Economic policy meets success when it lifts millions out of poverty. By that measure, India is now at the scariest point on the pendulum. In a brutal warning, the World Bank confirmed that the Indian subcontinent may reverse the gains made on poverty over the past two decades. Half of India’s population remains vulnerable, with consumption precariously close to the poverty line, and could slip back into poverty any moment. Thanks to the pandemic-led economic slowdown, we may swing wildly from achievement to failure in a small fraction of time.
Until recently, India was not only a growth superstar, but also saw its poverty rate declining at the fastest pace ever—from 58% in FY12 to 37% in FY18. By one private estimate, just 84 million were poor as of 2017, down from 270 million in 2011. So what’s going wrong? According to the World Bank, the adverse economic impact of the lockdowns was mainly on the informal sector that employs poorer households, which are at the risk of income and job losses.
Globally too, the pandemic is sparing none, having driven about 100 million back into extreme poverty, up from 60 million estimated earlier. Worryingly, the number could rise to even alarming levels if the pandemic drags on. The good news is that countries aren’t entirely powerless, including India, which can avert the damage with necessary government interventions.
While measures for migrants via the Prime Minister Garib Kalyan Yojana (PMGKY) and others are commendable, much more needs to be done for the urban poor. That’s because none of the six national social assistance programs are portable and offer benefits only to state residents. The government should reassess subsidies, borrow capital without fear, generate non-tax revenue to channel more funds towards projects that create jobs and spend meaningfully on healthcare and education. Crises and pandemics are rarely kind to any country and hence the government should walk that extra mile. As they say, poverty, like affluence, becomes its own sort of inheritance and must be avoided at all costs.