UMIC LMIC LIC

Transcription

1 USD per capita India: Poverty & Aid India: a big economy with an enormous population and extensive poverty India now has the tenth largest economy in the world, accounting for over 5% of world GDP. But India is also the second most populous country after China, and is the poorest of the BRICS on average per capita income by some way. It ranks 135 th in the world on this measure, with China the next lowest among the BRICs, ranked 92 nd. While India is classified by the World Bank as a middle income country (MIC), having graduated from low-income status in 2007, it remains very near the lower threshold of middle income status. MICs are a wide-ranging group, covering a broad spectrum of development levels. Despite regular comparisons with China, a fellow MIC, India is in a very different development position. China has recently successfully completed its transition through lower middle income to upper middle income status. 1 But India s income levels are around a third of China s. With a rapidly growing population/workforce, growth in national income has outpaced per capita income growth in India in recent years. Trends in India s average income have been closer to Nigeria s than the other BRICS since ,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Figure 2: GNI per capita for India and China & World Bank income group thresholds, Success at eradicating poverty in India is essential for eradicating global poverty India is also only middle income on average: its MIC status masks significant internal disparities and extensive poverty. More than a third of all those living in poverty globally live in India. It has more poor people than any other country, with one-third of its population some 400 million people living on less than US$1.25 a day. India has more than double the number of poor people living in China, the country with the second largest population living in poverty, and a comparable number to the whole of sub- Saharan Africa combined. China UMIC LMIC LIC Figure 1: GNI per capita for India, China and Brazil India

2 The populations of many of India s 35 states and union territories rival those of other large countries. 2 While there are no directly comparable figures with the World Bank s income thresholds, half of these states and territories had average GDP per capita of less than $1,000 a year in 2010/11. These 17 states account for 780 million people, the majority of India s population. Whilst GDP per capita is a measure of average income, inequality means that incomes are lower for a large number of people. The Indian national government sets individual state-level poverty lines, as well as urban and rural poverty lines within each state, and numbers in poverty across Indian states vary considerably, with the highest concentration of poverty in the north east of the country: Bihar, Chhattisgarh and Manipur state in particular. Madhya_ Others, 39% Legend 0% - 10% 10% - 20% 20% - 30% 30% - 40% 40% - 50% 50% + India, 30% DR Congo, China, 14% 4% Bangladesh, 5% Nigeria, 8% Figure 3: Global distribution of people living below $1.25 per day by country. Source: Development Initiatives, based on World Development Indicators The numbers living in poverty in some Indian states rival many countries. To allow comparison between Indian states and other countries we can use the Multidimensional Poverty Indicators, an index that measures non-income measures of poverty. 3 Under this index, four Indian states feature among the top ten locations globally with the highest poverty headcounts Uttar Pradesh, Bihar, West Bengal and Madhya Pradesh, and eleven in the top twenty. There are 120 million people in Uttar Pradesh alone on this poverty measure, second only to China and more than in Bangladesh. Figure 4: Indian states by the proportion of people living below state poverty lines. Source: National Planning Commission of India

3 USD per capita China Uttar Pradesh Bangladesh Nigeria Pakistan Bihar Ethiopia West Bengal Madhya Pradesh Indonesia DR Congo Rajasthan Maharashtra Andhra Pradesh Tanzania Karnataka Orissa Jharkhand Millions of peopeople in multidimensional poverty Gujarat Uganda Aid briefing Figure 5: Distribution of multi-dimensional poverty amongst Indian states and countries of the world, ranked by numbers of multi-dimensional poor. (Source: Multidimensional Poverty Indicators, OPHI) Yet India currently has limited domestic resources Government spending per capita is a useful indicator of the level of domestic resources available for combating poverty, as the government is typically seen as the primary institution responsible for leading interventions to combat poverty amongst its citizens. Government resources in India are low in per capita terms, averaging $350 per person in India ranks 121 st in the world on this measure, and has expenditure equivalent to just over one-third of China s ($995 per capita), and lower than sub-saharan Africa as a whole ($407 per capita). 4 These figures are indicative of a large resource gap in India. 12,000 10,000 8,000 6,000 4,000 2,000 - Brazil South Africa China India Sub-Saharan Africa GNI per capita Government expenditure per capita Figure 6: GNI and government expenditure per capita for India, other BRICs and sub-saharan Africa

4 Aid & related resources to India Over the last two decades India has experienced rapid growth in a range of international resources and receives large volumes of aid, remittances and foreign investment, which all have important roles to play in eradicating poverty. Net ODA to India totalled $2.8 billion in Since the mid-1990s remittances have grown around five-fold to reach $54 billion in 2010, while foreign investment (foreign direct investment and smaller, often shorter-term portfolio investments) grew from $10 billion in 2000 to $65 billion in Other official flows (OOFs), financing from official DAC sources that do not meet ODA criteria, are also significant: India received $5 billion in OOFs in 2010, and is one of the largest recipients of these forms of aid financing ODA FDI Portfolio Equity Remittances OOFs Debt Flows Figure 7: International Resource Flows to India in Figures are USD billions. ODA to India in more detail India is an important recipient of aid and has been one of the top ten country recipients of aid in 16 of the last twenty years. However, while India was the seventh largest single recipient of net ODA over , it was the second lowest recipient of net ODA per poor person, with net ODA of $6 per poor person a year on average over At the other end of the scale, while India and the West Bank both received similar total aid over , with 2,000 people living in poverty in the West Bank (0.04% of its population) this translates to the equivalent of $1.4 million per poor person. Niger Burundi Malawi Iran Chad Pakistan Guinea Brazil Madagascar Venezuela Indonesia Angola Bangladesh Philippines Turkmenistan Nigeria India China US$ (constant 2010 prices) Figure 8: Lowest 20 countries on the basis of net ODA per poor person, $1.25 per day poverty ( average, constant 2010 prices) 88

