India needs to fight poverty

Mon, 3 Jun Pre-Open

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Amongst the eight Millennium Development Goals - which range from halting the spread of HIV/AIDS to providing universal primary education - set up by the United Nations, includes halving extreme poverty by 2015. Extreme poverty is considered when people live on less than US$ 1.25 a day. This is one target that was achieved in 2010, five years in advance. In other words, global poverty was cut by half in 20 years.

Seeing this achievement, World Bank's President has set a target of eradicating extreme poverty completely by 2030. But the question remains, would it be as easy as how it was done to reduce the target of the balance 50%.

A comparable example would be that of a company growing from being a small entity to one very large sized firm, when eventually the growth levels slow down. Similarly, reducing poverty by half was possible in the two decades ended 2010. But can the same be replicated over the next twenty years?

A glance into the past

As reported by the Business Insider, there are two broad drivers of reducing poverty - growth and distribution of income. Regions such as China, India and Africa - which have the highest concentration of poor people, have seen very high growth levels since 1990. The higher GDP growth rates, led to more jobs and eventually led to higher consumption (a key indicator of poverty). As per the World Bank, consumption in the developing regions saw a sharp increase post 2000.

China led the way...

China was believed to have the highest proportion of poor people population in 1980. However, in the three decades ended 2010, the country is believed to have lifted nearly 680 m people out of poverty. The poverty rate in the country stands at about 10% now. As reported, China alone contributed to reducing three-fourths of the world's total decline in extreme poverty over the past three decades.

The key question here remains, we believe, that with the developing regions getting used to the new normal growth rates, will it be as easy to replicate the past two decades? It is believed that in 2010, there were nearly 85 m people living at or just below the poverty line (at or below US$ 1.2-1.25 per day). If the decline continues as per trend, the numbers are expected to reduce to 56 m by 2020 and 28 m in 2030.

The focus to fall on India

Given that China's poverty levels have reduced substantially, the focus now comes upon the next biggest regions with high poor people populations - India and Africa. As you would be aware, the growth levels in India have been only deteriorating in the past few years. And there are many debates as to what the new 'normal' growth rates would be going forward.

While growth is one side of it, the other poverty alleviation driver - income inequality - is something that we believe would be something that needs to be tackle for the World Bank President to achieve his target. With statistics such as 5% of the country's people owning two-fifths of the country's assets - one that has been getting worse with time - would only seem to hinder the targets.

At the end of the day, we believe it all boils down to proper implementation and monitoring of the government's efforts towards the poor section. A good distribution system is required to make sure that the efforts earmarked for the poor actually reach them. Not to mention the overall need for better governance. All this would eventually lead to fair and equitable distribution of assets, and eventually lesser number of poverty population.