Mahatma Gandhi, the greatest man of the twentieth century, often talked about poverty. For the prophet of non-violence, poverty was the worst form of violence. Yet, despite paying lip service to his ideals, the United Nations (UN) and its agencies have been unable to eradicate poverty in the seventy-nine years of their existence. The first of the 2030 Sustainable Development Goals (SDGs), adopted unanimously by United Nations Member States in 2015 reads: End poverty in all its forms everywhere.
Paradoxically, globally, extreme poverty has barely fallen since 2015, with 70 crore people, that is around 9 per cent of the world’s population, living in extreme poverty, and 280 crore living in poverty, even today. Poverty reduction gained momentum in 1995, after 186 countries signed the Copenhagen Declaration and Program for Action at the World Summit for Social Development. Heads of State and Government, present at the Summit, reached a consensus to place people, not the economy, at the centre of the concerns for sustainable development.
Participants pledged to eradicate poverty, promote full and productive employment, and foster social integration, to achieve a stable, safe and just society. Consequently, rich countries loosened their purse strings, liberally giving out cheap loans, debt relief and grants to poorer countries, and by 2005 the world’s poorest 72 countries, received funds equivalent to 40 per cent of their budgets, which has, unfortunately, come down to 12 per cent now. Even China’s ‘debt trap’ loans seem to be drying up; from US$ 30 billion in 2012, they were down to US$ 4 billion in 2021. From 1990 to 2014, the world made remarkable progress in reducing extreme poverty, with over one billion people moving out of poverty. The global poverty rate decreased annually, by an average of 1.1 per cent, coming down from 37.8 per cent in 1990 to 11.2 percent in 2014.
Unprecedented economic growth was the main reason for the record poverty reduction during 2000-2014; GDP of poor countries grew by an average 3.7 per cent per year. However, after 2014, factors responsible for rapid growth, viz. free trade, lack of global conflicts and intelligent transfer of cuttingedge technology, slowly lost their impetus, due to escalating global tensions ~ primarily between China and the US. Also, leaders like George Bush, who thought that the West had a moral responsibility to help the poor escape from poverty, were replaced by leaders like Donald Trump, whose vision was limited only to their own country. A combination of these factors slowed down poverty reduction to 0.6 per cent per year, between 2014 and 2019.
Thereafter, during Covid-19, industrial and agricultural production stalled, supply chains came unstuck, and almost all economies ~ developed and developing ~ recorded negative growth. Post-Covid, despite rising interest rates, inflation galloped, squeezing national bud gets, curtailing investment and putting an unimaginable strain on households. To add to the developing world’s woes, climate change became a reality, widespread ad verse climatic events impacted agricultural production, as also the citizens’ day to day existence. Unfortunately, this period also witnessed an increase in the number of conflicts around the world. At the current, reduced rate of poverty amelioration, almost 57.5 crore people will still be desperately poor in 2030.
Geographically, most of the poverty reduction has taken place in East Asia, the Pacific, and South Asia, while Sub-Saharan Africa and conflict-affected areas in Africa, have reported scant progress, with inflation-adjusted income of subSaharan countries still stuck at 1970- levels. Also, consumption remains depressed and household savings have fallen from 18 per cent of GDP in 2015, to just 5 per cent. External factors are also not encouraging; rich countries are diverting aid money meant for poor countries to provide essential facilities to the increasing number of refugees in their own countries; expenditure on climate change mitigation takes care of much of the remainder.
Clearly, developing countries need to get their act together, and generate resources for their development, which would mean eschewing corruption and vote-bank politics that ensu res most of the budget expenditure is on subsidies, grandiose projects, and pay and perks of ministers and civil servants. Presently, developmental economists are feeling frustrated; nothing seems to work to uplift the poor out of their poverty. Probably, investment in social infrastructure may be the solution; with good health and education infrastructure, poor countries can develop the human capital needed to lead them out of poverty. An oft cited example is of India introducing computer education in sch ools, which prepared it to make the maximum out of the IT sector boom of the 2000s.
According to a NITI Aayog Discussion Paper, ‘Multidimensional Poverty in India since 2005-06,’ published in January 2024, India registered a significant decline in multidimensional poverty, from 29.17 per cent in 2013-14 to 11.28 per cent in 2022-23 i.e., a reduction of 17.89 percentage points. The NITI Aayog Discussion Paper was cited by PM Modi, while addressing the Summit of the Future (SOTF) at the United Nations Headquarters in New York, on 23 September 2024. Coming just before the announcement of General Elections, doubts were expressed about the NITI Aayog Discussion Paper. With detailed statistics not being available, economists pointed out that the Niti Aayog analysis was based on summary statistics from the fiveyearly NSO Household Consumption Expenditure Survey (HCES, 2022-23), which was being published after a gap of more than a decade.
Significantly, HCES 2017- 18 was never published, allegedly because it indicated an increase in poverty levels and a decrease in consumer expenditure. The absence of official data, had prompted researchers to estimate the level of poverty in India by using related data sets, such as National Accounts Statistics, Consumer Pyramid Household Survey by CMIE, Periodic Labour Force Survey (PLFS) data, resulting in widely varying estimates of poverty levels. While learned economists may quibble about the extent of poverty in India, one can look at the situation in a different perspective. According to the 2024 Hurun India Rich List, India is home to 1,539 individuals with a net worth of Rs.1,000 crore or more, of which 334 have wealth of more than US$ 1 billion, with 75 individuals entering the billion-dollar club in the current year.
Notably, the wealth of India’s richest person, Gautam Adani showed an increase of 95 per cent during the preceding year, while the average wealth of Indian billionaires increased by 46 per cent. These statistics would suggest that the wealth of the richest 16 Indians is more than the wealth of 6o crore poorest people, and only a very small proportion of the incremental GDP goes to the poor. Thus, in the Indian context, economic growth is necessary, but not sufficient, to drive out poverty. Rather, economic growth needs to be well-rounded, and cover all sections of the population, and all sectors of the economy ~ definitely not growth of the kind that is happening now, which is concentrated in urban centres, and seemingly benefits only the already well-off.
A long-term strategy for economic development would req uire a structural transformation through which workers move to more productive sectors, specifically from agriculture (primary) to manufacturing (secondary) to services (tertiary), but in the interregnum, with better resources at our command, it may be possible to create conditions which make poverty bearable, and provide opportunities for the poor to come out of poverty. Also, the ill-effects of poverty can be mitigated by social safety-net policies which would cover healthcare, education, public services, and public infrastructure.
This growth model was contemplated by Nehruvian planners; fifty years ago, when we were desperately poor, government schools and hospitals were the best in any district, and higher and technical education were almost free, which gave both dignity and opportunity to the poor. Sadly, as of now, the quality of most government schools and hospitals is abysmal, and technical education costs the moon. In conclusion, we have come a long way since the liberalisation of 1991, but much remains to be done; our per capita income has risen eight times to US$2,400, but is still far short of the world average of US$12,500. Also, distribution of wealth is highly skewed; we have islands of wealth in a vast sea of poverty; our economic progress will be meaningful, only if the poor get their due share in the country’s prosperity. As US President Franklin D. Roosevelt had said: The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.
(The writer is a retired Principal Chief Commissioner of Income-Tax)