Structural Adjustment Program's Impact on Poverty in India and Africa

This essay examines the impact of Structural Adjustment Programs (SAPs), implemented by the World Bank and International Monetary Fund, on poverty in India and Africa. The paper explores how these programs, designed to promote economic liberalization, have affected the economies and societies of these two countries. The analysis is divided into three parts: an overview of SAPs, a discussion of their impact on India and Africa, and an assessment of the widening gap between the rich and the poor. The study highlights how SAPs, through measures like trade liberalization, currency devaluation, and reduced government spending, have led to negative consequences such as increased unemployment, reduced social welfare, and the neglect of agricultural sectors. The essay argues that SAPs have exacerbated inequalities and contributed to the underdevelopment of these nations, ultimately widening the gap between the rich and the poor rather than alleviating poverty. The paper uses case studies of India and Africa to support the claims.

Running head: STRUCTURAL ADJUSTMENT PROGRAM AND POVERTY
Structural adjustment program and poverty
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Introduction
The aim of the paper is to discuss the impact of structural adjustment lending in
growing poverty and how this lending has widened the gap between the rich and the poor
within the context of two poor countries. The two countries chosen for this analysis are India
and Africa since their economic condition at the time of structural adjustment lending was
poor. This paper is divided into three distinct parts while the first part of the analysis will be
presenting the brief analysis of the issue of structural adjustment, while the second part of the
analysis is the impact of the same on the economy and society of India and Africa and the last
part of the analysis is the present status of the countries in widening the gap between the rich
and poor.
Discussion
The structural adjustment programs are the set of macro-economic policy changes
initiated by the Bretton Woods institutions (The World Bank and International monetary
Fund) in order to initiate loans to the developing countries of the South (Bond et al. 2015).
Shortly known as the SAP, such changes in the economic model of the countries were
designed to make stronger influence in the poorer countries by penetrating in their domestic
market and opening up their market to the exploitation of the global economy (Bond et al.
2015). This is nothing but the removal of the trade barriers and tariffs and regulations from
the developing countries market in order to gain easier access to their market (Fosu et al.
2015). Hence India and Africa are chosen as the two countries for the analysis of the paper
(Dreher 2018). Some of the conditions are measures imposed under SAPs are:
 Diversification of the import and export of the country, easy access to the domestic
market of the Southern nations (Kentikelenis et al. 2015).

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 Replacement of the food crops with the profit oriented cash crops.
 Need of the state to have to refrain from interferences, in one word,” withering away
of the state” and play of the free market economy (Dreher 2018).
 Currency devaluation(Dreher 2018)
 Liberalization of the trade barriers and opening up of the economy to have easy
investment of the private players in the market (Haggard et al. 2018).
Hence it can be argued that the SAPs are one of the all inclusive changes in the economic,
social and political changes of the governance of the developing countries and the impact it
had was not only restricted to the economic sphere instead it spilled over the political and the
social aspects of the countries as well.
Case study: India (Impact of SAP in alleviating poverty)
There are significant changes on the indicators of poverty in the pre and post reform
era of the India’s poverty scale. It has been observed that the poverty indicators were showing
positive growth in the pre-reform period, however after the SAP are initiated, the indicators
showed a negative growth (Dreher 2018). The rural and urban parts of India showed
differential poverty indicators in terms of the widening gap of the rich and the poor of the
country (Wahab et al. 2017). While in case of the African countries, SAP consistently failed
to enhance the agricultural growth and the real wages fell, food prices were increased
drastically which impacted negatively the selected group of people, the poor and the
marginalised (Wahab et al. 2017). In case of India, the scenario was different since India
went through the mixed bag experience. The agricultural sector was one of the major hits of
the negative impact of the SAP. Industry was given higher importance in comparison of the
agricultural growth irrespective of the majority of the Indian population are solely dependent

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on the agricultural outcome (Lall et al. 2016). One of the reasons for the alleviation of
poverty is this negligence of the agricultural sector within the context of India. Higher
agricultural output tend to reduce the food prices and increases the availability of the food
production, however the opposite tend to ignore these crucial factors and gave higher
importance to the industrial sector (Lall et al. 2016). It was crucial to remember the fact that
75% of the total population of the country India is completely sustained by the agricultural
sectors and it is the primary sector that can directly impact their growth (Oram et al. 2018).
Moreover growth in the agricultural sector would have meant higher employment
opportunities for the youth of the country which is also expected to impact the non-
agricultural sectors. However the situation was different and the immediate impact was the
large scale unemployment of the youth since development in the industrial sectors required
effective skills which the Indian youth were lacking at that time (Oram et al. 2018). Another
important reason for the alleviation of poverty was the reduced public spending in the social
welfare schemes by the government and all forms of food subsidies were withdrawn as part
of the SAP. The public distribution system and rural poverty levels at the post reform period
suggest, such measures enhances the inequalities of India’s rich and poor by constantly
damaging the poorer sections of the country (Konadu-Agyemang et al. 2018). Furthermore it
is also important to consider the fact that reforms were primarily aimed at fostering trade and
commerce at the global level which was beneficial to the developed countries, in case of
India this system led to the increased imports of the luxury goods which undermined the local
and domestic industries (Bond et al. 2015). These reforms also led to the layoff the
government workers, their wage constraints, higher interest rate and the reduction in
government spending. Economically, India slipped into the vicious circle of debt which led to
the further reforms (Konadu-Agyemang et al. 2018). Heavy dependence on industrialisation
and reduced attention at the agricultural and primary sector investment led to the loss of

