The paper deals with the impact of macroeconomic developments on the incidence of poverty and offers an explanation as to why poverty fell sharply in the decade of 80s and has tended to increase significantly in the 90s. It develops a set of medium term (upto 2002- 03) macroeconomic projections which embody a ‘business as usual’ type of scenario and identifies the likely consequences on the level of poverty of this scenario. The paper also analyses the implications of a balance of payments adjustment which may be required after December 2000 to enhance the external debt repayment capacity and of a fiscal stimulus involving a jump in development expenditure. Finally, the paper answers the following question: What type of macroeconomic developments are consistent with realisation of the objective of containing the growth in poverty?