A former prime minister of India, Manmohan Singh, once said that his country “happens to be a rich country inhabited by very poor people.” Thanks in no small part to his efforts, the second half of that statement is significantly less true today than at any time in modern Indian history.
A study released earlier this year comes to the extraordinary conclusion that India, the world’s most populous nation, has virtually eliminated extreme poverty, with rates below 1%. In 1977, the rate was 63%. The World Bank sets the line for extreme poverty at $2.15 a day.
The reasons for the dramatic decline are manifold. But the most important changes have empowered individuals by giving them more freedom to shape and seize their own opportunities.
The foundation for the turnaround was the financial reform Mr. Singh led as finance minister in 1991. Since independence in 1947, India had labored under a centralized, socialist economy that required excessive licensing to undertake any economic activity. Entrepreneurship and global thinking were effectively squelched. One economist called the policy a “brew of stale ideology, vested interests, and fear of the unknown.”
Mr. Singh’s bold deregulations became a turning point in Indian history. “If you have a rigidly controlled economy, cut off from the rest of the world by infinite protection, nobody has any incentive to increase productivity and to bring new ideas,” he said.
His reforms “got government off the backs of the people of India, particularly off the backs of India’s entrepreneurs,” he added.
Wrote the Hindustan Times, “It is unlikely even the extreme poverty eradication would have happened had post-reform growth not generated the revenue to launch welfare programs.”
Those poverty-reduction programs, too, have leaned into Indians’ ability to solve their own problems. What is sometimes called “self-help groups” of 10 to 20 women are ubiquitous nationwide. They tackle everything from domestic violence to local hunger. The National Rural Livelihoods Mission supercharged them, leveraging these local ties to attack the sources of poverty.
Much work remains. India’s privileged castes hold a disproportionate share of its wealth. Women are underemployed compared with those in neighboring Bangladesh or Nepal. And India is “home to more billionaires than any other country bar China and the United States, but it has the lowest Human Development Index of all G20 countries,” noted scholars Avinash Chennuri and Kearrin Sims from Australia’s James Cook University in the East Asia Forum.
But the past 30 years have also made the path forward plain. As the freedoms of everyday Indians have risen, so too has their nation.
