Progress on poverty tracking: India needs fresh official estimates

There is little doubt that the prevalence of absolute poverty in India has fallen considerably over the last two decades. However, the exact measurement of poverty has been somewhat hampered by the absence of official poverty estimates. These had become problematic and controversial in the past because of some disagreement over what constituted an accurate and fair poverty line. In the absence of an internal consensus in the Indian establishment over this question, many have used the poverty line set out by the World Bank for countries in India’s income class. The World Bank’s line was introduced in 1990 as “a dollar a day”, and has been updated since in 2001, 2008, 2015, and 2022. It has now produced a fresh estimate of its poverty markers, and has set the line for low income at $3 worth of consumption a day, up from $2.15. For lower middle-income countries, the cutoff has been increased to $4.20 from $3.65.

 

This provides a possible entry point into estimating India’s progress in eradicating poverty. The number of people living in extreme poverty, under the $3 a day line, is now only 5.3 per cent of the population, compared to 27.1 per cent in 2011-12. Under $4.20 a day, the proportion has reduced from 57.7 per cent to 23.9 per cent in the same period. This progress should not be undersold because it represents a substantial increase in human welfare. It reflects a combination of overall economic growth and targeted poverty-alleviation programmes. This broad reformist consensus has been more successful at reducing poverty in India than any other policy mix, and must continue to be followed.

 

However, that does not mean that there are no geographical and other disparities in poverty reduction that must be addressed. The data used by the World Bank suggests, for example, that poverty rates in rural areas are still considerably higher than in urban areas. It might be argued that this difference is exaggerated because of the different price levels between the two zones. If so, that argument must be substantiated through consumer and other surveys. The essential problem here for India is that although consumption surveys have now resumed, with two back-to-back such exercises being conducted, there is still no effort to create a clear set of poverty estimates. The last such exercise was carried out a decade ago. Now that data is available for two back-to-back household consumption surveys, India must revisit the process to arrive at fresh estimates.

 

An updated poverty line is essential for India as it moves towards eliminating absolute poverty. The last mile in this effort is usually the toughest, and it will require a clear sense of where and what remain problem areas. It is also important to not give in to triumphalism. As the experience of the pandemic showed, the emergence of many from poverty is fragile, and they can fall back into destitution in the face of various economic shocks. Some will also, while acknowledging the importance of the welfare state, will question how only a quarter of the country can be poor when such a large proportion of it qualifies for free food under government schemes. It is also worth finding out to what extent such programmes are helping in reducing poverty. These questions can best be answered by data. Indian policy should not be dependent on multilateral poverty estimates.