Poverty & Inequality

South Asia's bottom half billion

  • Blog Post Date 09 November, 2012
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Ejaz Ghani

Pune International Center


South Asia has more people in extreme poverty than Sub-Saharan Africa. This column asks why such conditions continue in the second fastest growing region in the world. It argues that growth is extremely important and necessary but not sufficient for reducing poverty – policymakers need to combine it with social policies that will provide better education, healthcare, and bring about social change

South Asia is a development paradox. It is the second fastest growing region in the world after East Asia and has attracted global attention for rapid economic growth. India, which accounts for nearly 80% of the regional GDP and is the largest country in the region, is seen as an emerging economic powerhouse. Other countries in the region are also well advanced in the transition from low-income to middle-income status. But this progress doesn’t mask the fact that South Asia is home to the largest concentration of people living in debilitating poverty and social deprivation on the planet.

The geography of poverty has changed over the last two decades. More than 70% of the world´s poor now live not in low-income but in middle-income countries. Indeed, there are more poor people living in South Asia than in Sub-Saharan Africa. This raises two big questions:

  • First, has the pace of poverty reduction kept up with the pace of income growth?
  • Second, has the pace of human development and gender parities kept up with the pace of income growth?

The conventional wisdom is that growth can be sufficient for poverty reduction and social progress. The alternative view is that growth may not be enough in itself and that the growth story tends to be incomplete without improving social indicators like education, health, and women´s participation in economic activities. Which of these two stories is consistent with the reality of India and South Asia?

Growth and poverty

The number of poor people (defined as those living under $1.25 per day) in South Asia increased from 549 million in 1981 to 595 million in 2005. In India, where almost three-quarters of these poor reside, the numbers increased from 420 million in 1981 to 455 million in 2005. South Asia’s poverty rate fell from 60% in 1981 to 40% in 2005. But it did not fall fast enough to reduce the total number of poor people.

So, have poverty trends in South Asia underperformed the global trends? No, South Asia matches the global trend. India, Sri Lanka, and Bangladesh all have poverty reduction precisely in line with what economic growth would predict. But merely matching the global trends may not be enough for a region with the largest concentration of poor people in the world. South Asian countries have not done as well as China, for example.

Why does India lag behind China?

Why has India – with roughly the same population as China – not done as well as China at alleviating poverty? The poverty rate depends on income growth and how it is distributed across people – in other words, inequality. India has experienced slower economic growth relative to China, which partly explains the higher poverty rate.

What about inequality? Both China and India have experienced an increase in inequality, and inequality in China has increased more rapidly than in India. Despite this, China managed to reduce poverty faster than India, because it has grown faster. So fast growth can trump inequality and reduce poverty faster.

Growth and social progress

What about social progress? Has it kept up with the pace of income growth? I compare changes in education, health, and gender outcomes in South Asia, conditional on income growth, with the rest of the world. The story is mixed.

South Asia has experienced an improvement in adult literacy that matches the global norm. However, the region lags behind when it comes to secondary education, which is becoming more relevant than primary education as growth becomes increasingly skill-intensive in the region. Health indicators have not kept up with income growth. Despite unprecedented economic growth, South Asia has the highest rates of malnutrition and the largest numbers of undernourished children in the world. Undernourished children have higher rates of mortality, have lower cognitive ability, and are more likely to drop out of school.

Growth and gender disparities

Over the last 50 years, the role women play in the economy and society has been revolutionised. Around the world, the most striking forms of inequality, which include discrimination against women in access to education, health, employment, political voice, and resources within the household, have been largely reversed. Nevertheless, dramatic gender inequities persist in South Asia.

Boys outnumber girls in school enrolment. Dropout rates for girls across the region are higher than those for boys. Dowry puts pressure on families of girls to marry them early, leading to preference for sons. Legal and judicial systems, as well as law enforcement mechanisms, have failed to address the high incidence of violence against women. Death rates for young girls are much higher than boys – a sure symptom of a general pattern of discrimination against girls. The expectation that girls will grow up to do little other than serve their husbands reduces a parent’s incentive to invest in their daughter´s education and health. These uneducated women then have few alternatives and so the expectation becomes self-fulfilling, leaving women in a continuous circle of neglect. Gender disparities, which begin at childhood in the region, last a lifetime and carry on to the next generation.

Despite strong economic growth, women’s participation in the workforce in the region is among the lowest in the world. In much of the rest of the world, gender disparities in employment are reduced once a nation’s economy grows. But growth in the South Asia region seems to be less gender-inclusive. Indeed, for their stage of development, Pakistan and India have a remarkably low ratio of women in work to men in work.

What should policymakers do?

The paradox of South Asia is that growth has been instrumental in reducing poverty rates, but poverty rates have not fallen fast enough to reduce the total number of poor people. Poverty reduction in India and China, is precisely in line with what economic growth would predict. Although inequality has increased more rapidly in China than in India, China has still managed to reduce poverty faster than India, due to a faster pace of income growth.

So the conventional wisdom that economic growth is very important for poverty reduction is consistent with the facts in South Asia. Growth gives governments the budget and political space for poverty reduction. Supporting economic growth will continue to play an important role in fighting poverty. However, the alternative view that economic growth is not sufficient is also consistent with facts. The South Asian story on social progress – human development and gender disparities – is mixed. Human and social outcomes – education, health, and women´s participation in economic activities – have not kept up with income growth. In this sense, growth may not be adequate.

The biggest conundrum facing the world is that there are more poor people in middle-income countries than in low-income countries. Problems of poverty, human misery, gender disparities, droughts and floods are concentrated in the lagging regions within these countries. Human development, social well- being and gender improvements have not kept up with economic growth. There is a big risk that women may be more vulnerable to poverty traps. Many more women are joining the workforce through the informal sectors. And while informal sectors can be a "stepping stone" for people to go "up the employment ladder" many women find it difficult to climb out of the informal sector, for a number of reasons. Women are less mobile (geographically or in terms of their job opportunities) than men. It is simply easier for men to switch back and forth between informal and formal sector than women. This changes the dynamic of the informal sector and makes it more entrenched and self-reinforcing for women. This problem is also compounded by the fact that often children forgo education to work in the informal sector during their formative years, and education is easier to forgo when there is a business in the household that children are expected to contribute to.

So, while maintaining the growth momentum, policymakers should consider direct policy interventions to accelerate social progress, with a particular focus to gender inclusiveness, lagging regions and informal sectors. Imagine if more girls had gone to school a generation ago, millions of infant deaths could have been averted each year, and tens of millions of families could have been more educated, healthier, and happier.

This column is a summary of the book, ‘The Poor Half Billion in South Asia: What Is Holding Back Lagging Regions?’ published by Oxford University Press. An earlier version of this article appeared on www.VoxEU.org and Project Syndicate.

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