Poverty Reduction and Inclusion in Central and South Asia

Abstract

The concept of poverty evolved over time moving beyond the confines of income to non-income dimensions consisting of the concept of vulnerability and inclusion. The present chapter is an attempt to briefly look into how poverty can be eradicated through addressing exclusion so that no one is left behind—the pledge of 2030 Agenda for Sustainable Development. The chapter is organized in five sections. Section 9.1 is an introductory one that sketches background for a much broader discussion in the latter sections. Section 9.2 presents the income and multidimensional poverty status which provides a basis for Sect. 9.3 to further explain the deprivation in water, energy, food, and their relationship with the multidimensional poverty. Section 9.4 advances social exclusion as the driver of inequality. Finally, some policy suggestions are advanced on how poverty can be addressed through promoting inclusion. The central message of the chapter is that Central and South Asia have been making significant progress on poverty reduction over time. However, vulnerability and inequality are rising in most countries of the two sub-regions. This is mainly due to exclusion. Therefore, measures should be adopted to promote inclusion and to share the gains fairly across all population groups. This requires reforming existing policies, introducing new policies and legislations, as well as implementing effectively redistributive policies with a reform in existing fiscal policy, wage policy, in addition to making social protection inclusive and shock responsive.

1 Introduction

1.1 Justification and Framework

Poverty is a complex, multidimensional phenomenon encompassing both income and non-income deprivations. Apart from paucity of income, various non-income deprivations that can affect people’s well-being are inadequate education, lack of health care, low-quality housing, lack of water, sanitation and energy, or working in a hazardous environment (Tiwari 2020b).

The concept of poverty evolved over time moving beyond the original focus on income poverty. Although income continues to be a widely used poverty measure, it cannot truly reflect people’s well-being and happiness. Monetary measures are therefore not enough to guide policies to eradicate poverty as envisaged by Sustainable Development Goals (SDGs), in particular SDG 1 on ending all forms of poverty everywhere (Tiwari 2020b).

Poverty and vulnerability remain a stark reality in the Central and South Asian region. With modest economic growth, the two sub-regions have made progress on poverty reduction and human development. However, they are nonetheless highly vulnerable. A larger proportion of people are living just above the poverty line, therefore, a shock can push them back into poverty.

Exclusion and discrimination still prevail (Senapati 2021; Thapa et al. 2021; Tiwari 2010a). This situation constrains achieving SDG 1 of ‘No Poverty’. Still tens of millions of people are devoid of drinking water, energy, food in world, and a large proportion of them live in South Asia and some in Central Asia. These are generally the population groups which are left behind and are excluded on various grounds such as belonging to certain castes and races or being a woman. The exclusion makes them vulnerable to any shock including rising health threats like COVID-19. Promoting inclusion and improving their access to basic services including water, energy and food is therefore necessary for eradicating all forms of poverty, as well as contributing to the achievement of the SDGs.

1.2 Objectives and Methods

The chapter presents status of income and non-income deprivations with the objective of assessing how inclusion can be an effective approach for removing disparities, and eradicating poverty. In order to fulfill the objective, the chapter uses poverty and inequality data of the World Bank, multidimensional poverty data of United Nations Development Programme (UNDP), and the Oxford Poverty and Human Development Initiative (OPHI). It also draws on several other secondary literature to build its arguments and to draw policy implications.

1.3 Chapter Outline

The chapter is divided into five sections. Following this introductory section, Sect. 9.2 presents the status of income or consumption-based poverty, as well as multidimensional poverty and human development.¹ This description provides a good basis for leading the discussion of Sect. 9.3 which focuses on the deprivation of water, energy, and food. Section 9.4 advances social exclusion as the driver of inequality, building on which the final section ends with some policy implications.

2 Poverty and Inclusion: Status and Trends

This section explains the status and trends of both monetary and non-monetary or multidimensional poverty. It presents deprivations at sub-regional and country levels. But before moving on to this, it briefly outlines human development status and trends.

2.1 Human Development Status and Trends

Human development is the expansion of freedom and choices of people. The concept builds on Amartya Sen’s Capability approach (Sen 1980; Alkire 2010). UNDP has advanced several indices to measure it, chief among them is the Human Development Index (HDI). HDI is a summary measure of achievements in three key dimensions of human development: a long and healthy life, access to knowledge and a decent standard of living. The 2020 Human Development Report (HDR) presents HDI ranking of 189 countries including 5 countries of Central Asia and 8 countries of South Asia for the year 2019 (UNDP 2020a).²

The status of human development varies widely across the 13 countries of Central and South Asia. This is evident from their ranks and values. In terms of HDI ranking, Kazakhstan stands at the 51st, with Afghanistan at the 169th position out of 189 countries and territories.³ In terms of HDI value, Kazakhstan lies in the Very High Human Development Group, and all other countries have high or medium levels of development, excluding Afghanistan which is in the Low Human Development Group. Two of the four countries belonging to the High Human Development category are also from South Asia (Table 9.1). On the whole, Central Asian countries have a higher level of human development, and South Asian countries are making faster progress.

