From Poverty to Empowerment

Extreme poverty is finally in retreat in India, having reached 22% in 2012 – less than half the rate in 1991. But escaping abject destitution, as defined by the official poverty line, is not the same as achieving a decent standard of living.

MUMBAI – As India gears up for its general election next month, it has some cause to celebrate: extreme poverty is finally in retreat. In 2012 – two decades after the government launched a series of economic reforms aimed at opening up the economy – the official poverty rate had reached 22%, less than half the rate in 1994. But it is time for India to raise its aspirations. Escaping abject destitution, though an important milestone, is not the same as achieving a decent standard of living and sense of economic security. To that end, there is still much to be done.

Indeed, the extent of the task is reflected in a new McKinsey Global Institute report, “From Poverty to Empowerment,” which uses an innovative analytical framework, the “empowerment line,” to estimate the cost to the average citizen of fulfilling eight basic needs: food, energy, housing, potable water, sanitation, health care, education, and social security. According to this metric, 56% of Indians in 2012 “lacked the means to meet essential needs.”

Remarkably, this number is more than 2.5 times larger than the number of people still living below the poverty line in India. Even more striking is that the “empowerment gap” – that is, the additional consumption required to bring these 680 million people to the empowerment line – is seven times larger than the cost of eliminating extreme poverty.

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