Cost of Living Crisis in Developing Countries

A study has concluded that low-income population in India is negligibly vulnerable to slipping into poverty due to a global spike in inflation.

The study – titled ‘Addressing the Cost of Living Crisis in Developing Countries’ – was conducted by the UN Development Programme (UNDP).

About the report –

• Title — Addressing the cost-of-living crisis in developing countries: Poverty and vulnerability projections and policy responses.
• It is released by the UN Development Programme (UNDP).
• Objectives of the report —
  • • It estimates the potential effects of food and energy inflation on global poverty and vulnerability.
    • It simulates the welfare loss mitigation potential of two policy options: blanket energy subsidies and targeted cash transfers.
• Methodology —
  • • The study used the distribution of per capita household income for benchmark and cost of living scenarios at three income levels — $1.9 a day (World Bank’s standard for absolute poverty), $3.2 and $5.5.
    • For vulnerability to poverty, the analysis uses a threshold of $13 a day.

Key highlights of the report –

• 71 million people could be pushed into poverty —
  • The study estimated that nearly 71 million people could be pushed into poverty.
    • This is due to rising food and energy prices in the wake of the Ukraine war as well as disruptions in supply chain.
  • It further concludes that the Caspian Basin, Balkans and sub-Saharan Africa are expected to see maximum impact.
• Targeted and time-bound cash transfers can be an effective tool —  The report advocated targeted and time-bound cash transfers as an effective tool.
• Risk factors for Pakistan and Sri Lanka —
  • Based on its assessment, Pakistan & Sri Lanka are among countries likely facing high poverty impacts across all poverty lines.
  • The report said that, in these countries, around 3% of the population, on average, could fall into poverty.
• India specific observation —
  • The chances of those in India earning $1.9 a day slipping into poverty due to this upturn would be zero.
  • The impact would be a mere 0.02% and 0.04% if a poverty line of $3.30 or $5.50 a day was assumed, respectively.
  • According to the report, the overall impact is negligible in India.

About the ‘United Nations Development Programme’ —

• As the United Nations led agency on international development, UNDP works in 170 countries and territories to eradicate poverty and reduce inequality.
• Headquartered in New York City, it is the largest UN development aid agency.
• It was formed in 1966 to help countries eliminate poverty and achieve sustainable human development.
• Its work is concentrated in three focus areas; sustainable development, democratic governance, peace building, and climate & disaster resilience.
• Important reports published by UNDP includes —
  • • Human Development Index
    • Sustainable development Goals
    • Gender Inequality Index