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8th January 2024 (10 Topics)

India’s stubborn income poverty problem

Context:

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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