Speculation without data

Poverty estimates need govt surveys to resume

Two recent working papers published by the Bretton Woods organisations — the World Bank and the International Monetary Fund (IMF) — have weighed in on the debate surrounding India’s record on poverty reduction. While the papers do not represent the official view of either organisation, they do nevertheless serve as an entry point for discussion into India’s long-term success at poverty reduction and how recent events, including the pandemic, may have affected that effort. The World Bank paper, titled “Poverty In India Has Declined Over The Last Decade But Not As Much As Previously Thought”, was authored by Sutirtha Sinha Roy and Roy van der Weide; and the IMF paper, “Pandemic, Poverty, and Inequality: Evidence from India”, was authored by India’s IMF representative Surjit Bhalla alongside former chief economic advisor Arvind Virmani, and Karan Bhasin. While the World Bank paper argues that India has reduced the proportion of people in “extreme poverty” by half between 2011 and 2019, the IMF paper goes even further and suggests that, if in-kind transfers such as food rations are properly accounted for, India has in fact eliminated extreme poverty. Both papers use the definition of “extreme poverty” commonly used by multilateral organisations, namely income of less than $1.90 per day in purchasing power parity terms. The IMF paper — notably more sanguine than the World Bank’s — even claimed that consumption inequality in 2020-21 was at the lowest level in four decades.

The World Bank’s figures show that the proportion of Indians in rural areas living in extreme poverty fell from 26.3 per cent in 2011 to 11.6 per cent in 2019. The equivalent fall in urban areas was from 14.2 per cent to 6.3 per cent, which was slower but also came from a different base. The paper noted that these falls were less impressive than what could be expected from the macro-level private final consumption expenditure (PFCE) statistics. Not coincidentally, the IMF authors chose to use the more impressive PFCE numbers. The World Bank’s accounting also revealed this poverty reduction was uneven. Demonetisation, as expected, increased poverty rates. And so did the sharp slowdown in the economy in the year immediately prior to the pandemic, when it found that rural poverty rose 10 percentage points. This reveals the continued vulnerability of many, particularly in rural India, to economic shocks. The government must prioritise higher and stable growth if extreme poverty is to be eradicated.

The World Bank’s figures were based on the Consumer Pyramids Household Survey, conducted by the Centre for Monitoring Indian Economy, which is widely used now by both companies and academics. While useful and indicative, in the longer run ,India cannot continue to depend upon piecemeal and often incomplete private sector surveys to gauge such vital questions as the level of poverty or of unemployment. There is no alternative to restarting the consumer expenditure survey on priority. The last round of the survey, which is an integral part of the National Sample Survey, was conducted immediately after demonetisation and the data has not been released. Until authoritative, transparent and professional government data is once again the order of the day, any claims about poverty reduction will remain pure speculation. The absence of data will also not allow the government to make necessary policy interventions.