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Financial Crisis May Worsen Poverty in China, India

Introduction

By year's end, the impact of the global financial crisis of 2008 wasstarting to be felt in the developing world, with slowdowns expected in all emerging economies. These growth declines could have significant effects on the world's poorest populations. The World Bank estimates that a 1 percent decline in developing country growth rates traps an additional 20 million people in poverty. Concern centers on slowing growth in India and China, the world's two most populous nations and the largest contributors to reductions in global poverty in the last two decades, according to many academic studies. Reduced economic growth in both countries could reverse poverty alleviation efforts and even push more people into poverty, say some experts.The financial crisis has also likely made the achievement of the United Nations' Millenium Development Goals (MDGs) on poverty--to halve the proportion of people in extreme poverty by 2015--more difficult.

The Poverty and Hunger Challenge

With an average annual growth rate of 10 percent, China has lifted over 600 million of its 1.3 billion citizens out of extreme poverty--those who earn less than $1 a day--since 1981. In the same time period, India's 6.2 percent average annual growth rate has brought an estimated 30 million out of its 1.1 billion people out of extreme poverty. But an estimated 100 million Chinese and more than 250 million Indians remained under the extreme poverty line in 2005, according to the latest World Bank poverty estimates (PDF). Roughly 470 million Chinese and 827 million Indians earned less than $2 a day, the median poverty line for all developing countries. Though some economists say World Bank figures understate the true extent of poverty, there is broad agreement that a slowdown in China and India will harm poverty alleviation goals....

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