Asian governments should use their fiscal policy to combat the widening income gaps that are undermining decades of successful poverty reduction in the region, says the Asian Development Bank (ADB).
"With inequality rising almost everywhere in Asia, governments need to urgently expand and improve their public investments in inclusive growth," says ADB president Takehiko Nakao during the regional development bank’s 47th annual meeting.
More than 80% of Asia’s population live in countries where inequality is worsening, meaning that many are being left behind even as globalization, technological progress, and market reform have led to strong economic growth.
Policies on both spending and revenue such as antipoverty programs and progressive taxation can promote inclusive growth.
But among fiscal policy tools, government expenditure, more than taxation, has a tangible effect on boosting equality, says ADB.
Public spending on education and health services improve the well-being of the poor and augment their productive capacity.
Targeted subsidies protect the most vulnerable and deprived segments of society, while better public infrastructure can make it easier for the poor to access good education and healthcare, says the bank.