BackThe world after Millennium Development Goals
India needs to urgently improve its policy mix if it wants to abolish poverty
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In September 2000, 189 members nations of the United Nations came together in the Millennium Summit to chart out an ambitious agenda called the Millennium Development Goals (MDGs)—ranging from reducing poverty to improving access to health and education —to be achieved by 2015. As the world commences the last year of that solemn pledge, the World Bank (WB) and the International Monetary Fund (IMF) have jointly authored the Global Monitoring Report to not only gauge the level of achievement in MDGs but also set out an even more ambitious target for the next 15 years. Both the exercises hold valuable lessons for India as it hopes to radically overhaul its growth and development policies under the Narendra Modi-led government that is politically the best placed to do so since the start of economic reforms in 1991.
On the MDGs front, the achievements are middling. Barring six sub-targets, out of a total of 21, none will be met by the 2015 deadline. However, the ones achieved, especially halving the population living in extreme poverty (ie income less than $1.25 a day), has buoyed the sentiment enough for the WB and IMF to actually expand the next round of targets to be achieved by 2030.
The new targets, christened Sustainable Development Goals (SDG), come under two broad rubrics. One, reducing the proportion of the global population living under extreme poverty to 3%. At present, just five countries, including India, account for three-fifths of the world’s extreme poor. India accounts for half of these poor. Two, promoting shared prosperity by improving living standards of the bottom 40% of the population in every country, including the developed economies. Studies suggest that a one point increase in income inequality (measured by Gini Coefficient) lowers the annual growth per capita gross domestic product by around 0.2 percentage points in advanced economies.
To achieve these goals, the report details three key elements of economic policy. First, greater investment in human capital which includes policies to provide early childhood education, vocational training and improve access to equal opportunities. It is correct that early investments of this nature are critical in breaking the inter-generational transmission of poverty. However, despite several big bang announcements by successive governments in India, primary educational outcomes as well as skilling initiatives leave a lot to be desired.
Second, while the report emphasizes the centrality of growth in removing poverty, it also underlines the importance of prudently providing safety nets to the vulnerable population which will otherwise face significant barriers in raising incomes. Such policies include efforts such as midday meal schemes which incentivize school attendance as well as improve health parameters for children. However, not all subsides are beneficial or efficient and there is no better example than India. Badly designed and blanket subsidies have been found to benefit the richest 20% households six times more than the poorest 20%. India is at a point where technology, especially Aadhaar, has made it possible to radically overhaul the safety nets. And there are several inspiring stories to follow. For instance, in 2005 Indonesia saved $4.5 billion by reducing fuel subsidies and channelled the money into cash transfers to the truly deserving.
Third, and perhaps the most important policy stance for India’s future, relates to making economic growth environmentally sustainable. Overdependence of growth on reckless exploitation of non-renewable natural resources can foreclose future outcomes. Moreover, the resulting environmental damage hits the poorest the hardest. With the “Make in India" initiative there appears to be a national consensus on embarking on a path of manufacturing resurgence. However, there is little consensus or clarity on how to incorporate environmental concerns. Again, there are global examples such as Brazil’s Bolsa Floresta programme that rewards poor families for stopping deforestation.
The year 2015 will be crucial for governments across the world as they embark on achieving the SDGs by 2030. But none would be under greater scrutiny than the Modi government in New Delhi. If it does not make the right decisions now, it may effectively lock the Indian people onto a rather treacherous future. The clock is ticking.
Does India have the policies to meet the Sustainable Development Goals by 2030?
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