McKinsey Global Institute (MGI) released the report titled From Poverty to Empowerment: India's imperative for jobs, growth and effective basic services on 19 February 2014. The report praising the reduction in poverty in India from 45% in 1994 to 22% in 2014 has suggested for creating a new national vision for economically empowering the people living in poverty.
For realizing the vision, McKinsey Global Institute (MGI) has created the Empowerment Line. The Empowerment Line is 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.
The Main highlights of the report based on Empowerment Line
• In 2012, 56 percent of the population lacked the means to meet essential needs that is, some 680 million Indians experienced deprivation.
• 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.
• Indian households, on average, lack access to 46 percent of the basic services they need, and it identifies wide geographic disparities in the availability of social infrastructure.
• Job creation and productivity gains have historically been the most powerful forces for improving living standards—and India is in need of deep reforms that can encourage businesses to invest, scale up, and hire.
• 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 if no major reforms are undertaken.
MGI’s research outlines a more ambitious yet economically sound path of inclusive reforms, which could lift 580 million people above the Empowerment Line by 2022, while virtually eliminating extreme poverty.
Accelerating job creation
India needs to add 115 million new non-farm jobs over the next decade to accommodate a growing population and reduce agriculture’s overall share in employment.
Raising farm productivity.
Increasing investment in agricultural infrastructure and implementing reforms to improve market access, rationalize price supports, expand the adoption of new technologies, and streamline agricultural administration and extension services can help to achieve annual yield growth of 5.5 percent. This would bring India’s yields into line with those in other emerging Asian countries by 2022.
Increasing public spending on basic services
To fill the most critical gaps, public spending on basic services would need to grow in real terms by about 6.7 percent annually through 2022.
The fiscal resources will be available if India can achieve faster GDP growth. The share allocated to health care, water, and sanitation, however, needs to double.
Making basic services more effective
Half of India’s current public spending on basic services does not translate into improved outcomes for the poor. By 2022, however, that spending can become 50 percent more effective if the nation as a whole matches the standards already set by the best-performing states.
Some of the most promising strategies include forming partnerships with the private and social sectors, mobilizing community participation, and using technology to streamline and monitor operations.
About McKinsey Global Institute
The McKinsey Global Institute (MGI), the business and economics research arm of McKinsey, was established in 1990 to develop a deeper understanding of the evolving global economy. Our goal is to provide leaders in the commercial, public, and social sectors with the facts and insights on which to base management and policy decisions.
When: 19 February 2014