Poverty in India: World Bank Report

In News 

• According to a World Bank working paper,extreme poverty in India dropped to 10.2% in the pre-Covid year of 2019 from as much as 22.5% in 2011 .
  • This is the second working paper after a recent International Monetary Fund paper that talked about poverty reduction. 
  • However, while the former dealt with the period before Covid, the latter focuses on the period during the pandemic.

About 

• The paper uses the Consumer Pyramids Household Survey (CPHS) – an annual survey conducted by the Centre for Monitoring the Indian Economy (CMIE) – to provide estimates of how poverty and inequality in India have evolved since 2011. 
• The CPHS is more recent, has wide coverage, and collects comprehensive data from Indian household living conditions.
• The paper implements a careful reweighting exercise to make CPHS to approach the representativeness of nationally representative surveys such as the Periodic Labour Force Survey (PLFS) and the National Family Health Survey (NFHS). 
• It also makes full use of the CPHS consumption to make it comparable to the NSS consumption. In that way, it can show the evolution of poverty in India from 2011 to 2019.  
• Aims 
  • To encourage exchange of ideas on development and quickly disseminate the findings of research in progress.

Major Highlights of the report 

• Poverty in India is 12.3 percentage points lower in 2019 as compared to 2011. 
• The poverty headcount rate has declined from 22.5 percent in 2011 to 10.2 percent in 2019. 
• Poverty reduction was higher in rural areas as compared to urban India. 
  • Rural poverty dropped by 14.7 percent while urban poverty declined by 7.9 percentage points during 2011 to 2019.
• Farmers with small landholding sizes have experienced higher income growth.
  • Real incomes for farmers with the smallest landholdings have grown by 10 percent in annualised terms between the two survey rounds [2013 and 2019] compared to a 2 percent growth for farmers with the largest landholding,
• Extreme poverty was as low as 0.8 per cent in the pre-pandemic year of 2019, and food transfers were instrumental in ensuring that it remained at that level in the pandemic year of 2020. 
  • Extreme poverty is measured as the number of people living on less than $1.90 per day (?144.40 at ?76 a dollar). 
• Consumption inequality in India has moderated after 2011, with almost no change between 2015 and 2019. 

What is Poverty?

• It is a multidimensional concept .
• It can be defined as a condition in which an individual or household lacks the financial resources to afford a basic minimum standard of living.
• Economists and policymakers estimate “absolute” poverty as the shortfall in consumption expenditure from a threshold called the “poverty line”. 
• The official poverty line is the expenditure incurred to obtain the goods in a “poverty line basket” (PLB). 
  • The PLB comprises goods and services considered essential to a basic minimum standard of living — food, clothing, rent, conveyance, and entertainment. The price of the food component can be estimated using calorie norms or nutrition targets. 

How is it measured and its importance?

• Poverty can be measured in terms of the number of people living below this line (with the incidence of poverty expressed as the head count ratio). 
  • The “depth” of poverty indicates how far the poor are below the poverty line.
• Six official committees have so far estimated the number of people living in poverty in India 
  •  the working group of 1962
  • V N Dandekar and N Rath in 1971
  • Y K Alagh in 1979
  •  D T Lakdawala in 1993
  •  Suresh Tendulkar in 2009
  •  C Rangarajan in 2014. 
  • The government did not take a call on the report of the Rangarajan Committee; therefore, poverty is measured using the Tendulkar poverty line.
    • The Lakdawala Committee assumed that health and education is provided by the state — therefore, expenditure on these items was excluded from the consumption basket it proposed. Since expenditure on health and education rose significantly in the 1990s, the Tendulkar Committee included them in the basket. 

• Poverty numbers matter because central schemes like Antyodaya Anna Yojana (which provides subsidised food grains to households living below the poverty line) and Rashtriya Swasthya Bima Yojana (health insurance for BPL households) use the definition of poverty given by the NITI Aayog or the erstwhile Planning Commission. 
  • The Centre allocates funds for these schemes to states based on the numbers of their poor. Errors of exclusion can deprive eligible households of benefits.

Other ways can poverty be estimated

• In 2011, Oxford University researchers Sabina Alkire and James Foster devised the multidimensional poverty index (MPI) to capture poverty using 10 indicators: nutrition, child mortality, years of schooling, school attendance, ownership of assets, and access to proper house, electricity, drinking water, sanitation, and clean cooking fuel. 
  • The MPI is a more comprehensive measure of poverty because it includes components that capture the standard of living more effectively.

Governments initiatives in this context 

• Multi-pronged strategies are being taken by the Ministry of Rural Development (MoRD) to address rural poverty and improve the economic well-being of the people in rural areas with the main focus on increasing livelihood opportunities, empowering rural women, providing social safety net, skilling of rural youth, infrastructure development, increasing land productivity etc. through programmes of Department of Rural Development, viz., 
  • Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS)
  • Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM)
  •  Deen Dayal Upadhyay – Gramin Kaushalya Yojana (DDU-GKY)
  • Pradhan Mantri Awaas Yojana – Gramin (PMAY-G)
  • Pradhan Mantri Gram Sadak Yojana (PMGSY)
  • Shyama Prasad Mukherjee National RuRBAN Mission (SPMRM) and National Social Assistance Programme (NSAP), and programmes of Department of Land Resources, viz., Watershed Development Component of Pradhan Mantri Krishi Sinchai Yojana (WDC-PMKSY).

• Other related schemes: 
  • Pradhan Mantri Jan Dhan Yojana
  • Schemes for Financial Assistance:
  • Pradhan Mantri Kisan Samman Nidhi
  • Pradhan Mantri Jan Dhan Yojana
  • Integrated Rural Development Programme (IRDP)

Issues /Challenges

• Poverty alleviation has always been accepted as one of India’s main challenges by the policy makers, regardless of which government was in power.
• Government policies have failed to address a majority of vulnerable people who are living on or just above the poverty line. 
• It also reveals that high growth alone is not sufficient to reduce poverty. Without the active participation of the poor, successful implementation of any programme is not possible.
• It remains among middle-income countries that are home to over half the world’s poor. Progress in poverty alleviation has also been affected by shocks like demonetisation and the pandemic
• The pandemic is the biggest setback to poverty reduction worldwide and it will stretch out targets for countries like India.

Way Forward 

• Poverty can effectively be eradicated only when the poor start contributing to growth by their active involvement in the growth process. 
• This is possible through a process of social mobilisation, encouraging poor people to participate and get them empowered.
• This will also help create employment opportunities which may lead to increase in levels of income, skill development, health and literacy.
•  Moreover, it is necessary to identify poverty stricken areas and provide infrastructure such as schools, roads, power, telecom, IT services, training institutions etc. 

Source:FE