Poverty and Economic Development

As a Western I always related poverty to African countries, until I found out that India actually accounts to more than 1/3 of the total world´s poorest. In fact, India´s population is even larger than the whole African continent.

According to India’s Planning Commission, India’s poverty line is 965 rupees per month ($18usd) in urban areas and at 781 rupees ($16usd) for rural. In a per day basis, this is 32 ($0.64usd) and 26rs ($0.52usd) respectively.

It is estimated, by the way, that 60 to 70% of India´s 1.2billion population lives in rural areas. Just by looking at some shopping tickets I see that one onion costs little less than 2rs and a kilogram of rice in the commodity market quotes at 30rs. So there you have the basic meal for more than 600 million people in this country.

On the other hand, we have the United Nations’ Development Programme that sets a worldwide uniform poverty line at $1.25 USD per day in Purchasing Power Parity terms.  Of course, I guess the guy that sets this poverty lines lives in a mansion somewhere in New York or Switzerland, drives a Bentley and I´m pretty sure he has never been to any rural area of any country at all. Anyway, their chart looks like this:

The interesting fact that is not reflected here is that China and India opened their economies virtually at the same time in the early 90’s. But if you run this chart in Google Public Data Explorer from that time to today, you can see that China brought the poverty level from 60% of their population living in extreme poverty 20 years ago, to 16% in 2005.

In India unfortunately the big chunk of the wealth stays in the higher levels of society. This is where I think the caste system serves its purpose, with predetermined roles and tasks in society that makes it very inflexible for people to escalate socially and economically.

The next chart illustrates the increase of income per capita in both countries (in USD per year). Notice that even before in the 80´s India’s income per capita was slightly larger than in China.

The charts and figures are macroeconomic data, but I wanted to illustrate a real life picture of what cheap uneducated labor in India means. Can you imagine how would the numbers above look like if these people were employed in higher value added jobs, instead of having all them doing a job that one person could do by him/herself?

This is when the time comes to understand in perspective where India is standing in terms of educational development. And since the most valuable resource a nation can have is it’s people, that’s the greatest challenge for India to move into being a super power, that I have no doubt they will be someday. And even if I might be long gone when this consolidates, I’m happy already to know that I was part of contributing to their development:

“No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable…”        – Adam Smith

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Mexican blogger living abroad and writing about experiences of traveling around México, Italy, India and Spain.

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