Ourview | India’s falling poverty count

Last week, the World Bank released its latest estimates of global poverty that show how the scourge is finally in retreat in all regions of the world despite the financial crisis and the sharp increase in food and fuel prices.

The World Bank estimates global poverty numbers for every three years. The new data provides estimates for 2008, the latest year for which global averages can be calculated because the most recent comparable data for low-income countries is not yet available. Extreme poverty is in decline in South Asia as well.

What about India? The World Bank website provides Indian data for 2010. This data shows that around 67 million Indians were pulled out of poverty in the five years after 2005. But there is also a sobering truth: our poverty headcount ratio --- or the proportion of Indians living below the global poverty line of $1.25 a day, calculated in terms of purchasing power parity dollars at 2005 prices --- is higher than in neighbouring countries such as Pakistan and Nepal. So a lot of work still needs to be done, especially if poverty data is combined with other social indicators such as adequate nutrition and access to public services such as health and education.

The fact that poverty reduction has accelerated over the past five years is especially heartening. Here are the numbers. The headcount ratio fell by 13.87 percentage points over the 24 years between 1981 and 2005. It fell by another 8.97 percentage points in the five subsequent years. At least part of this should be because of the magnificent growth acceleration in the first decade of this century.

There has been heated debate on the impact of economic reforms on poverty, and the statistical trends are undoubtedly mixed. But the success in reducing poverty since 2005 despite a slight increase in inequality does strengthen the case of those who argue that faster economic growth is the best anti-poverty measure. The stunning collapse in Chinese poverty, with an astonishing 660 million pulled out of poverty since 1981, is almost surely a result of its 30-year economic boom.

Faster economic growth is not the only thing that matters. The experience in many Latin American countries in recent years shows that well-run social programmes are also an important part of the attack on poverty. But both the stunning success in China and the faster drop in poverty rates in India since 2005 show that rapid economic growth is perhaps even more important.

There is no long-term trade-off between economic growth and poverty reduction.

Growth or redistribution: what holds the key to removing poverty in India? Tell us at views@livemint.com