Analysis

India's Economic Resurgence

- Moving Millions out of Poverty

To say the world is currently witnessing turbulent times is an understatement. Heart-rending violence in Israel, the unending Ukraine war, earthquakes and massive floodings that have caused unprecedented deaths, destruction and misery are fresh on our minds.

The global economic scene is no better and no source of comfort either. For sure, Europe and the US are walking a tightrope between high inflation and recessionary fears. China too has its own laundry list of serious economic problems to worry.

The oversupply of negative news feeds is indeed overwhelming. Amid all this, India offers a completely different perspective. From a relatively stable security environment to a powerful economic resurgence, India appears to be an island of confidence and positivity not seen before.

Known for humongous poverty, crass incompetence and what not, India has turned a page and there is no looking back. With a projected GDP growth at 6.3% this fiscal (India Development Update (IDU), World Bank1), the country continues to be the leading light among large economies.

India has undergone a deep and comprehensive multi-dimensional transformation under the astute stewardship of Prime Minister Modi. And, there is data to back this. 

Attesting these massive changes is a study (National MPI - A Progress Review 20232) by India’s NITI Ayog. Using a global benchmark to measure poverty – Multidimensional Poverty Index or MPI – the study has found that India’s poverty rate has dropped to 14.6%. It reported that 13.5 crore (i.e.,135 million) Indians escaped multidimensional poverty between 2015-16 and 2019-21. 

Further, the study informs that rural India is making significant progress. Rural poverty declined from 32.59% to 19.28%. Fastest poverty reduction was recorded in the states of Uttar Pradesh, Bihar, Madhya Pradesh, Odisha, and Rajasthan. It may be pointed out that these states have been lacking development for several decades.

Moving 135 million people or roughly 40% of the US population out of poverty is no mean achievement by any yardstick. This is significant not only for India but also for global poverty alleviation programs since a large chunk of poor people live in India.  So, when India comes out of poverty, it dents global poverty. 

India’s resurgence comes at a time when we are observing hardships and poverty even in rich nations including the US and the UK. 

Per latest data published by US Census Bureau’s American Community Survey3, nearly 41 million people or 12.6% lived below poverty line in the US in 2022. These numbers are higher than in 2010.

In UK, people in absolute low income increased from 17.2% in 2021/22 to 18.3% in 2023/24, adding 800,000 people into poverty. (Resolution Foundation4)

Other European nations too face economic woes. The IMF5 has pointed out recently that Germany's economy, already hit by high inflation and a slump in manufacturing, is expected to shrink by 0.5% this year. Long term structural problems like an aging society and a consequent shortfall of skilled workers are also likely to impact Germany.

Now that we have poverty numbers for India and UK, it would be tempting to say that the UK is poorer than India in percentage terms. But that may be a hasty conclusion. Given the differing time frames and methodological differences of the cited studies, it may not be appropriate to compare poverty levels in the two countries using data solely from these studies.

For now, as the Indian juggernaut rolls full steam ahead to becoming an economic powerhouse, it has made a silent but profound impact on other nations, particularly the poorer nations of the global South. It is no surprise that many nations, including the African Union are closely following India’s economic progress and seek to emulate it.

India has long been shamed for its ‘Hindu rate of growth’. For many decades after its independence from Britain, many armchair pundits in the West as well as in India, took keen interest in spreading a myth that India will be a perpetual basket case that would never be capable of providing a decent living for its people. True, India’s GDP growth was not much to write home about for a long time.

For several decades India’s stillborn experiments with a socialist model of economic management took it nowhere.  There were no viable results on the ground and most people, except a few influential leaders, knew and understood this quickly. But the nation paid the price with unsustainable poverty.

A cantankerous polity too succeeded in creating a weak and fractious political ecosystem that often worked against India’s self-interest. Consequently, the country often had weak or coalition ruling administrations whose hands were tied when it came to making the correct but politically difficult decision to serve the interest of its poor millions. It had only itself to blame for all its miseries.

But Prime Minister Modi’s arrival changed all that. Hard data and study after study have revealed that a determined government that has a leader with a clear and informed vision and iron clad will to execute that vision can certainly lead the people out of poverty. Most importantly, PM Minister Modi has demonstrated that this can be done in a relatively short period of time.

But India needs to beware of the flip side to this resurgence. Economic success is like a roller coaster where ups and downs are the norm. Policy prescriptions together with numerous other factors like political stability, climate change (e.g. impact of rainfall on crop yield) determine fortunes of nations. Hence today’s success is no guarantee for a continued smooth ride in the future, particularly in a post-Modi India. 

Consolidating the current gains and adopting a nimble policy framework in accordance with the demands of time will ensure India’s continued success in eradicating poverty further. That is a heady task that would hinge on the shoulders of future leaders who succeed Prime Minister Modi. 

For now, nay sayers will continue to belittle or even black out India’s achievements. But for the 13.5 crore Indians, this is sweet progress, as prosperity beckons and unshackles them from poverty forever. 

Reference
1. World Bank retains India's GDP growth at 6.3 % for 2023-24 despite global headwinds (newsonair.gov.in)
2. National Multidimensional Poverty Index- A Progress Review 2023 | United Nations Development Programme (undp.org)
3. Post-pandemic poverty is rising in America’s suburbs | Brookings
4. Poverty in the UK: statistics - House of Commons Library (parliament.uk)
5. Germany headed for deeper recession, IMF says – DW – 10/10/2023

04-Dec-2023

More by :  Naagesh Padmanaban

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