Inclusiveness key to ending poverty

In May 2018, India lost its unfortunate title of being the nation with the largest number of poor people. In fact, India currently boasts one of the fastest rates of poverty reduction in the world, with 44 Indians rising out of poverty every minute. According to a June 2018 Brookings Institute study, less than three per cent of Indians, or 20 million people, will remain in extreme poverty by 2022, and it could be eliminated completely by 2030. 

Much of this success can be attributed to strong and rapid economic growth; and that growth will need to be sustained over the coming decades. However, in order to reach the Sustainable Development Goal of total poverty eradication, India will need to address something much bigger than its GDP. It must transform the array of markets and systems throughout society that consistently exclude the poor and conspire to keep them either in poverty or perpetually on the verge of falling back into it. 

To understand the true plight of the poor in developing countries, we must look at this telling statistic: Anywhere from 10 per cent to 40 per cent of the low-income population emerges from poverty every few years, while 10 per cent to 30 per cent fall back into it over the same period. What this means is that much of the world’s poor are hardworking and industrious enough to lift themselves up, but outside forces are continually knocking them back down.

 

What are these forces? They include health-related emergencies, a death in the family, livestock scourges, and crop failures. Poor families simply don’t have the means to overcome these calamities, which can have an outsized impact on their finances and well-being. But beyond these devastating tragedies are the daily obstacles that poverty presents, from poor sanitation to lack of electricity to unreliable law enforcement to no access to formal financial services.

Governments build systems to support their citizens — keep them healthy, help them succeed financially, provide transportation and education, and make their lives easier. But while these systems are intended to work for everyone, they often don’t work for the poor. Low-income people don't necessarily have the resources to apply for a loan, access medical treatment, use public transportation, pay school fees, or weather bouts of unemployment. The situation is even worse for women and girls, who have fewer employment and educational opportunities than men. Essentially, society’s systems are not built to serve all people equally.

That’s why it’s time to rewrite the rules of good governance, markets, and systems to better serve the poor and ensure they are able to escape poverty permanently. In India, that's exactly what's being done in many aspects of society, including agriculture, education, financial services, sanitation, technology, infrastructure, and regulations. 

Most poor people in India rely on agriculture for their livelihood, so programmes that work to improve crop yields, agricultural practices, and access to markets go a long way toward helping low-income families achieve financial stability and independence. For example, in the Muzaffarpur district in Bihar, a farmer group helps individual producers collectivise and reap the benefits of aggregation by offering training in quality control; information about best practices; and access to packaging, transportation, technology, credit, and high-quality inputs such as seeds and fertilisers. When these farmers were on their own, they often suffered from fixed contract pricing and price volatility. As a group, they have greater power to negotiate prices and reach new markets throughout the country. 

There are about 4.5 billion people living without safe sanitation throughout the world. In India, nearly 40 per cent of people practice open defecation. This leaves a large percentage of Indians to deal with serious health threats that can have a devastating impact on their livelihoods. Because traditional sewage systems are too expensive and unwieldy for semi-urban and rural communities in India, it’s critical to design non-sewered systems that offer a cost-effective, decentralised, and safe solution. 

In Devanahalli, Bengaluru, where 60 per cent of households use onsite sanitation containment systems such as septic tanks and pit latrines, project designers at the Consortium for DEWATS Dissemination (CDD) created a plant that separates liquid from solid waste, treats waste, and produces compost and water that are safe for agricultural use — all without using any electricity. In less than a year, the amount of waste being treated in Devanahalli has increased from zero per cent to 40 per cent. And the plant, which is relatively inexpensive to build and run, has been used as a model by local municipalities and state governments that are looking to make similar investments. 

Lack of access to basic financial services such as savings accounts and business loans is another major problem that keeps people stuck in poverty and unable to overcome financial emergencies. Because of the ubiquity of mobile phones, including among the poor, more and more of the 1.7 billion people who live outside the formal financial system are getting connected to formal financial services like bank accounts, credit, and insurance. 

India has been at the forefront of investing in the technologies and programmes that expand digital financial inclusion. For example, new government regulatory rules are allowing the private sector to create payment banks that offer a wider variety of financial services to the poor. And the government launched a programme called PMJDY in 2014 to help poor people open bank accounts and receive benefits through them. Particular attention is being paid to increasing women's access to and use of financial services, which has been shown to lead to greater empowerment and independence. 

Because of India’s dedication to the goal of eradicating poverty, it has achieved tremendous success over the past decade. Still, there are currently 70.6 million Indians living in extreme poverty, and tens of millions more who are just one emergency away from sinking back into destitution. In order to finish the job and break the cycle of poverty, we need to redesign the critical markets and systems that bring safety, stability, and prosperity to the poor.    

The writer is President of Bill & Melinda Gates Foundation’s Global Growth & Opportunity Division

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel