In its latest biennial Poverty and Shared Prosperity Report, the World Bank has warned that the Covid-19 pandemic could push between 27-40 million new people into poverty in Sub-Saharan Africa and around 49-57 million in the South Asia region. The newly impoverished will predominantly be urban-dwellers, working within informal services and manufacturing sectors, rather than agriculture. They are also more likely to live in crowded urban environments and be employed in sectors hit hardest by lockdowns and other restrictions on mobility.
Increasing Extreme Poverty
The bank estimates that the pandemic will plunge an added 88 million to 115 million people into extreme poverty in 2021. Depending on the severity of the economic impact, this number could rise to 150 million. This translates to over 1.4% of the worldwide population falling below the extreme poverty line, which is defined as living on less than $1.90 a day. Before the pandemic, global extreme poverty was expected to diminish to 7.9% in 2020. Now, it is projected to ascend to at least 9.2%.
Poverty Hotspots
A majority of the incoming impoverished individuals will originate from countries already struggling high poverty rates, such as those within Sub-Saharan Africa and South Asia. The middle-income countries (MICs) will house around 82% of the total poor. In another alarming statistic, about 132 million of the planet’s poor reside in regions with high risk of flooding, one of the most common and destructive hazards in low-income countries.
Backpedalling Progress
This surge in poverty represents a setback to the progress made between 1990 and 2015, when the extreme poverty rate fell by 26%. Over that quarter-century, we saw poverty rate decrease from nearly 36% to just 10%. In the period between 2012 and 2017, income growth even extended to include the poorest 40% of the population. Today, however, this shared prosperity is in danger of stagnation or even contraction due to falling average incomes.
Influence of Covid-19 on Global Poverty
For the first time in 20 years, global extreme poverty is on the rise. The primary driving factor behind this regression is the disruption caused by Covid-19. This pandemic worsens the impacts of other challenges like conflict and climate change, both of which have already been hindering poverty reduction efforts.
Recommended Strategies
The World Bank proposes a two-track approach that combines short and long-term strategies. In the short run, policy actions are needed to prevent the Covid-19 crisis leading to increased income inequality and a less inclusive world. Preparations for a post-Covid economy should include fostering space for capital, labour, skills, and innovation to move into new businesses and sectors. The long-term strategy must continue examining foundational development issues, including conflict and climate change.
Poverty in India
In India, poverty estimation is conducted by the NITI Aayog’s task force, focusing on consumption expenditure rather than income levels. According to the Global Multidimensional Poverty Index 2020, India managed to lift approximately 270 million people out of multidimensional poverty between 2005-06 and 2015-16. However, the Covid-19 pandemic is now threatening these advancements with studies revealing that average poverty levels will be set back by three to ten years.
Government Measures and Future Prospects
In response to the crisis, the Indian government has enhanced its social safety programs. These include direct benefit transfers such as cash transfers under the PM Kisan scheme, liberal financing under the Mahatma Gandhi National Rural Employment Guarantee Act, and releasing free and subsidised food grains under the Pradhan Mantri Garib Kalyan Yojana. Moreover, a special economic package has been announced to help those adversely affected by the pandemic.
Looking to the future, tackling poverty, especially amidst the backdrop of Covid-19, demands global and regional cooperation in sharing disease information and potential cures. Aid from international financial organizations for developmental and poverty eradication purposes is crucial. At the national level, governments need to implement both the short-term and long-term strategies proposed by the World Bank along with their existing efforts.
