'Pew's view that 75 mn pushed into poverty is an opinion survey'

An International Monetary Fund (IMF) working paper — which estimated poverty in India till 2020-21 — is an important feedback for policy makers and researchers since there is no official poverty estimation after 2011-12. One of its authors and former chief economic advisor Arvind Virmani tells Indivjal Dhasmana that $3.2 on purchasing power parity (PPP)-basis per person per day could be taken as the poverty line in India. Edited excerpts:

The working paper has given poverty estimates based on both private final consumption expenditure (PFCE) and state gross domestic product (SGDP). Which one is more useful?

All our estimates are based on unit level data from the consumer expenditure survey of 2011-12. This 2011-12 data is projected forward using different growth rates by two different methods: (a) the real growth of PFCE, derived by deflating nominal PFCE growth by CPI (consumer price index). (b) Real SGDP growth rates applied to consumer expenditure data disaggregated by state and then re-aggregated. In our view, the poverty estimates derived by the second method (b), are more accurate than those based on the first method (a). 

Earlier, Pew Research Centre had shown that 75 million people were pushed into poverty due to Covid. Your study found fault with these numbers. What are the main reasons for this?

Pew does “opinion surveys”. These are not used by the World Bank or the IMF or any other multilateral development bank for estimating poverty. Our paper showed that poverty did increase in 2020-21; 15-25 million people were pushed below the poverty line. However, it was completely offset by the free food grains (wheat & rice) provided through the PDS (public distribution system).
 

Why does the study say that PPP $3.2 should be the official poverty line?

There are several poverty lines defined by the World Bank. The lowest one, $1.9/day (called absolute poverty), is appropriate for “low-income countries,” while the next one, at $3.2/day, is more useful for middle-income countries. As India has eliminated low-income poverty and has become a lower-middle income country, it’s more useful to start using the $3.2/day poverty line.

Should we have a poverty line in terms of the rupee, as well, which was the case till 2011-12?

As the paper shows, the Tendulkar poverty line used by India to estimate poverty line in 2011-12 is almost the same as the $1.9/day poverty line defined by the World Bank. We have used the $1.9 line and the $3.2 as it will be easier to do cross country poverty comparisons.

The subsidised food programme of the government has made a big difference to blunt the impact of Covid-induced lockdowns, according to the study. Should the free ration to 800 million people continue even after September 2021?

 The free ration was intended to offset the negative effect of the pandemic on the economy. It was extended in 2021, because of the second wave. The 2021-22 GDP is estimated to be two-three per cent above that in 2019-20. So, the per capita GDP is back at the 2019-20 level. The extension of free ration till September 2022, is done as a matter of abundant caution. This is because there may be some vulnerable segments of the population whose wages/income are still below 2019-20 levels. I expect all segments to have fully recovered by H2 of FY23.

There have been multidimensional poverty estimates released by NITI Aayog earlier this year. Which one should the policy makers rely on — IMF working paper or NITI Aayog — for policy purposes?

The expenditure poverty estimates are useful in a macroeconomic context. But multidimensional poverty es­ti­­mates are more useful for prioritising social programmes in education, health, public health, women & child development, water & sewage and housing, among others.