Leading cause for decreased poverty in India in last 50 years: The World Bank

India is one of the poorest countries in the world.  Furthermore, it has one of the highest populations, and is growing at a particularly high rate.  Even though the country has had many major struggles, it is still growing at a fairly quick rate.  In fact, according to World Bank data, they grow on average of 5-7% annually in terms of GDP.  It is my belief that much of this growth is due to the efforts made by the World Bank and the International Development Association (IDA — the agency of the United Nations affiliated with the World Bank) in the past 50 years.  No doubt, India’s economy is much stronger and there is much less poverty than there would be, had it not been for the efforts of the world bank in the last 50 years.

Before any world organizations had a presence in India in the mid 20th century, growth (in terms of GDP or otherwise) was marked with stagnation, as most labor was simple subsistence farming.  In any case, the World Bank, in the past nearly 50 years has invested over $40 billion dollars to stimulate growth and create economic support.  Without this help, India would be much worse off today.  For instance, during crises ranging from the 1975 foreign exchange crisis to the 1966 devaluation of the rupee, the World Bank has continually stepped in and provided financial assistance to the country and save it from almost certain fiscal demise. Further information about this can be found here (source also cited as reference).

Even today, India is benefiting from the assistance from the World Bank.  A $2 billion loan was just approved to the government of India to aid in the restructuring of the financial sector and spur the creation of new small and medium sized businesses.  Without loans such as this (and others in the past 60 years), the country of India would be much worse off than it is today.  No doubt that the World Bank will still continue to aid India and other countries in the future, but the organization has provided incredible financial resources that have strengthened India’s viability into the future.

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4 Responses

  1. Many third world and impoverished countries benefit from World Bank and IDA intervention, but it’s nice to see that India’s banks have been able to use their loans to build strong credit growth and quality. It’s no surprise that India’s lending abilities have been damaged by the global economic crisis. However, it should be worthwhile for the World Bank to issue the Banking Sector Support Loan so that the Indian banks can continue to support economic growth.

  2. Another serious problem in India that is related to population growth is the traffic congestion. For example, a new bridge was built over the course of 2 years in Hyderabad in October 2007. During the first day of its opening it was “devoured by India’s growth without a burp” (Hot, Flat and Crowded, 2008).

    Furthermore, India’s Tata Group is going to begin mas-producing its $2,500 four-passenger car. Imagine the effect this car will have on the already-crowded streets of India. Not to mention, imagine the detriment to the already-polluted Indian environment this car will have.

  3. It would be interesting to see where a lot of this aid was focused. My guess is that there was a significant investment in infrastructure and education. This is evidenced by the significant double digit growth India experienced in the first half of the decade in the services sector – these are clearly better paying, more sophisticated jobs that require a vast and reliable infrastructure as well as an educated work force. Check out this paper I found that contains some growth data:
    http://www.epwrf.res.in/upload/MER/mer10609007.pdf

    It may also be interesting to look at how the 1991 trade liberalization and deregulation has affected poverty as well.

  4. It is interesting to read about the economic boom India has experienced over the past 50 years, but can anyone comment on the apparent pressing social problems in the country?The gap between the wealthy and poor is astounding. This may be a result of the cast system present in India. How else can a country with such impressive economic and industrial growth still remain one of the poorest?

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