A brief history of India’s poverty levels

A brief history of India’s poverty levels

Subject – Economy

Context – Gandhi, former president of the Indian National Congress, tweeted the screen-grab of a story published on the website of Jansatta, which stated that poverty in India had increased between 2012 and 2020.

Concept –

What is poverty?

• In 2009, the report on poverty estimation, chaired by Late Prof Suresh Tendulkar, stated: “Fundamentally, the concept of poverty is associated with socially perceived deprivation with respect to basic human needs”.
  • Tendulkar committee’s estimation method is the last officially recognised method for arriving at poverty numbers in India.
• Poverty is a “relative” concept.
• Of course, there is such a thing as abject poverty and it typically refers to a state where a person is unable to meet its most basic needs such as eating the minimum amount of food to stay alive.

What is a poverty line?

• “poverty line” — a level of income or consumption expenditure that divides the population between the poor and non-poor.
• It helps policymakers in figuring out what percentage of the population is poor relative to the rest.
• Again, in a relatively poor country such as India — our per capita income is roughly one-fifth of China’s and one-thirtieth of US’ — the income or consumption levels chosen as the cut-off point for poverty (also called the poverty line) are often quite similar to “starvation” levels (or lines).
• Poverty line suggested by the Tendulkar Committee was Rs 29 per day per person in urban areas and Rs 22 per day per person in rural areas.
  • Before the Tendulkar Committee’s recommendation, India’s poverty line was Rs 12 for rural areas and Rs 17 for urban areas.

How to choose a poverty line?

The purpose behind choosing a poverty line is two-fold.

• One, to accurately design policies for the poor.
• Two, to assess the success or failure of government policies over time.

What has happened in India’s fight against poverty?

Head-count ratio

• If one looks at the headcount ratio then India made rapid strides since 1973.
  • Headcount ratio of poverty is the percentage of India’s population that was designated to be below the poverty line.
  • Incidence of poverty fell quite sharply from 55% in 1973 to under 28% in 2004.

Tendulkar Poverty Line

• Tendulkar poverty line was defined differently from the past poverty line.
  • In the past, poverty lines were essentially about the amount of money required to meet a certain minimum amount of calories.
  • But during this phase, it was assumed that the government would take care of two other basic requirements — healthcare and education.
  • As such, the committee included the money required to meet the growing expenses on healthcare and education.
  • This raised the poverty line and essentially told us that India was poorer than what it previously believed — that is why the table mentions two poverty numbers for 2004.

Absolute number of poor in the country

• Even though the percentage of people below the poverty line were coming down over the years, the absolute numbers remained stubbornly at the same level — as the third column of the table above shows — until the start of economic reforms in the early 1990s.
• Between 1993 and 2004, close to 20 million people were brought above the poverty line.
• But the truly remarkable period was between 2004 and 2011 when close to 140 million people were brought out of poverty in just 7 years.

What has happened to poverty levels since 2011-12?

• Unfortunately, even though India is home to possibly the largest number of poor people in the world, there has been no official update on India’s poverty levels since 2011-12.
• Typically, poverty levels are updated by using the Consumer Expenditure Survey, which is conducted by the National Statistical Office (NSO) once every five years.
  • The last such survey was conducted in 2017-18.
  • That survey reportedly showed that for the first time in four decades consumer expenditure in India had fallen.
  • If that survey’s data was plugged into poverty line calculations, several economists believe it would have shown that poverty levels, as well as the absolute number of poor, had risen between 2011-12 and 2017-18.
  • However, the findings of that survey were scrapped by the Modi government in 2019. The government claimed that the survey suffered from “data quality” issues.
• According to tan unofficial calculation — which used the Tendulkar poverty line, which is the last official method — even though the incidence of poverty has come down marginally — from 21.9% in 2012 to 20.8% in 2020 — India has witnessed an increase in the absolute number of poor in the country.