Karthik's Thoughts (Come what may!!): India vs China Poverty Alleviation; 1 year since Dream Fulfilled.

#502

I was intrigued to read this week Economist, article on China vs India Poverty Alleviation. So here goes my thoughts. While, I don't subscribe to China's way of governance, it can't be helped but to admire the progress they have made. I have been a witness to the Chinese growth story having been in Shanghai and other places a few times. Also surprising reveleation is the progress Chinese Women have made in society which is practically equal to men.

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Here's a detailed comparison of poverty alleviation efforts in India and China over the past 20 years, along with some insights into what China did differently that India could learn from.

India vs. China: Poverty Alleviation in the Past 20 Years

1. Poverty Reduction Numbers

China:

In 2000, around 49% of China’s population lived below the poverty line.
By 2020, China declared the eradication of extreme poverty, with less than 1% of its population living in poverty.
Approximately 800 million people were lifted out of poverty between 1981 and 2020.

India:

In 2000, about 26% of India's population lived below the national poverty line.
By 2020, this had reduced to around 10%, translating to around 271 million people lifted out of poverty between 2005-2015.

2. Methods and Strategies Adopted

China's Approach:

Economic Reforms and Growth:
- China implemented sweeping economic reforms starting in the late 1970s under Deng Xiaoping. These reforms focused on opening up the economy, encouraging foreign investment, and transitioning from a planned to a market economy.
- Rapid industrialization and urbanization created millions of jobs, boosting incomes.
Government Policies:
- Targeted poverty alleviation programs like the "Targeted Poverty Alleviation" strategy launched in 2013 focused on identifying and assisting the poorest households.
- Infrastructure development in rural areas, including building roads, schools, and hospitals, facilitated better access to markets and services.
Education and Health:
- Massive investments in education and healthcare improved human capital, making the workforce more productive and capable of higher earnings.
- Health insurance schemes and educational subsidies helped reduce out-of-pocket expenses, lifting many out of poverty.
Agricultural Reforms:
- Land reforms and the Household Responsibility System allowed farmers to lease land, incentivizing productivity and increasing agricultural output.

India #.
India's Approach:

Economic Liberalization:
- India liberalized its economy in 1991, which led to significant economic growth. However, the benefits were not as uniformly distributed as in China.
- The service sector, rather than manufacturing, became the primary driver of growth, which created fewer jobs for low-skilled workers.
Social Welfare Programs:
- Schemes like Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) provided employment and income support to rural households.
- Subsidies for food, fuel, and fertilizers, as well as direct cash transfers, helped alleviate poverty for many families.
Financial Inclusion:
- Initiatives like the Pradhan Mantri Jan Dhan Yojana aimed at increasing financial inclusion helped poor households save and invest more effectively.
Rural Development:
- Programs like Pradhan Mantri Gram Sadak Yojana (PMGSY) improved rural infrastructure, connecting remote areas with markets and services.
- Emphasis on building sanitation infrastructure through the Swachh Bharat Abhiyan improved public health.

3. Key Differences and What India Could Learn

1. Implementation Efficiency:

China: The centralized political system allowed for rapid decision-making and implementation of policies. Local officials were held accountable for meeting poverty reduction targets, creating strong incentives for effective action.
India: The democratic system, while more inclusive, often results in slower policy implementation due to bureaucratic hurdles and political opposition.

2. Focus on Manufacturing:

China: Focused heavily on manufacturing, which created millions of jobs for low-skilled workers and facilitated large-scale urban migration.
India: The service sector has been the primary growth driver, which generally requires a higher skill set, leaving many low-skilled workers without adequate employment opportunities.

3. Urbanization and Infrastructure:

China: Aggressively promoted urbanization and built extensive infrastructure, connecting rural areas to urban centers and markets.
India: Although significant progress has been made, infrastructure development and urbanization efforts have not been as robust or inclusive.

4. Targeted Programs and Accountability:

China: Targeted and well-monitored poverty alleviation programs ensured that resources reached the intended beneficiaries.
India: Programs have often been less targeted and plagued by leakages and corruption, reducing their overall effectiveness.

