Below the poverty line

Poverty reduction is one of those subjects on which violent arguments arise despite one basic area of agreement. Everyone across the economic spectrum agrees poverty reduction is an excellent thing. People disagree on the methods, the details and the definition of poverty. How much do you need to earn on a daily basis to be above the poverty limit? That question has various answers, which is partly where disagreement arises.
 
When it comes to India where the data-gathering system is poor, tending to dysfunctional, the disagreements are larger. In 2012, the Indian government reckoned that about 22 per cent of the population was below the poverty line, which it defined as around Rs 37, or about $1.2 on the purchasing power parity scale. The Millennium Development Goals project guessed it was around 22 per cent as well. The Tendulkar Committee defined it as about 22 per cent of the population in 2009-10 and the Rangarajan Committee estimated it as about 30 per cent of the population in 2010.

 
Whatever poverty was, it was generally agreed to have reduced in the 21st century, as the per capita income grew. The United Nations Development Programme guessed that 271 million Indians had been lifted above the poverty line between 2005-06 and 2015-16. One can argue endlessly about the data but given excellent growth through that decade, despite two major global financial crises, poverty surely did reduce.
 

Arguably, poverty started increasing again after November 8, 2016, when demonetisation took a sledgehammer to the informal economy which offered employment to vast numbers. The gross domestic product growth also slowed from that point onwards. The poorly designed goods and services tax and its messy implementation also hurt the informal economy, already on its knees.

 
In the last three months, it’s likely that several years of poverty reduction has been reversed. Anywhere between 50 to 120 million people have been rendered unemployed by a harsh lockdown launched with less than four hours notice. Each of these individuals have families to support and those families are now edging closer to starvation.
 
We can argue about numbers all over again. But daily wage earners, temporary workers, domestic staff, mall employees, etc., have all been rendered jobless, along with skilled tradesmen and mechanics. These are people at the bottom of the economic ladder and as the saying goes, often just a couple of meals away from starvation at the best of times.

 
They are back below the poverty line now. It doesn’t matter if you define that as Rs 37 per day or Rs 123 per day or some other number; somebody earning zero with no savings is below that line. It is a truly remarkable feat to have reversed years of poverty reduction within a few weeks without war, famine, tsunami or other major catastrophe.
 
This was largely self-inflicted although, of course, it will be blamed on the coronavirus. No other country inflicted such a thoughtless lockdown upon itself. It is hard to estimate how long it will take for those millions to come back into the workforce and start climbing back into the “lower-income” group from the “zero-income” group.

 
This is not the only socio-economic trend that lasted for decades, to be reversed within the past few weeks. Poverty reduction was driven by urbanisation. During that same period of 2005-2015, India witnessed the largest urban migration in history. Hundreds of millions of rural dwellers came into the cities in search of work. Multiple settlements — over 5,000 according to the Census 2011 — changed status from being villages (where over 50 per cent of the population relies on agriculture) to “non-municipal” towns, where over 50 per cent of the population works in non-agricultural sectors. Urban centres offer employment opportunities orders of magnitude better than any village.

 
Again, you can argue about the exact dimensions. There is persistent undercounting of urban dwellers because people who live and work in a city 11 months of the year tend to maintain their voter IDs in their home village. But everyone admits Indian urbanisation was a big phenomenon in the early 21st century. This too has been reversed and many of those who have returned to their villages will be wary about coming back to the cities. Economic growth and poverty reduction will wait upon their return.