Table 9.1 Human Development Index trends, 1990–2019

2.2 Current Status of Poverty and Vulnerability

The HDI depicts country level development status, whereas poverty reflects individual’s deprivations. A negative association appears between the two measures across countries. Central Asia has a higher level of human development and lower poverty than South Asia.

The World Bank had devised three poverty lines—$1.9, $3.2 and $5.5 a day—for measuring monetary poverty in low income, lower middle income, and upper middle-income countries, respectively. Extreme poverty (PPP$1.9 a day poverty) is low in Central and South Asia. It ranges from no poverty in Kazakhstan to as high as 11.8% in Uzbekistan, 8.7% in India, and 7.7% in Bangladesh.⁴ The aggregate poverty rate in the two sub-regions is 7.2% (Fig. 9.1).⁵

Fig. 9.1

Source World Bank PovcalNet. Last accessed 30 December 2020. Poverty rate for Afghanistan is not available

Poverty headcounts (%) in Central and South Asian Countries, in 2018.

Using a poverty line of $3.2 seems to be more appropriate to measure poverty, as most countries are lower middle-income countries in the two sub-regions. At this threshold, the poverty incidence ranges between 0.3% in Kazakhstan to as high as 41.4% in India, 41.3% in Uzbekistan and 40.1% in Bangladesh (Fig. 9.1). Altogether, 708.2 million live below $3.2 a day; of which 560.5 million or four-fifths (79.2%) are in India alone. When three other South Asian countries (Bangladesh, Nepal, and Pakistan) are included, South Asia becomes home to almost all the impoverished people in the two sub-regions, implying that eradicating income poverty requires a special focus in South Asia.

South Asia is more vulnerable than Central Asia because a large share of the population is living just above the poverty threshold. When the threshold is raised from $3.2 to $5.5 a day, the aggregate poverty rate jumps from 36.7 to 71.9% in the two sub-regions (Fig. 9.1). Thus, 35.2% or 680.7 million people are living between $3.2 and $5.5 a day in the two sub-regions. Out of them as many as 661.3 million people are in South Asia and 19.4 million are in Central Asia. However, that does not mean that Central Asia is not vulnerable. The following section shows an increase in poverty in the past before setting to decrease.

2.3 Trends of Income Poverty

Central and South Asia reduced poverty significantly during 1990–2018. In total, the proportion of people living below $3.2 a day decreased from 64.7 to 36.7%. However, the decreasing trends differ between the two sub-regions.

The number of people living in poverty in Central Asia first doubled in 2000 from 1990 (67.2% vs. 33.2%), and then subsequently declined, reaching 22.2% in 2018. Unlike Central Asia, South Asia has consistent falling pattern. Overall, poverty decreased from 69.9 to 37.2% between 1990 and 2018; however, poverty occurs at a much higher rate than Central Asia. Out of all countries, Bhutan recorded the fastest decrease by 66.8% points (PP) followed by Pakistan (61.4PP), Nepal (57.7PP), India, (41.3PP), and Bangladesh (39.7PP) (Figs. 9.2 and 9.3).

Fig. 9.2

Source World Bank PovcalNet. Last accessed 30 December 2020

Poverty trends (%) in Central Asian Countries from 1990 to 2018 (PPP$3.2/day).

Fig. 9.3

Source World Bank PovcalNet. Last accessed 30 December 2020

Poverty trends (%) in South Asian Countries from 1990 to 2018 (PPP$3.2/day).

2.4 Multidimensional Poverty

UNDP and OPHI launched multidimensional poverty index (MPI) in the 2010 Human Development Report to measure multidimensional poverty across countries. Several countries have subsequently adapted the MPI to their national context. Thus, there are two versions of MPI: global MPI and national MPI. While the definition and measurement of national MPI varies across countries, the global MPI is measured using a fixed set of 10 indicators in three dimensions: health, education, and standards of living (Tiwari 2020a). The 10 indicators are nutrition, child mortality, years of schooling, school attendance, drinking water, sanitation, cooking fuels, electricity, housing, and assets.

