China’s Poverty lessons for India

Context:  According to a new World Bank report, titled “Poverty and Shared Prosperity 2022: Correcting Course“ that economic upheavals brought on by Covid-19 and later the war in Ukraine” had produced “an outright reversal” in poverty reduction across the planet.

• The pace of poverty reduction had been slowing down anyway since 2015 but the pandemic and war have caused an outright reversal. So much so that the “world is unlikely to meet the goal of ending extreme poverty by 2030.

How can poverty be measured?

• The World Bank (WB) defines extreme poverty by particular consumption level. This is called the poverty line and it is pegged at US$2.15.
• In other words, anyone living on less than $2.15 a day is considered to be living in extreme poverty. About 648 million people globally were in this situation in 2019.
• PPP equivalent of $2.15 is the number of Indian rupees an Indian would need to buy the same basket of goods in India that an American can buy with $2.15 in the US.

What has the World Bank stated about India’s poverty levels?

• According to the WB, India is the country with the highest number of poor people.
• World Bank used the data from the Centre for Monitoring Indian Economy (CMIE), it found that the number of people living in abject poverty increased by 56 million (5.6 crore) in 2020. That’s almost 80% of the total 70 million the world over that the World Bank estimates to have been pushed into poverty in 2020.
• According to the Bank, close to 600 million Indians survive at less than $3.65 (Rs 84) a day level of expenditure.

What did China achieve?

• Intending to provide lessons to other developing countries, the World Bank and China’s Ministry of Finance undertook a study in 2019 to understand what China achieved and how it did it. This study was finally published earlier this year.
• The World Bank found that between 1978 and 2019, China’s poverty headcount dropped from 770 million to 5.5 million people. In other words, China lifted 765 million (76.5 crore) people from extreme poverty in the past four decades
• It means, on average, every year China pulled 19 million (1.9 crore) poor people out of extreme poverty for the past 40 years. In doing so, China accounted for almost 75 per cent of the global reduction in the number of people living in extreme poverty during this period.
• In 2021, China declared that it has eradicated extreme poverty according to the national poverty threshold, lifting 765 million people out of poverty since 1978, and that it has built a “moderately prosperous society in all respects.”
• Decades of progress in China are also reflected in substantial improvements in other measures of well-being.
• Life expectancy at birth went from 66 years in 1978 to 77 years by 2019, and the infant mortality rate dropped from 52 in 1978 to 6.8 per thousand infants in 2019.
• Education achievements in China were also relatively higher than in its peers before 1978 and progressed further since, as the country universalised basic and secondary education.
• Taken together, improvements in health, education, and income over the four decades are reflected in China’s rising position in the Human Development Index from 106 (out of 144 countries) in 1990 to 85 (out of 189 countries) in 2019, and the narrowing of the gaps with other large developing countries

How did China do it?

The main conclusion is that China’s poverty reduction success relied mainly on .

• The first pillar was rapid economic growth, supported by broad-based economic transformation, which provided new economic opportunities for the poor and raised average incomes
• The report states that China’s poverty reduction story is primarily a growth story. But rapid and sustained economic growth was accompanied by a broad-based economic transformation.
• In other words, reforms began in the agricultural sector, where poor people could benefit directly from improvements in productivity associated with the introduction of market incentives.
• Some other areas which led to poverty reduction
  • The development of low-skilled,
  • labour-intensive industries provided a source of employment for workers released from agriculture.
  • Urbanization helped migrants take advantage of the new opportunities in the cities and
  • migrant transfers boosted incomes of their relatives remaining in the villages.
  • Public investment in infrastructure improved living conditions in rural areas but also connected them with urban and export markets,”
• A crucial point to note here from India’s perspective is that reforms were gradual. Reforms in all these areas were incremental, which may have helped businesses and the population adjust to the rapid pace of change.
• The second pillar was government policies to alleviate persistent poverty, which initially targeted areas disadvantaged by geography and a lack of economic opportunities, but subsequently focused on poor households, irrespective of their location.
• Effective governance, which was key to the successful implementation of the growth strategy as well as the evolving set of targeted poverty reduction policies.
• China also benefited from some favourable initial conditions at the time of opening up, such as a relatively high level of human capital which is widely recognised as a critical input for the population to rapidly benefit from new economic opportunities once market reforms set in.

Way Forward:

• Therefore, India can also adopt mentioned areas of improvements while learning form the steps taken by China in order to reduce poverty, However Indian government need to modify these initiative as per the requirement of India.
• It will help in poverty reduction which will represent a better picture of inclusive India which will be free from hunger, poverty and malnutrition.

 Source:  Indian Express