 
The reliance on the National Horticultural Board's figures has also meant that the rate of growth of fruits and vegetables output is now much higher than the figure yielded by other estimates. Thus, while official index of fruits and vegetables production has risen by about 18 per cent between 1993-94 and 1998-99 and the value of fruits and vegetables output rose by about 14 per cent between 1993-94 and 1996-97 as per the NAS with 1980-81 as base, the 1993-94 series shows a 33 per cent increase for the period 1993-94 and 1997-98. As a result fruits and vegetables are now estimated to account for more than 50 per cent of the increase in total value of crop output during this period. It is this factor which contributes to the substantially higher rise in agricultural GDP in the 1993-94 series when compared with the 1980-81 series, which was noted earlier.
 
It may well be that there has indeed been such massive diversification and increase in the value of fruits and vegetables during the nineties. After all, it is possible that higher urban incomes (which our estimates put, residually, as increasing at over 4.5 per cent in real per capita terms during the 1990s as against only around 2 per cent during the eighties) have boosted demand. But the sheer magnitude of the revision requires re-examination since, if this has indeed happened, fully 23 per cent of crop output is accounted by fruits and vegetables grown in only 4.5 per cent of crop area. If this is not actually the case, then whatever little still remains unexplained in terms of the "puzzle" of higher poverty amidst growth, is likely to lie in the revisions of the national income estimates which have recently been carried out in the NAS.
 
Thus, a careful look at the available data currently suggests the following : the rate of growth of per capita output in real terms in the rural sector has sharply decelerated from 3.1 per cent in the 1980s to 1.8 per cent in the 1990s .This is a result of the combination of a collapse in rural non-agricultural employment and a significant deceleration in agricultural growth other than in the category "fruits and vegetables". The purchasing power of the incomes derived from sales of this output in turn depends upon the relative price indices, and if the price index relevant for the rural poor (CPIAL) is used, then there is no increase in real incomes in the rural sector. Thus, the trends in rural poverty are no longer a puzzle, but reflect the effects in the countryside of macro-economic policies at work .