India / McKinsey calls for an ‘inclusive reforms’ to reduce poverty

Pursuing an “inclusive reforms” agenda that boosts investments and generates more jobs will help to significantly reduce poverty in India, where over half of the population struggle to meet their essential needs, McKinsey Global Institute (MGI) said today. 

MGI, business and economics research arm of global consultancy major McKinsey & Company, has also projected that India could achieve an economic growth of 7.8 per cent over the next decade provided the country implements inclusive reforms.

“…An economically sound path of ‘inclusive reforms’-one in which India taks steps to stimulate investment, job creation, and farm productivity and to dramatically improve the effectiveness of basic services.

“These reforms could significantly reduce poverty and potentially allow India to achieve an average GDP growth rate of 7.8 per cent between 2012 and 2022,” MGI said in a report tiled ‘From poverty to empowerment: India’s imperative for jobs, growth, and effective basic services’.

Chosen excerpts by Job Market Monitor. Read the whole story at  ‘Inclusive reforms’ key to reduce poverty, says McKinsey | Business Standard.

The Report

 India has made encouraging progress by halving its official poverty rate, from 45 percent of the population in 1994 to 22 percent in 2012. This is an achievement to be celebrated—yet it also gives the nation an opportunity to set higher aspirations. While the official poverty line counts only those living in the most abject conditions, even a cursory scan of India’s human-development indicators suggests more widespread deprivation. Above and beyond the goal of eradicating extreme poverty, India can address these issues and create a new national vision for helping more than half a billion people attain a more economically empowered life.

To realize this vision, policy makers need a more comprehensive benchmark to measure gaps that must be closed and inform the allocation of resources. To this end, the McKinsey Global Institute (MGI) has created the Empowerment Line, an analytical framework that determines the level of consumption required to fulfill eight basic needs—food, energy, housing, drinking water, sanitation, health care, education, and social security—at a level sufficient to achieve a decent standard of living rather than bare subsistence.

In applying this metric to India, we found that in 2012, 56 percent of the population lacked the means to meet essential needs. By this measure, some 680 million Indians experienced deprivation, more than 2.5 times the population of 270 million below the official poverty line. Hundreds of millions have exited extreme poverty but continue to struggle for a modicum of dignity, comfort, and security. The Empowerment Gap, or the additional consumption required to bring these 680 million people to the level of the Empowerment Line, is seven times higher than the cost of eliminating poverty as defined by the official poverty line (exhibit).

Chosen excerpts by Job Market Monitor. Read the whole story at India’s path from poverty to empowerment | McKinsey & Company.

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