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.
New poverty line
- This report documents these trends using new poverty lines based on the 2017 round of International Comparison Program (ICP) price data collected to generate estimates of purchasing power parity (PPP).
- All poverty estimates in this report use the 2017 PPP-based poverty lines. This updated approach changes the specification of the extreme-poverty line from US$1.90 (2011 PPP) to US$2.15 (2017 PPP), as well as the specification of other international poverty lines.
Key highlights of report
- 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.
- 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.
- 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.
- 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.
About India
- 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.
Suggestions
- 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.
- To realize the potential of fiscal measures, the report calls for action on three fronts: 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.
