India, No Longer a Poverty Posterboy

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According to a World Bank working paper released this week, India more than halved the proportion of its extremely poor people – those earning below $1.9 by purchasing power parity a day – between 2011 and 2019. This would suggest the country is in sight of eradicating an historic scourge.

Similar findings by an earlier International Monetary Fund (IMF) study estimate that taking food subsidy into account, India had almost eliminated extreme poverty by 2020-21, the report said.

Given the scale of the problem at the time of Independence, this is a considerable achievement in two generations. It also coincides with India becoming the world’s fifth-largest economy.

India’s development model has often been charitably described as creaky, and many of its neighbours in Asia have transited to industrial economies in less than a generation, the report said.

Even among its immediate neighbours, India’s per capita income does not stand out. It remains among middle-income countries that are home to over half the world’s poor. Progress in poverty alleviation has also been affected by shocks like demonetisation and the pandemic.

Those aside, the incidence of extreme poverty has been declining faster in villages than in cities. The food subsidy programme has been whittled down to cater to half the urban and two-thirds of the rural population, the report said.

The pandemic is the biggest setback to poverty reduction worldwide and it will stretch out targets for countries like India. Going by the World Bank paper, India could pull the last 10% of its population out of extreme poverty well within a decade.

The IMF study finds consumption inequality in 2020-21 shrank to its lowest level in 40 years because of government intervention that doubled free grain rations to 800 million people during Covid, the report said.

Sharper declines in wage inequality were, however, arrested at the onset of the pandemic in 2019-20.

As the government dials down pandemic-induced food subsidies, poverty reduction will revert to being driven by growth in incomes in the bottom 20% of the population. (Economic Times)