According to a new World Bank report, titled “Poverty and Shared Prosperity 2022: Correcting Course”, the Covid pandemic has been the biggest setback to global poverty alleviation in decades.
“The world is unlikely to meet the goal of ending extreme poverty by 2030 absent history-defying rates of economic growth over the remainder of this decade,” states the report.
What has the report found?
The report states that global poverty reduction has been slowing down since 2015 but the Covid pandemic and the war in Ukraine have completely reversed the outcomes.
By 2015, the global extreme-poverty rate had been cut by more than half. Since then, poverty reduction has slowed in tandem with subdued global economic growth. The economic upheavals brought on by COVID-19 and later the war in Ukraine produced an outright reversal in progress.” (see CHART 1 on Poverty).
As such, the global goal of ending extreme poverty by 2030 would not be achieved.
In 2020 alone, the number of people living below the extreme poverty line rose by over 70 million; the largest one-year increase since global poverty monitoring began in 1990. As a result, an estimated 719 million people subsisted on less than $2.15 a day by the end of 2020.
Inequalities, too, have risen (see CHART 2 on Inequalities). The poorest people bore the steepest costs of the pandemic: income losses averaged 4 per cent for the poorest 40 per cent, double the losses of the wealthiest 20 per cent of the income distribution. Global inequality rose, as a result, for the first time in decades.
Global median income declined by 4 per cent in 2020—the first decline since measurements of median income began in 1990.
What about India’s poverty levels?
Poverty has gone up in India too.
“Previous estimates suggested a poverty headcount rate at the US$1.90 poverty line of 10.4 percent in 2017…The latest estimate based on Sinha Roy and van der Weide (2022) shows that poverty at the US$1.90 poverty line was 13.6 percent in 2017,” finds the report.
However, the report uses data from Centre for Monitoring Indian Economy (CMIE), because there are no official estimates of poverty available since 2011.
“The most recent survey data released by the National Sample Survey Office of India used to measure poverty is the 2011/12 National Sample Survey (NSS). The government decided not to release the 2017/18 NSS round because of concerns about data quality,” it states.
But it could not have left India out of the poverty estimates simply because India is one of the countries with the biggest poor population. “Because of India’s size, the lack of recent survey data for the country significantly affects the measurement of global poverty, as was evident in Poverty and Shared Prosperity 2020.”
It states that given the country’s size and importance for global and regional poverty estimates, the CMIE data helps fill an important gap.
What are the suggested solutions?
According to David Malpass, President World Bank Group, “fiscal policy—prudently used and considering the initial country conditions in terms of fiscal space—does offer opportunities for policy makers in developing economies to step up the fight against poverty and inequality”.
To be sure, the average poverty rate in developing economies would have been 2.4 percentage points higher without a fiscal response. Yet government spending proved far more beneficial to poverty reduction in the wealthiest countries, which generally managed to fully offset Covid-19’s impact on poverty through fiscal policy and other emergency support measures.
Developing economies had fewer resources and therefore spent less and achieved less: upper-middle-income economies offset just 50 per cent of the poverty impact, and low- and lower-middle income economies offset barely a quarter of the impact.
The World Bank has three specific suggestions when it comes to fiscal policy.
1: Choose targeted cash transfers instead of broad subsidies.
2: Prioritize public spending for long-term growth.
3: Mobilize tax revenues without hurting the poor.