Poverty Reduction in IndiaJust this May, India was reported to have stepped down in the ranking of the largest number of poor people in one country when Nigeria took its previous place. India has increasingly been acknowledged for its poverty reduction efforts and results in the last 10 years. According to The World Bank, poverty in India has dropped from 38.9 percent to 21.2 percent in less than a decade since 2004.

However, despite the fact that there has been a lot of success in poverty reduction in India, there are still quite a few challenges ahead. This article will first discuss the driving force for success in the past and future strategies for further improvements.

Lessons from the Past—the Urban v. Rural Lens

Poverty reduction in India has been largely consistent with its patterns of economic growth since the 1980s. In other words, as India’s economy picked up its per capita income growth rate from 1.8 percent to 4.3 percent per year in around three decades, the rate of people climbing out of poverty has increased as well.

Before economic reforms of the 1990s, economic growth in rural areas was especially conducive for poverty reduction in India. Compared to growth in the manufacturing sector, growth in the agricultural and service sectors have shown better outcomes in alleviating poverty overall. Urban growth and manufacturing growth did not necessarily benefit the rural poor and its benefits in the urban population were far from consistent.

After the 1990s reforms, the patterns of poverty reduction shifted significantly. Urban growth came to be the key driver of poverty reduction in both urban and rural areas. The agricultural, service, as well as the manufacturing factors all accelerated poverty decline. Ultimately, urban growth is less favorable than rural growth in terms of distributional effects when trying to decrease poverty.

Uneven Growth

Poverty reduction advances at very different paces in different geographical areas in India. States including Kerala are decreasing poverty at a much faster rate than states like Bihar and Rajasthan. More strikingly, one’s gender, social status, and ethnicity are important factors when it comes to getting rid of poverty. Gaps of economic improvement across such identities are significantly wider.

The economic elites are also taking a larger share of economic advancement. Every year, the top 10 percent get more than half of the national income, which has increased significantly from the 1980s when the number was closer to a third. At the same time, the bottom 50 percent take a mere 15 percent.

To be Addressed

While the rate of extreme poverty has dropped, many are still living in “poverty” in India when factors like education and healthcare are considered. Therefore, stronger and more capable state services are in need in order for people’s living standards to continue to improve.

Specific social groups, including women and scheduled tribes, need to have to better access to participation in the country’s economic growth. As historically disadvantaged groups, their advancement will be beneficial to not only themselves but society at large. Participation among these groups needs to be encoraged and facilitated.

Like many countries in East and Southeast Asia, India is also facing an aging population—the workforce will likely shrink, the demand for elderly care will be overwhelming for the nation’s current welfare services, and there will be increasing concerns for poverty among the elderly.

Seemingly, India’s economy will continue to grow at its current rate. In order for India’s economic growth to have a significant impact on reducing poverty, a restructuring and rethinking of economic distribution need to happen. As some studies have shown, what works in urban areas doesn’t necessarily work in rural areas. The nation still has a lot to do to secure the lives of those who only recently struggled out of poverty and to work to bring the rest of its population out of poverty for good.

– Feng Ye
Photo: Flickr

poverty in india
India is redefining poverty. In the latest update from the Former Chairman of the Economic Advisory Council, Chakravarthi Rangarajan, an urban family living on under 47 rupees (78 cents) a day, or a rural family living under 32 rupees (53 cents) a day, would be deemed poor. These values are up from 27 and 33 rupees, respectively, on the definition of poverty in India, and would deem 94 million more Indians as poor. However, the new poverty level is still low compared to the World Bank’s cutoff for extreme poverty: $1.25 a day. The line in India has been criticized many times before, and people have even challenged previous prime ministers to live on less than a dollar a day.

According to the new definition of poverty, 29.5 percent of the Indian population was poor in 2011-2012. The cutoff for poverty in India has never been so high before, but, when applied to past years, it reveals a decrease in the number of Indians living in poverty. In 2010, under the current standard, 38.2 percent of Indians were poor.

In coming up with the new poverty line, Rangarajan’s committee studied government statistics on the ability of households to pay for food that provides the minimum nutrition an individual needs, as well as the ability of individuals to obtain education, health care, housing, electricity, transportation and clothing.

The poverty line is significant because social sector programs are directed toward those who fall below it. But, that might change too. The Rangarajan panel suggested that entitlement to social security programs should be disconnected from poverty ratios. Instead, entitlement to the programs may be better linked to social and caste census. Either way, the new definition will factor into Finance Minister Arun Jaitley’s budget-making.

India’s government released a new budget focused on curbing, borrowing and reviving growth this week. This seems like good news, but critics are not sure how the new spending will reduce the fiscal deficit plaguing the country.

Different parts of the country have dealt with finances differently and to varying results. Recently elected Prime Minister Narendra Modi bragged frequently about the way he ran the state of Gujarat as Chief Minister since 2001 – its per capita income was among India’s highest. But he neglects to include the fact that the state’s poverty rate in 2011-12 was only a little below the national average, and its rural poverty rate was actually higher than the national average. While Gujarat focused on industrialization and ignored welfare programs, the state’s income inequality continued to grow.

Meanwhile, in southern state Kerala, industrialization has fallen by the wayside. But, social indicators are highest in the nation because of the state’s practice of investing heavily in social welfare. Under the new definition of poverty in India, Kerala’s poverty rate in 2011-12 was only 11.3 percent, and only 7.3 percent of the rural population would be considered poor. Because Kerala chose to invest mainly in education and health care, everyone, including the poor, has increased an access to opportunities.

– Rachel Reed

Sources: New York Times, Slate
Photo: Owni