The MPI has two components: headcount and intensity. The headcount is the proportion of multidimensional poor who are deprived in one-third or more of the 10 (weighted) indicators. Intensity is the proportion of indicators in which poor people are deprived (Tiwari 2020b). Thus, MPI adjusts multidimensional poverty headcount with the intensity of poverty. The following section presents global MPI in order to facilitate country comparison.

2.4.1 Status of Multidimensional Poverty

Global multidimensional poverty is measured using data from national household surveys such as Demographic Health Survey and Multiple Indicators Cluster Survey. These surveys are rolled out in different years for different countries; therefore, it becomes difficult to provide MPI results for all countries for the same year. However, as most countries of the two sub-regions have MPI poverty headcount between 2015/2016 and 2017/2018, they have been compared here.⁶

A comparison shows that poverty headcount is highest in Afghanistan (64.1%) and lowest in Kazakhstan (0.5%). India shares the largest proportion of the world’s multidimensional poor, where 27.9% of its population are poor (Fig. 9.4).

Fig. 9.4

Source UNDP and OPHI (2020)

Multidimensional poverty headcount in countries (%).

2.4.2 Trends of Multidimensional Poverty

The trend of multidimensional poverty headcount is available for 9 out of 13 countries of Central and South Asia. The average annual reduction between the two survey years is higher in South Asian countries than Central Asian countries. Excluding Pakistan, the four South Asian countries have annual reduction between 2.4 and 2.7%, whereas the annual reduction in Central Asian countries ranges between 0.1% in Kazakhstan to 1.0% in Tajikistan. Average annual reduction of the multidimensional poverty headcount ranges between 0.1% points in Kazakhstan and 2.7% points in Bangladesh, India, and Nepal (Table 9.2).⁷

Table 9.2 Trend of multidimensional poverty headcount

In summary, Central Asia has a better status than South Asia both in terms of human development and poverty incidence. Between the two sub-regions, South Asia is home to most of the poor. This is also because it has a much larger population apart from higher poverty rate. However, South Asia is progressing faster than Central Asia, which is evident from the rapid decrease in poverty, as well as increase in human development.

At the country level, Kazakhstan has highest level of human development and Afghanistan has lowest across the countries of two sub-regions. Conversely, Kazakhstan has the lowest multidimensional poverty and Afghanistan has the highest poverty incidence. Within Central Asia, Uzbekistan has the lowest human development and highest poverty rate.

3 Linkage Between Water-Energy-Food Nexus and Poverty

3.1 Water, Energy, and Food Deprivation: Components of Multidimensional Poverty

Food, drinking water, and energy are basic human needs and are essential for survival. South Asian countries lack adequate access to these basic needs despite the sub-region having achieved higher economic growth and human development than Central Asia. The subregion remains a global hotspot for poverty, hunger, and other deprivations. This is evident from the status of the MPI which consists of food, drinking water, and energy related indicators. Out of the ten MPI indicators, four are related to food, water, and energy.

A positive association appears between the deprivation in food, energy, and water and the multidimensional poverty rate. Multidimensional poverty is generally higher in South Asian countries; and is highest in Afghanistan, followed by Pakistan, Nepal, India, and Bangladesh. These are also countries where deprivation of food, water, and energy is higher. More than 27% of population are undernourished in Nepal and Pakistan, and almost 21% in India. They also have higher deprivation in drinking water and energy. Of the four countries where multidimensional poverty is higher, Afghanistan is the most deprived where more than 30% of people are deprived of drinking water and 24% are deprived of electricity (Table 9.3). The high correlation of deprivation in nutrition, water and energy with the multidimensional poverty head count, implies that improving access to these services could decrease poverty in these countries.

Table 9.3 Percentage of people who are poor and deprived in food, water, and energy

Low human development status persists among the excluded population groups including women, and growing inequality is the result of economic growth that has excluded much of the population. Gender inequality in South Asia is of prominent concern although the situation is improving over time. Millennium Development Goals (MDGs) have played a significant role in enhancing gender parity in primary school; however, gender differences are still high in the higher levels of education. Moreover, a wide wage gap prevails by gender with higher positions in various occupations mainly held by men.

3.2 Impact of COVID-19 on Poverty

UNDP and the World Bank have projected that COVID-19 will increase both income and multidimensional poverty, as well as exclusion and inequality. As presented in the preceding section, inadequate access to food, water and energy can further amplify deprivation and increase poverty.

