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It's too soon to end the fight against poverty.

It's too soon to end the fight against poverty

In a radio broadcast in October 1939, Winston Churchill described Russia as 'a riddle, wrapped in a mystery, inside an enigma'. He might as well have been talking of India in 2013.

The country has a space program and nuclear weapons and is home to some of the most technologically advanced companies on the planet. Yet many of its people live in squalid conditions and in extreme poverty. Many lack access to clean drinking water and even enough to eat.

In the November 26th edition of Bloomsberg Business Week, Mehul Srivastava points out that the vast majority of Indians, especially villagers, eat enough to fill their stomachs but not enough to stay healthy.

'Corruption, incompetence and official indifference mean record stockpiles of grain rot in warehouses, and supplies meant for the poor are often stolen,' says the author. 'India spends $14 billion a year to help to feed those who cannot afford to buy rice or wheat in the market. Every year, the World Bank estimates, almost 40% of that aid simply falls through the cracks of a system of paper-and-thumbprint accounting, starving the poorest, most isolated Indians.'

Mehul Srivastava concludes that, to cure India of hunger would require the nation to be cured of all else that ails it, notably corruption, bureaucracy, caste differences and the problem of having more people than it can employ.

Against this background comes news that the British government is to end all direct financial assistance to India in two years' time, 'in recognition of India's changing place in the world and the country's ability to fund its own development programs'. The decision will save the UK around £200 million by 2015 - an amount that Indian finance minister Pranab Mukherjee last year referred to as 'a peanut in our total development expenditure'.

British support for India will in future be limited to skill-sharing in area areas such as trade, investment, education and health. A small number of British development experts will work with the Indian government. There will also be a program of private-sector investment to help some of the poorest parts of India.

The reforms mirror wider changes in the global fight against poverty. In volume 49, issue 4 of Finance and Development, Dean Karlan reports that national governments and international organizations such as the United Nations and World Bank no longer lead the way in providing aid to developing countries. Now philanthropic contributions by such bodies as the Bill and Melinda Gates Foundation and George Soros's Open Society Foundation, and social enterprises such as the Grameen Bank, are better known.

Dean Karlan argues that developing economies are attracting more direct investment, but they still need official aid and money from private donors to help to correct market failures and catalyze solutions for the poor.

While there are still far too many people in the world who lack decent nutrition and access to clean, running water, their numbers have fallen dramatically in recent years. And these rising average living standards in many developing countries have triggered a reassessment of what it means to be considered poor.

According to Martin Ravallion in the same issue of Finance and Development, China recently doubled its national poverty line from 90 cents a day to $1.80 (adjusted to reflect constant 2005 purchasing power) and countries including Colombia, India, Mexico, Peru and Vietnam have also raised their poverty lines.

These revisions, says the author, are unsurprising since the poverty measure in any given setting will be accepted only if it accords reasonably well with prevailing ideas of what poverty means in that setting.

But absolute poverty still exists. So long as more than 1 billion people continue to live on less than $1.25 a day, improving their living standards must remain the global development community's first priority - whether it be through national governments, international bodies, private philanthropists or more modest individual giving.

There is a massive job still to do.