(Any opinions expressed here are those of the author and not those of Thomson Reuters Corp.)
The reaction to news that India’s economy grew at its slowest rate in over a decade was predictable. There was frustration over squandered potential, pleas for a rate cut, unshaken optimism and even an opportunity to indulge in clever wordplay. Yet as everyone from economists to businessmen had their say, the demographic affected most by this slowdown was silent – India’s poor.
One of the big successes of India’s economic growth has been its positive impact on poverty reduction. The percentage of the country’s population living below the poverty line declined from 37.2 percent in 2005 to 29.8 percent in 2010 (the last year when exact numbers were available). That translates to 52 million Indians who have been lifted above the poverty line. Encouraging as those gains are, the country still counts over 320 million poor among its citizens.
Higher economic growth has also correlated with a larger rate of poverty reduction. Between 2005 and 2010, the country’s GDP grew at an average of 8.5 percent and the poverty rate (the proportion of the population below the poverty line) registered an average annual decline of 1.48 percent. In the preceding decade, when GDP growth averaged 6.5 percent, the poverty rate declined at 0.74 percent annually.
If these seem like really small percentages to quibble over, consider this: over the next seven years, India has the opportunity to lift anywhere from 66 million to 160 million people out of poverty (see chart). The difference between the two numbers is that the first assumes a 1 percent annual decline in the poverty rate, while the second assumes a 2 percent decline.