A 2020 UNDP study conducted with the Pardee Center for International Futures assessed the potential negative impacts of COVID-19 by 2030 under ‘baseline’ and ‘high damage’ scenario. The estimated number of new extreme poor due to COVID-19 ranges between 44 and 251 million in the world. However, the study also finds that a focused set of SDG investments over the next decade in social protection, governance, digitalization, and a green economy could prevent the rise of extreme poverty. The SDG interventions suggested by the study combine behavioral changes by both governments and citizens, such as improved effectiveness and efficiency in governance and changes in consumption patterns of food, energy, and water (UNDP 2020b).

Using January 2021 forecasts of economic growth, the World Bank expects that COVID-19-induced new poor in 2020 will rise between 119 and 124 million. This range of estimates is in line with other estimates based on alternative recent growth forecasts (Lakner et al. 2021).⁸

Apart from income poverty, the COVID-19 pandemic has threatened the progress in reducing multidimensional poverty. A substantial rise in multidimensional poverty is anticipated through two multidimensional poverty indicators that are being severely affected by the pandemic—nutrition, and school attendance of children. With a prolonged crisis it is likely that children from vulnerable households will be out of school and/or become undernourished due to lack of adequate nutrition. This could push those households into multidimensional poverty.

4 Drivers of Poverty: Social Exclusion and Horizontal Inequality

People are deprived for various reasons including social exclusion and horizontal inequality. Horizontal or group-based inequality refers to the situation when certain population groups are excluded from access to services and/or income earning opportunities, leading to differences in outcomes. The differences in outcome further perpetuate the differences in access to opportunities, thus keeping the horizontal inequality spiral rolling. Perpetuation of inequality is due to power dynamics. Those who are in power intend to maintain the status-quo, always leaving the excluded groups behind (Stewart 2002; Tiwari 2010b; Tiwari et al. 2009; UNDP 2019). Social and cultural factors very often create such an exclusion resulting into horizontal inequality, which is manifested in political and economic dimensions. The lack of participation of the poor and their exclusion in the political system perpetuates the inequality and exclusion.

UNESCAP (2018) used three broad types of inequality: inequality of outcome, inequality of opportunity and inequality of impact. It measured inequality of opportunity through computing ‘Dissimilarity Indices’ for the five sub-regions of Asia-Pacific including Central, and South Asia using 15 individual or household-based opportunities critical for human well-being.

Some of the highest overall values on the dissimilarity index are found in countries of South and South-West Asia. The countries that stand out as particularly unequal in a wide range of opportunities are Afghanistan, Bangladesh, and India. The opportunities that appeared as most unequally distributed are household access to clean fuels, individual’s attainment of secondary and higher education, and household access to a bank account. On the other hand, access to safe drinking water and household access to a mobile phone are the most equally distributed opportunities. Compared to South Asian countries, inequality in Central Asian countries was low. The lowest inequality was found in Kazakhstan followed by Turkmenistan, Kyrgyzstan, and Tajikistan respectively. Among South Asian countries, Iran and Sri Lanka have low inequality. Of all the countries of the two sub-regions the lowest inequality was in Kazakhstan.

Group-based inequality prevails widely in all society. Past experience reveals that the so-called ‘conflict entrepreneurs’ mobilized such groups who have grievances against discrimination, leading at times to violent conflict (Tiwari 2010b). Therefore, addressing social exclusion and inequality have been central focus of the government policy to maintain peace and stability. Countries have implemented various pro-poor policies and affirmative actions to address exclusion in various dimensions as mentioned in the following section.⁹

5 Policy Measures for Addressing Poverty and Exclusion

Underlying reasons for poverty and inequality within a country are lack of empowerment, and exclusion which make poor people deprived of even basic services like food, water, and energy. The population groups which are more deprived are children, women, persons with disabilities, people living with HIV/AIDS, older persons, Indigenous peoples, refugees, internally displaced persons, and migrants. The following are some of the major policy recommendations to reduce exclusion and inequality within countries. Several of these recommendations build on the existing pro-poor policies.

5.1 Increasing the Capabilities of the Bottom Population Groups

Progressively achieving and sustaining income growth of the bottom 40% of the population at a rate higher than the national average will help address exclusion. Income is an important means to enhance other capabilities like health and education. But there is a lack of one-to-one correspondence between the two. Therefore, empowering the poor and deprived also requires building other forms of human capabilities like food and nutrition, education, housing, and other services including energy and water.

