Poverty has long been a major challenge in South Asia, one of the world’s most densely populated regions. However, recent data from the World Bank’s September 2024 update to the Poverty and Inequality Platform (PIP) shows significant progress in poverty reduction across this region, despite various global challenges.
This report details how poverty trends have evolved in South Asia, the progress made in recent years, and the factors influencing this positive trajectory.
Poverty trends in South Asia
The World Bank’s 2024 update reveals that South Asia has experienced one of the largest reductions in extreme poverty in recent years, making it a leading example of how developing regions can overcome significant socio-economic challenges.
In 2019, before the Covid-19 pandemic struck, the percentage of the population in South Asia living in extreme poverty (defined by the $ 2.15 per day poverty line) was approximately 10.6%. This rate increased to 13% in 2020, reflecting the immediate impact of the pandemic, which led to job losses, disruptions in supply chains, and widespread economic instability.
However, the region showcased remarkable resilience and adaptability. By 2022, the extreme poverty rate had declined to 9.7%, which was lower than pre-pandemic levels. The trend continued to improve, with projections estimating that the rate will further decrease to 7.6% by 2024.
Comparing poverty across various income lines
While the $ 2.15 poverty line is commonly used to measure extreme poverty, examining poverty rates at different thresholds provides a broader picture of economic well-being in South Asia. The $ 6.85 poverty line is a more typical measure for upper-middle-income countries and reflects the struggle of a wider segment of the population to achieve a better standard of living.
At this level, 80.4% of South Asia’s population was classified as poor in 2019. Although this figure increased slightly to 81.9% in 2020, it started to decline in subsequent years, reaching 78.8% in 2022 and further reducing to an estimated 75.6% by this year.
This reduction in poverty, even at higher income thresholds, showcases a widespread improvement in living standards and economic opportunities for millions of people across South Asia.
Key drivers of poverty reduction in South Asia
Economic recovery post-Covid-19
The region’s recovery from the pandemic has been uneven but largely successful. While South Asia was heavily affected by Covid-19’s economic fallout, governments across the region took decisive measures to stimulate growth, such as fiscal stimulus packages, support for small businesses, and targeted social assistance programmes.
These interventions helped stabilise economies and provided a foundation for poverty reduction.
Growth in key economic sectors
South Asia’s economy has traditionally been driven by agriculture, but recent years have seen growth in sectors like technology, services, and manufacturing. These sectors have created job opportunities, especially for the younger population, contributing significantly to poverty reduction.
The expansion of digital services and e-commerce has also played a role in boosting household incomes, even in rural areas.
Improvements in social welfare programmes
Governments in South Asia have increasingly focused on enhancing social protection programmes, which has helped cushion the poor against economic shocks.
For instance, direct cash transfers, food subsidies, and employment guarantee schemes have ensured that vulnerable populations are better protected from poverty, especially during crises such as the pandemic.
The role of inflation and global shocks
Despite this progress, South Asia’s journey out of poverty has not been without setbacks. The region faced additional global shocks such as rising inflation, particularly after Russia’s invasion of Ukraine in 2022. This led to increased prices for essential goods, which disproportionately affected low- and lower-middle-income countries in South Asia.
Nevertheless, the region has shown remarkable resilience by adapting to these challenges and continuing its journey toward poverty reduction.
Comparisons with other regions
Compared to other regions, South Asia’s progress in poverty reduction stands out. For example, while Sub-Saharan Africa’s poverty rate has remained stubbornly high, with little improvement from 36.7% in 2019 to 36.5% projected for 2024, South Asia’s poverty reduction has been more significant and sustained.
This contrast underscores the effectiveness of South Asian countries’ strategies to combat poverty, despite facing numerous obstacles.
Poverty and inequality in South Asia
The reduction in poverty has not always been accompanied by a reduction in inequality. Inequality remains a significant concern in South Asia, as wealth distribution continues to be uneven. The Gini index, a common measure of income inequality, remains relatively high in many countries, suggesting that while poverty rates are falling, wealth and income disparities persist.
To address this, more efforts are needed to ensure that economic growth benefits all segments of society, particularly the most marginalised and vulnerable. Investment in education, healthcare, and infrastructure can play a crucial role in reducing inequality and ensuring that the benefits of growth reach everyone.
The outlook for South Asia
The PIP’s projections suggest that by 2024, South Asia could see poverty rates reach record lows. However, sustaining this progress will require continued policy interventions and investments in areas such as education, healthcare, infrastructure, and technology.