India is uniquely placed to drive global poverty reduction. India is home to 26% of the global extreme poor, the largest number of poor people in the world, as well as the largest number of people who have recently escaped poverty. Despite an emerging middle class, many of India’s people are still vulnerable to falling back into poverty.
This means that the world’s ability to end extreme poverty by 2030, an objective originally adopted by the World Bank and now a key element of the Sustainable Development Goals rests on India’s ability to make strong and sustained inroads in reducing poverty.
After 1991 economic reforms, per capita income grew nearly two-and-a-half times in real terms compared to the preceding three-and-a-half decades from 1.8% per year to 4.3% per year. India is now among the fastest-growing economies in the world.
Five key requirements for sustainable poverty reduction and shared prosperity in India going forward:
1) Accelerating rural poverty reduction:
With four out of every five of India’s poor living in rural areas, progress will need to focus on the rural poor. Capitalizing on growing connectivity between rural and urban areas, and between the agriculture, industry and services sectors, has been effective in the past two decades and holds promise for the future.
2) Creating more and better jobs:
The road out of poverty in India has been built on the performance of the labour market, but also benefitted from rising transfers and remittances, and favourable demographics among other factors. Future efforts will need to address job creation in more productive sectors, which has until now been tepid and has yielded few salaried jobs that offer stability and security.
3) Focusing on women and Scheduled Tribes:
Two of the most worrying trends are the low participation of women in the labour market and the slow progress among Scheduled Tribes. India today ranks last among BRICS countries, and close to the bottom in South Asia in female labour force participation. Scheduled Tribes started with the highest poverty rates of all of India’s social groups, and have progressed more slowly than the rest.
4) Creating more ‘good’ locations:
More and more of India’s poor are concentrated in the poorest states, and even within relatively prosperous states, certain pockets of deprivation persist where people are unable to share in the state’s successes.
5) Improving human development outcomes for the poor:
This is central to improving their quality of life and income-earning opportunities. We cannot continue to assume that rapid economic growth will automatically translate into better human development outcomes. The recent past shows that some problems, such as undernutrition and open defecation, are endemic and not confined to the poor, and have not improved with economic growth.