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number of jobs and damages of the environmental conditions (Oram et al. 2018). Hence the
poor and the marginalised of the society were the worst hit of the reforms which were meant
to bring “prosperity” (Konadu-Agyemang et al. 2018). Moreover for a developing country
like India which required enhanced role of the state faced the problem of less of intervention,
however what is important here to note is that in order to ensure free market forces, elements
of market have to be on equal standing while in case of India the situation was different and
the gap between the rich and the poor since the rich become richer and poorer remained poor
(Bond et al. 2015).
Case study: Africa
In case of structural adjustments on Africa, it has been observed that economic
conditions in most of the African nations since the implementation of SAP have been
deteriorating (Konadu-Agyemang et al. 2018). One of the reasons for the wide spread poverty
of the developing nations are reform of the public sector, devaluation of currency which led
to the budget deficit and elimination of the marketing boards which is responsible for non-
protection of the vulnerable population form the exploitation of the market (Lall et al. 2016).
With an already existing corrupted bureaucracy the implementation of this program led to the
accumulation of the excessive wealth at the hands of the rich while the poor remained poor
throughout the process (Oram et al. 2018). Moreover the domestic market was targeted badly
due to the non-intervention of the government in the currency protection and let it float
according to the obligation of the market. This failure of governance and reduced spending
on the poorer section of the population led to the heightened issues with poverty. Similar like
India, SAP led to the problem of higher prices for the import good and considering the
economic condition of the poorer section of the country, it became difficult for the people to
afford the basic goods and services. Moreover, poorer section lost their purchasing power due

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to the non-availability of the employment opportunities (Lall et al. 2016). Hence it has been
argued by the scholars tat social aspect of development were completely ignore which led to
this never ending gap of the two spectrums (Oram et al. 2018). Moreover, Sub-Saharan
Africa at the end of 1980s was facing issues like high population growth, lower level of
investment and inefficient sources (Lall et al. 2016). Hence it is crucial to note that
irrespective of the motive of productivity, SAP remained focused on the utilization of the
existing resources and non-creation of new resources. This is responsible for the excessive
pressure of the poorer population over the limited resources (Zheng et al. 2018). One
particular issue of the widening poverty gap of the rich and poor within the context of Africa
is the mistake in the fiscal measures adopted. The erstwhile mechanism for the support of the
poorer and vulnerable sections in terms of education, social services and the required
infrastructure were reduced from the social expenditure (Lall et al. 2016). This can be
contributed to the half-hearted implementation of the policies with the external imposition of
the macroeconomic policies without considering the nature of the economic policies. At the
end of the reforms, one of the crucial aspects of this widening gap is the issue of nutrition and
food security since most of the developing countries had to depend on the import of the food
grains for their sustenance (Naciri et al. 2018). Hence it is crucial to argued that the “Fit for
all” model in terms of bringing economic stability was bound to fail unless there are enough
analysis of the issue of economic development which is inclusive of the social and all other
aspects of it (Sachikonye et al. 2016). Hence it is to be noted that the consequences of SAP
led not only to the widening gap of the rich and the poor, it also created the inequalities
between people more severe in nature. This inequality led to the further degradation of the
poor for the longer run and it is one of the major factors of the underdevelopment of the
poorer nations of the world.

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Conclusion
Many developing countries of the world are under poverty till today partly due to the
policies initiated by the international organization since it has developed the dependence of
the poorer countries on the richer nations. As part of the neoliberal ideologies, the
Washington Consensus of the developed nations of the world led to the introduction of some
of “adjustment” in the macroeconomic policies of the poorer nations of the world in order to
ensure open market operations to the erstwhile countries with a closed economy structure.
However what was lacking in the system is the understanding that SAP were imposed
externally on the economic structure internally different from each other where in most of the
cases, the state intervention was required as part of the protection of the poor and
marginalised. However these reforms led to the reduction of the role of the state in terms of
spending on education, social welfare and health care. This also contributed to the further
development of debt and unemployment which dragged these two countries under the
umbrella of poverty. Hence it could be concluded that impact of SAP were more negative
than positive since it has not only alleviated poverty, it also widened the already existing gap
between the rich and the poor.

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