5.2 Addressing Discriminatory Policies and Formulating New Policies

Mere building of income and non-income capabilities will not suffice to end discrimination and poverty. For example, a Dalit in South Asia might have earned higher income but he may not be able to take part in decision making in society. A state legislation is necessary to end the discrimination such as untouchability issues with Dalit which still prevails in rural areas of some South Asian countries.

Some people suffer from multiple deprivations, for example a Dalit woman who is deprived for being Dalit and being a woman. This requires correcting, not only the discrimination between caste and ethnic groups, but also gender discrimination.

Thus, promoting inclusion requires a holistic approach addressing multiple inequalities and exclusions. This can be done by remedying the existing policies and introducing new ones that can empower poor and excluded groups building their capabilities and agency so that they can interact with the state and society more actively.

5.3 Role of Redistributive Policies

Inequality in opportunity, and outcome reinforce each other. It is likely that a rich person has a better opportunity of higher and quality education; or a highly educated person can be rich earning higher income. Poor and excluded groups might have higher capabilities but those capabilities may not result in higher outcome because the rich and powerful could serve as barrier in the process of fulfilling their own entrenched interest.

It is a great challenge to ensure inclusion and equality in an unequal society for the reasons that outcome and opportunity are mutually reinforcing. Those who are better off will have higher opportunities and will benefit from higher outcome. In order to break this spiral, countries must also implement some affirmative actions and redistributive policies. Such redistributive policies are progressive fiscal policy, wage policy, and social protection. Progressive fiscal policy has the feature of progressive taxation with pro-poor expenditure, meaning that raising more resources from the better off class and spending on universal social protection will disproportionally be of more benefit to the poor and excluded class of society.

Neo-classical economics held that wages increase with the rise in marginal productivity of labor. However, this does not seem to be the case as advanced by Piketty (2013) who held that the rise in inequality is mainly the result of a higher rate of return on capital than average economic growth. This implies that those who own capital get a greater share of the economy over time. This could also be because wages in countries do not rise at par with increase in labor productivity. This therefore requires addressing labor market institutions including discriminatory wage policies, as well as enhancing voice and participation of labourers through strengthening their trade union and ensuring labor rights.

5.4 Social Protection and Inclusion

The 2030 Agenda for Sustainable Development underscores the importance of social protection for the attainment of the SDGs. Target 1.3 addresses the role of social protection in ending poverty in all its forms. Specifically, it seeks the implementation of “nationally appropriate social protection measures and systems for all, including floors.”

Social protection is an important instrument to reduce poverty, inequality and exclusion. In fact, few countries have been able to reduce poverty and improve living conditions on a broad scale without comprehensive social protection systems in place. Studies show that a larger proportion of the population will be living in poverty in the absence of social protection transfers (Fiszbein et al. 2014).

The role of social protection is extending over time with increasing shocks, including health risks like COVID-19. It is implemented not only with the aim of smoothening consumption of the poor during a crisis, but also with broader imperatives of promotive and transformative roles. Fostering human capital through investing in education and health of the poor and vulnerable is necessary for making society resilient.

As the social imbalances reinforce planetary imbalance, social protection can play a double role. It can contribute to the reduction of inequality in society, as well as promote green recovery, thus relieving the pressure on the planet. Reduced pressure on the planet could help prevent zoonotic diseases. Some flagship programmes, such as Mahatma Gandhi National Employment Guarantee Programme, also have the intention of green recovery in addition to protecting the poor. A massive investment in social protection with its dual objectives of addressing social and planetary imbalances can be the right approach to recover from current COVID-19 crisis.

6 Conclusion

Central Asia and South Asia have been making significant progress over time. Although they are slightly at different stages of development, they have similar challenges that they need to address in order to progress and sustain their development. Vulnerability and inequality are increasing in most countries of the two sub-regions. This is due to exclusion and inequality. Therefore, holistic measures should be adopted to promote inclusion and to share the gains fairly to all members of society. Reforming existing policies, introducing new policies and legislation are necessary. They need to be complemented by some redistributive policies including reform in fiscal policies, wage policies, and a move towards an inclusive and shock-responsive social protection system.

Addressing social imbalances such as social exclusion and inequality have positive effects on other dimensions. A positive association holds even between higher inequality and higher consumption of natural resources. Thus, addressing social imbalances can also help in addressing planetary imbalances such as climate change. Inequality is a problem of all societies. While domestic policy actions are necessary to attack such imbalances, addressing them also requires a simultaneous effort at both global and regional levels. Countries of Central Asia and South Asia must come together to manage such exclusion and inequality in order to realize the pledge of ‘leave no one behind’.