The worrying slowdown in India’s fight against poverty

Context: A new poverty estimate has been released by SBI Research.

What do the findings of the recent estimates suggest?

As per SBI Research, Poverty in India declined to 17.9% in 2020-21, compared with the last available official estimate of 21.9% in 2011-12.

These new estimates suggest an annual decline of 2.75 million in our number of poor during 2012-21, as against a drop of 20 million every year between 2004-05 and 2011-12.

The data confirms a sharp slowdown in India’s rate of poverty reduction by two other estimates by authors affiliated to the World Bank and International Monetary Fund released earlier this year.

Data indicating a slowdown in poverty reduction

There is sufficient evidence to suggest that economic conditions of most people at the bottom of the distribution have worsened.

PLFS Data

Per capita real income from PLFS surveys also shows a 1.1% decline per annum between 2018-19 and 2020-21. The PLFS also reports that the drop was largely due to weakening urban per capita incomes, which went down by 4.2% per year over that period.

– Consumption expenditure, from PLFS data, shows per capita monthly consumption declining at 0.12% per annum between the years 2018-19 to 2020-21. Once again, it was urban areas that saw a decline in per capita consumption, at 4% per annum, as against a rise in rural per capita consumption of an annual 3.7%.

– PLFS data also shows that the proportion of India’s population for whom per capita income was not sufficient to meet consumption expenditure was 26% in 2018-19, which increased to 29% in 2020-21.

Both agricultural as well as non-agricultural wages fell in the last year, with farm wages declining at an annual 2% and non-farm wages at 3.8%.

Urban income and consumption declines raise questions on claims of an economic revival.

What are the implications?

The decline in India’s trend of poverty reduction in the last decade is worrying.

But what is also a worry is the sharper decline in urban incomes, which has implications for a demand revival in the economy.

While it may have contributed to reduced inequality, it also poses a problem of sustaining economic growth.

Some of these trends could worsen in the wake of an inflationary spiral India is going through that will reduce real disposable incomes.

Way forward

Clarity on poverty may be unavailable until data on consumption expenditure is available.

However, the trends in evidence raise concerns on the rising vulnerability of people and sustainability of growth.

These require an immediate response, irrespective of our poverty debate.

Source: This post is based on the article “The worrying slowdown in India’s fight against poverty” published in Livemint on 1st Jul 22.