A large dent on poverty

A large dent on poverty

Counting India’s poor is an industry in itself. This humble task has led in recent years to a dramatic rise in the number of committees, experts, academic treatises and seminars devoted to the subject. The final number, of course, remains bitterly contested. The tendency is to project upward revisions in the poverty estimates.

A new report from the World Bank and the International Monetary Fund (IMF), Improving the Odds of Achieving the MDGs (Millennium Development Goals): Global Monitoring Report 2011 casts a different, more promising light on the subject. The report notes that the number of poor living below $1.25 per day in India came down from 51.3% of its population in 1990 to 41.6% in 2005. It is expected to reduce even further to 22.4% by 2015. More important in this respect is the $2 per day poverty line. By 2015, this number is expected to come down to 56.9% of the country’s population from 82.6% in 1990. While in absolute terms, this number would still be unconscionably high at 702 million persons, the reduction would still be nothing short of dramatic.

This report notes that globally, “The number of people living on less than $1.25 a day is projected to be 882.7 million in 2015, which is lower than the previous estimate of 918 million. The decline results mainly from data changes for India, which showed a more rapid growth of per capita consumption than previously reported in the national accounts."

There is no doubt that other MDGs related to primary education, gender equality, child mortality and environmental sustainability are important, the key issue is to bring down poverty. Once a dent has been made on that count, it is much easier to effect institutional changes that can improve these outcomes. On that crucial issue, India is well on track.

While these figures should not lead to claims that do not meet the eye, but it certainly is reason to give pause to the wild estimates of poverty that often claim that anywhere from 50% to 77% of Indians are poor.

The key lesson in the report, iterated again and again, is that growth matters. Countries that have policies that promote growth are more likely to achieve MDGs than those who do not. It would be easy to dismiss the validity of this lesson for India by saying that at 8%-plus growth rate, the country does not have to fear anything and instead the focus now ought to be on distributing the fruits. Wrong. Much can still go wrong between now and 2015.

Economic growth today is taking place in spite of an adverse policy framework, not because of it.

Growth or redistribution: what is key to removing poverty? Tell us at views@livemint.com