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Home > Business > PTI > Report

Poverty rate drops in India: World Bank

T V Parasuram | November 18, 2004 11:21 IST
Last Updated: November 18, 2004 12:02 IST

There was a "spectacular" drop in poverty around the world, more so in developing economies, including India, which grew much faster than the developed world, registering a 6.1 per cent economic growth this year.

According to the World Bank's annual global prospects report, the fastest growing region was East Asia and the Pacific, led by China with 7.8 per cent growth and South Asia led by India with six per cent growth.

The fastest growing individual countries are China (8.8% growth), Russia (8% growth) and India (6%).

"Their performance helped power developing countries as a whole to an anticipated 6.1 per cent growth rate in 2004 - an expansion without precedent over the past 30 years.

"Moreover, it marks a second year of very strong growth, and it may be the first time that recovery in developing countries preceded, rather than followed, recovery in high income countries," the World Bank's 'Global Outlook and the Developing Countries' report said.

Developing country economic performance has been strong since 2002, and this is projected to continue over the next two years and beyond.

This pattern of high growth would in all likelihood lead to a halving of the number of poor in developing countries between 1990 and 2015 - one of the key millennium development goals, the report said.

The rapid growth of developing economies, mostly concentrated in East and South Asia, has produced a spectacular, if not historic fall in poverty that will enable the achievement of the poverty millennium development goals on a global basis, it added.

The number of people living on less than $1 a day was 467 million in 1990 and $32 million in 2000. It is expected to be 268 million in 2015. The percentage of those living on $1 day or less is expected to fall in South Asia from 41.5 per cent in 1990 to 16.4 per cent until 2015, the report said.

There isn't the same progress when it comes to estimating the number of people living on less than $2 a day- 971 million in 2004 to a projected 968 million in 2015.

Progress, it said, is highly uneven across and within countries. The global target, however, will largely be achieved because of the significant progress in poverty reduction in China and India. Sub-Saharan Africa lags behind.

The report also noted that the developing nations are ahead of the developed countries in the pace of recovery. Across the developing world, virtually every region enjoyed solid growth, and rapidly rising trade volumes played an important role.

Economic activity in developing countries is expected to have risen 5 per cent in 2004, even excluding China, India and Russia.

In South Asia, despite the moderation of the Chinese and Organisation for Economic Co-operation and Development economies, growth is expected to accelerate in 2005, reflecting the enduring impacts of structural reforms, market opening and stronger domestic demand as the dampening impact of last year's poor crop fades.

As agricultural production and related incomes return to trend growth rates in 2006, gross domestic product growth is expected to moderate somewhat, the report noted.

Failure to address the twin US deficits (fiscal and trade), the World Bank report said, could have significant impacts on developing countries, especially if that failure leads to an increase in protectionist behaviour.

This is especially relevant because the substantial improvements in living standards, wages and incomes in many upper-lower and middle income countries have been the result of their expanding their world market share in manufactures.

An increase in protection could halt these countries' progress and deny other poor countries the same avenue to development, the report said.

The report warns that should oil prices rise even further, the economies of low income countries are likely to be among the hardest hit.

Oil prices are assured to moderate in the base case, falling from $39 a barrel (for the average of West Texas Intermediate, Brent and Dubai oils) in 2004 to $ 32 in 2006.

However, given supply and geopolitical conditions, there is a real risk that prices will either remain at current levels ($46.8 )n October 2004 for this average--$49.5 for Brent) or rise even further.

In the high growth region-East Asia and South Asia-there are two contrasting patterns. In South Asia the employment in agriculture lifted mostly to services, with a small increase in industrial output.

In East Asia, employment in agriculture shifted more evenly between industry and services.

In India, the numbers suggest that the labour force will grow by about 20 per cent between 2005 and 2015, or about 1.8 per cent per annum. And in each year, about 0.9 per cent of the initial labour force will move across sectors, the report added.

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