5 Loans account for the majority of ODA to India Net ODA to India over averaged $2,483 million, although gross ODA over the same period was significantly higher, at $4,328 million. The difference is due to large repayments that India makes to donor countries which have loaned funds to India as part of their aid programmes 5. Over India made an average $1,881 million per annum in loan repayments to donor countries. Evaluating gross ODA gives a picture of the aid resources that are flowing into India. Over % of gross ODA came from DAC donor countries and 31% from multilaterals. Only 27% of this ODA was in the form of grants, with 73% in the form of loans. Thus a large proportion of ODA to India ultimately has to be paid back. The top donors to India are Japan, the UK and IDA Japan was the largest bilateral donor to India over and gave 32% of total gross ODA over the period. The majority of Japan s ODA to India is in the form of loans and gave an average $1.4 billion in loans over , 48% of total ODA loans received by India. Japan has been the largest bilateral donor to India since the early 1990s. The UK was the second largest donor to India over , and gave the largest volume of grants, an average $517 million. India is also the UK s largest recipient of ODA. Germany is the third largest donor to India, and gives a significant volume of both loans ($260 million over ) and grants ($165 million) Japan United Kingdom IDA All other donors Figure 10: Gross ODA disbursements by top 3 donors and all other donors, Technical cooperation and budget support In 2010 India received $112 million of free-standing technical cooperation (TC), including $102 million from DAC donors. Germany is by far the largest donor of Technical Cooperation, providing 50% of total TC to India in , followed by Japan, the UK and France. In 2010 India received $60.4 million of budget support, all from multilateral sources. The vast majority of this support was for two projects an EU-funded basic health project ($35 million) and an IDA project supporting governance reform in Andhra Pradesh ($26 million). 5,000 4,000 3,000 2,000 1, ,000-2,000 2,982 1,382-1,881 Loan repayment Gross Loan Grant Figure 9: Modalities of aid to India, averages

6 Transport & Storage, Energy and Water & Sanitation are the sectors receiving most aid. The sector which received the largest volumes of ODA over was economic infrastructure and services (46% of the total), with transport and storage and energy as the largest sub-sectors. Social infrastructure and services was the second most-funded sector, with the water & sanitation and education sub-sectors receiving the largest volumes. Japan was the largest donor to the economic infrastructure and services sector, whilst IDA was the largest donor to the social infrastructure and services sector. India as a donor India is also a donor itself, although it does not have an official definition of what constitutes development assistance and does not report its activities to the OECD. However, the OECD estimates that ODA-like aid flows from India totalled $639 million in India s Ministry of External Affairs (MEA) estimated that it gave $517 million in development assistance globally in 2009, 7 and assistance is primarily focused within the region, with Bhutan, Afghanistan and Nepal receiving the highest volumes. However other institutions also give development assistance; the Exim bank gives substantial loans to sub-saharan Africa, and there is a Special Commonwealth Assistance for Africa programme. There are also plans to establish an Agency for Partnership in Development to link the key institutions involved in development assistance. 8 Questions for further work Transport & Storage Education Health Population & Reproductive health Water & Sanitation Energy Banking & financial services Agriculture, industry & fishing What do slowing growth rates mean for India s poverty reduction prospects? How do domestic resources at the state level compare across India, and with poverty levels? How can ODA and other financial flows contribute towards meeting the resource gap in India? Other 7% 8% 19% 11% 9% 6% 27% Figure 11: Sector allocable aid to India, based on gross disbursements averages. 9 6% 7% We welcome comments and suggestions: please contact Ian.Townsend@devinit.org These are World Bank income groups, specifically in 2011 (see tables): low income, $1,025 or less; lower middle income, $1,026 to $4,035; upper middle income, $4,036 to $12,475; and high income $12,476 and above. World Bank income grouping are determined using the Atlas measure of PPP exchange rates these are not available at state level. Note: this figure is based on the multidimensional poverty indicators, rather than absolute poverty (below US$1.25 a day) as $1.25 data is not available for Indian states data, of 160 countries. In order to qualify as ODA, loans must meet certain criteria, such as being at least 25% concessional OECD, Statistics on resource flows to developing countries, updated 22 Dec 2011) Derived from Ministry of External Affairs annual reports. Africa-Asia Confidential, New Delhi s Development partnerships August 2010 Other sectors mainly include: multi-sector, environment, government & civil society, business & other services.