In India, the poverty rate decreased by about 30% over the period 1975 to 2005, but at the same time the number of people in the country living on less than $1.25 per day increased from 420 million to 450 million. The average Indian income increased significantly as the Indian economy powered ahead, creating great wealth for many people, but the scale of economic development was uneven across the country.
According to one theory, economic activity tends to become concentrated in particular locations, where producers can be close to consumers. The nearness between producers and consumers lowers the cost of transport and makes it easier for producers to monitor consumer preferences. When there is a concentration of customers, economies of scale exist, lowering the costs of production for the producers. Workers are attracted to the area to get jobs, and they become consumers, adding to the demand for the products and increasing the concentration of economic activity.
On the other hand, areas where economic activity is not concentrated tend to lag behind, remaining reliant on subsistence agriculture. People from those areas tend to migrate to the cities in search of higher incomes and better living conditions. Rural incomes can increase as demand for agricultural produce increases, but first investments need to be made in transport infrastructure so that rural producers can sell their produce in the cities at a profit.