India needs to spend 3.77% of GDP to tackle poverty

India needs to spend 3.77% of GDP to tackle poverty
MGNREGS must be beefed up to provide jobs for rural poor, says the International Labour Organization
India needs to spend $61.11 billion a year, or 3.77% of its gross domestic product, to tackle the alarming levels of extreme poverty and rural distress and, simultaneously, beef up the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) to provide guaranteed jobs for the rural poor, International Labour Organization (ILO) director-general Guy Ryder said on Wednesday.

Over 230 million people live below what is called the extreme poverty level, with a daily income of less than $1.90, while 680 million survive below the moderate poverty level of $3.10 a day, in terms of purchasing power parity.

To push people in extreme poverty to moderate levels, India will have to scale up its expenditure on various job generation programmes to the tune of $61.11 billion a year.

“The MGNREGS has had an emblematic value in addressing extreme poverty and needs to be strengthened by the government,” Ryder said. Clearly, the current government needs to continue with the scheme to make a dent in extreme poverty, the ILO director-general said.

MGNREGS was introduced by the previous United Progressive Alliance government in 2005.

At the release of the ILO’s flagship report ‘World Employment and Social Outlook (WESO) 2016—Transforming Jobs to End Poverty’, Ryder reminded the Narendra Modi government that sustained income transfers coupled with social protections schemes, including formalizing “informal labour”, are the pre-requisites for coming to grips with worsening extreme and even moderate poverty.

The ILO’s report estimates that over 36% of the developing world lives in poverty—on a daily income of less than $3.10 in purchasing power parity terms. The report calls on all nations to spend some $600 billion a year—or nearly $10 trillion over 15 years—for eradicating extreme and moderate poverty.

India ranks high among countries with extreme poverty and has to raise, by over 200%, its current levels of spending for people to cross into moderate poverty.

ILO says vulnerable employment in developing countries, where people have jobs but remain unpaid because of lack of social protection, is raising new social tensions, including extremism. Further, the high levels of poverty coupled with income inequality reduce the impact of economic growth on poverty reduction. Several studies have recently debunked the theory that high economic growth eventually contributes to reducing poverty.

At a time when India remains drowned in rural distress and growing extreme poverty due to lack of jobs, the government must devise policies geared towards social protection on a war footing. The “virtues of MGNREGS are many”, said an ILO official.

The scheme has, by assuring a minimum wage, raised the overall income floor in rural areas. The current rural distress, according to the official, is largely due to the substantial reduction of expenditure on MGNREGS which, in turn, reduced the levels of employment. “The situation in India is quite distressful and the government must invest in rural infrastructure,” the official said.

Further, the focus on urban development and urban amenities have worsened living conditions in rural India, the official maintained.

“These are worrying situations and they have to be properly addressed through policies for employment generation in the rural sector,” the official added. The Narendra Modi government must also focus on formalizing employment for the 90% engaged in the informal sector by simplifying procedures, enhancing credit, and other schemes. “...crowding people into the formal economy is a very complex process but it can be done,” Ryder said.