Saturday, February 22, 2014

Empowerment Line based poverty stands at 56% in India, McKinsey Global Institute (MGI)

McKinsey Global Institute (MGI) has come up with the Empowerment Line (full report here), 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—that are above the bare subsistence level and are essential to  achieve a decent standard of living.

Using this approach, they show that 56% of the population lacked the means to meet essential needs in 2012—about 680 million Indians, which is 2.5 times higher than 270 million people below the official poverty line. 

The study notes that “if India’s recent weak economic performance continues and no major reforms are undertaken, we project that in 2022 more than one-third of the population will remain below the Empowerment Line and that 12 percent will remain trapped in extreme poverty.”

The study also found that Indian households lack access to 46% of the basic services they need and there is wide geographical disparities in the provision of social infrastructure. It comes from their Access Deprivation Score, which shows the availability of basic services at the national, state or district level.

The study recommends four key inclusive reforms/priorities, which if implemented then India can bring 90% of its people above the Empowerment Line in  decade:
  1. Accelerate job creation (Indian needs to add 115 million new nonfarm jobs over the next decade; manufacturing and construction sectors along with labor-intensive services sectors could be the backbone for this)
  2. Raising farm productivity (increase investment in agriculture infrastructure and implement reforms to improve market access, rationalize price support measures, adopt new technology, and streamline agriculture extensive services)
  3. Increasing public spending on basic services (increases in real terms by at least 6.7% annually through 2022)
  4. Making basic services more effective (learn from success stories in basic services delivery in best-performing states; at present half of public spending on basic services does not translate into improved outcomes)