Skill Sets Development and Women Empowerment/Employment: India vs. China

1. Skill Sets Development

China:

Vocational Training: China has heavily invested in vocational education and training (VET) to equip its workforce with practical skills aligned with industry needs. By 2017, there were over 12,000 vocational schools in China.
Government Programs: The government’s "Made in China 2025" initiative emphasizes upskilling workers to support high-tech industries. Training programs are frequently updated to meet emerging market demands.
Public-Private Partnerships: Collaboration between the government, educational institutions, and private sector has been key in developing relevant skills.

India:

Skill India Mission: Launched in 2015, this initiative aims to train over 400 million people by 2022. The program includes schemes like Pradhan Mantri Kaushal Vikas Yojana (PMKVY).
National Skill Development Corporation (NSDC): Established to foster skill development, it supports vocational training institutions and creates funding models.
Challenges: Despite these initiatives, the scale and quality of vocational training remain uneven, and many programs lack alignment with market demands.

2. Women Empowerment and Employment

China:

Labor Force Participation: As of 2020, women's labor force participation rate in China was around 60%, significantly higher than the global average.
Government Policies: Policies such as maternity leave and employment protection have helped women remain in the workforce.
Education: Equal access to education has enabled a significant number of women to enter higher-skilled professions.
Challenges: Gender wage gaps and limited representation in top leadership positions remain issues.

India:

Labor Force Participation: The female labor force participation rate in India was about 21% in 2020, one of the lowest among large economies.
Government Initiatives: Programs like Beti Bachao Beti Padhao, aimed at improving female education and employment, and the MUDRA scheme, which provides micro-financing for women entrepreneurs, have been steps in the right direction.
Challenges: Socio-cultural barriers, safety concerns, and lack of flexible work opportunities hinder women's participation in the workforce.

3. GDP and Economic Growth Comparison

China:

Economic Growth: From 2000 to 2020, China’s GDP grew from approximately $1.2 trillion to $14.7 trillion. The annual growth rate averaged around 9.1% during this period.
Poverty Alleviation Spending: China invested heavily in infrastructure and social programs, which were crucial for poverty reduction and economic development.

India:

Economic Growth: Over the same period, India’s GDP grew from about $480 billion to $2.9 trillion, with an average annual growth rate of around 6.5%.
Poverty Alleviation Spending: India has also increased spending on social welfare programs and infrastructure, but the scale and impact have been less pronounced compared to China.

Key Takeaways

Skill Sets Development:

China's Strengths: Comprehensive vocational training, strong government-industry collaboration, alignment with market demands.
India's Progress: Significant initiatives but needs better alignment with industry requirements and scaling up.

Women Empowerment and Employment:

China's Approach: Higher labor force participation, supportive policies, equal educational opportunities.
India's Challenges: Lower participation rates, socio-cultural barriers, and safety issues need more robust and targeted policies.

Economic Growth and Poverty Spending:

China: Sustained high growth with substantial investments in poverty alleviation and infrastructure.
India: Steady growth with increasing focus on social welfare, but needs more efficient implementation and greater scale.

Conclusion

China's success in poverty alleviation can be attributed to its rapid economic growth, effective government policies, and focus on industrialization and infrastructure development. China’s focused approach on skill development through extensive vocational training, combined with robust policies supporting women’s employment, has significantly contributed to its economic growth and poverty alleviation. India has made strides in these areas but faces challenges in execution and socio-cultural barriers that limit progress. Learning from China’s targeted and scalable programs could enhance India’s efforts in poverty alleviation, skill development, and women empowerment. India, while making significant strides, can learn from China's targeted approach, robust infrastructure investment, and efficient implementation mechanisms.

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11th June 2023: A Dream Fulfilled

On 11th June 2023, a dream of more than 40 years was fulfilled. Ever since childhood I was intrigued and it got more when I read Alistair MacLean's thrilling novel in the 1981. I had been fascinated by the Golden Gate Bridge. Despite numerous business trips to the West Coast, the demands of work had always kept me from visiting these iconic sites. Last year, I finally made it to San Francisco, and standing before the majestic Golden Gate and exploring the historic Alcatraz prison; nearby on a boat ride, felt like a personal triumph. (Clint Eastwood Starrer, "Escape from Alcatraz").......