Since there are so many people working in agriculture and living in rural areas, the agricultural sector has (and should have) an unrivaled priority in policies aimed at reducing poverty.
And because there is a simple and straightforward link between rural poverty and agricultural productivity, the end goal is to raise the productivity per person in order to alleviate poverty. As a consequence policies should focus on spurring investment and technological progress.
Okay, that’s the conventional wisdom in approaching rural poverty and in theory there was really no problem viewing it in this way. But India faced new complications with this strategy. Firstly, this kind of reasoning implies many things: to increase productivity, India needed re-distributive land reforms from its traditional system (and the reform was incomplete), then subsidies were needed to cater to poor farmers’ needs for new inputs (better seeds, fertilizers, pesticides, machinery…) and here again the results of the policy were limited.
Worst of all, after the 1991 economic reforms, subsidies actually went down because of the government’s fiscal deficit. And rural poverty subsequently went up, also due to other social safety nets disappearing concurrently. Secondly, the reforms were thwarted by the persistence of the social structure in rural India. Marginalization and exploitation for instance have become part of the system, which resisted land reform and logic of entrepreneurship.
On the bright side, when anti-poverty programs did work, they’ve had a great influence on the social structure and helped people move up the social ladder. The problem is mostly that reforms have been conservative and incomplete while something more direct and “beefy” was needed (no offense to vegetarians).
Consistent poverty reduction in India has failed, especially in largely agricultural states such as Madhya Pradesh and Uttar Pradesh, because investments in rural literacy, education, technology and infrastructure were insubstantial. This explains the structure of the Indian economy: as agriculture evolves, it frees labor for manufacturing and commercial industries, but since this hasn’t happened the country has focused on the services sector instead, which employs far fewer people. And thus rural poverty in India has subsisted up until today while at the same time the services sector accounts for most of the country’s GDP.