Graduate from fighting poverty to combating deprivation

Subir Roy

Senior Economic Analyst

IINDIA’s development efforts so far have been focused on bringing as many people above the poverty line as possible. Defined a couple of decades ago by academic Suresh Tendulkar, the line sought to indicate the minimum consumption needs that would have to be met for a person to be considered to be out of the grip of poverty.

But as the country has been witnessing steady and high overall economic growth since the liberalisation in the 1990s, barring blips caused by demonetisation and the pandemic, there is a feeling that the bar needs to be raised. The minimum needs that a person has to be able to meet in order to not feel deprived must go beyond basic consumption.

As it happens, global thinking has been progressing along similar lines. There is now a felt need to replace the focus on removing extreme poverty with what it takes to empower people so that they can lead meaningful lives and, most importantly, what kind of investment is required to make this possible.

Global consultancy McKinsey has done some number-crunching in this regard. It has sought to outline a pathway for the global economy to move from focusing on the extreme poverty line of $2.15 per day to an empowerment line of $12 per day — the minimum that an individual needs to spend so as to lead a useful life. From focusing on just food, clothing and shelter, now the focus has to be on nutrition, housing, healthcare and education.

To raise the bar for sustainable and inclusive growth, the study estimates that the global economy will have to spend altogether $37 trillion between now and 2030. What is more, this new target of economic empowerment will have to be reached through economic growth in an environmentally friendly manner. Otherwise, some of the fruits of the rapid growth will not have to be spent in raising the quality of people’s lives but in seeking to help them out when they fall victims of extreme weather events like droughts and floods brought about by climate change. Thus, instead of the earlier single focus on removing poverty, the world now must have a dual focus — raise the minimum living standards and limit global warming.

The challenge ahead is for the countries to not just be able to meet the net-zero emission commitments that they have already made but to raise these commitments. But the sobering thought is that the spending plans that countries have so far outlined are not enough to meet the commitments already made, not to speak of raising the bar.

To quantify the task ahead, to achieve the net-zero goal, the global economy will have to spend, according to the report, an additional $47 trillion. If to this one adds the spending needed to achieve empowerment, then one is looking at spending altogether $84 trillion. To achieve this, the world will have to set aside 8 per cent of its GDP every year till 2030.

The good news is that, according to the data from the United Nations Development Programme, 25 countries have been able to halve multidimensional poverty in the last 15 years. However, there is still a long way to go as over a fifth of the 6.1 billion people counted — half of them children — still remain poor.

The other good news is that the goal is not as formidable as it looks in terms of plain numbers. By just following the current policies, the global economy can meet half the spending goals through achievable growth and innovation. But that still leaves a large uncovered gap, 4 per cent of GDP or $40 trillion, which will have to be earned.

Here the focus needs to shift to policy changes that individual countries will have to make in order to bridge the gap. A large part of the burden falls on the shoulders of India’s policymakers as it accounts for not just a substantial part of the global population (it has surpassed China as the most populous country, with a population of 1.4 billion) but also a substantial part of its poor. According to one academic estimate which used the Tendulkar poverty line, in 2019, India had 346 million poor, who made up 20.8 per cent of the population.

The good news is that India can expect to find a sizeable portion of the additional resources that it needs through the rising GDP, empowered by a high growth rate — the highest for a large economy. But the not-so-good news is that it does not seem to focus enough on sustainable growth. A new coalmine will add to the country’s energy supply, the demand for which is growing fast with rising income. But if running the mine means severely damaging the forest cover, then the question that needs answering is: will it be worth it? If environmental concerns are widely ignored, the need to combat the extreme weather events will eat into a lot of the additional income that will be generated.

Here, a heavy responsibility rests on the shoulders of the political leadership. It has to tell the public: true, a new mine will mean more jobs for the local people, but the country as a whole will have to pay a price in the years to come if a whole lot of environmentally unsound projects are adopted. The leadership has to, in particular, resist the pressure created by business interests. More than big businesses, it is pressure from the likes of contractors who see additional orders in new projects and who keep local politicians happy which will have to be resisted.

India’s poor need better nutrition, healthcare and, perhaps most importantly, better education and help in skill development so that successive generations can deliver more productive workers. Hence, it is imperative for the government to spend more on healthcare, education and skill development. This will have to come from policies which promote not just nominal growth but also productivity. And very many more jobs will have to be created to overcome the country’s serious unemployment situation. There is a need to particularly focus on policies to aid small and medium businesses which are able to expand and create jobs more speedily than large enterprises.

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