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8th January 2024 (10 Topics)

India’s stubborn income poverty problem


While the decline in multidimensional poverty is positive news, addressing the persistently high levels of income poverty over the past five years is imperative.

Macroeconomic Optimism and Government Recognition

  • Positive Indicators: Optimism surrounds India's economic outlook with a projected GDP growth of 7.3%, booming Sensex, and foreign exchange reserves surpassing $620 billion.
  • Government's Effective Coordination: Credit is given to the RBI Governor, Shaktikanta Das, and the Ministry of Finance for their coordinated efforts, acknowledged with the Governor of the Year award.
  • Political Landscape and Confidence: Despite challenges raised by opposition parties, the Modi government, with renewed confidence, steers forward toward the 2024 parliamentary elections, with potential influence from the Ram temple project.

Economic Performance Analysis

  • GDP Growth and Inflation Metrics: Comparing the UPA and Modi governments over a decade, GDP growth averaged 6.8% under UPA, slightly higher than Modi's 5.8%. Inflation was higher under UPA, emphasizing economic variables.
  • Focus on Poverty Reduction: Evaluating poverty reduction efforts, UPA's decline was faster during its second term, while the Modi government showed a puzzling and concerning slowdown in poverty reduction during its second term.
  • Multidimensional Poverty Measures: While income poverty persists, UNDP's MPI and NITI Aayog's national MPI indicate a significant reduction in multidimensional poverty, emphasizing improvements in health, education, and living standards.

Policy Recommendations for Tackling Income Poverty

  • Income Poverty Challenge: Despite advancements in other poverty measures, income poverty remains stubbornly high, with a minimal decline during the Modi-II period, possibly exacerbated by the impact of COVID-19.
  • Need for Employment-Intensive Growth: Addressing income poverty requires a focus on spurring employment-intensive growth, emphasizing skill formation in rural areas and facilitating transitions to higher productivity jobs in urban areas.
  • Holistic Approach: A holistic approach involves skill development in rural areas, encouraging movement from agriculture to urban jobs, and direct income transfers to the most vulnerable, aiming at sustainable poverty reduction.
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