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Resource centre on India's rural distress
 
 

Poor Economics: Has India’s poverty really fallen? -Santosh Mehrotra & Jajati Parida

-Financial Express

Dataset and methodological weaknesses cast doubt on recent poverty estimates that claim drastic reduction

Bhalla, Bhasin and Virmani in a working paper (IMF), claimed India’s poverty, per a $1.9 per person per day poverty line (at PPP), was 0.9% of the population in 2020. Thanks to government transfer of free rations of 5 kg per person month, it fell to 0.8% (from 0.9% in 2019). Roy and de Velt, for the World Bank (WB), claim poverty fell from 22.5% to 10.2% between 2011 and 2019. Remarkably, both papers contradict the WB’s official publications, which state that, as a result of Covid, poverty will increase by 88-115 million in 2020, and the largest contributor to this would be India.

Naturally, the media in India has lapped up these conclusions, and purveyed them widely, to the delight of the government. Therefore, the papers deserve a thorough examination, both for their methodology and findings.

First, Bhalla et al use National Accounts Statistics (NAS) to estimate private final consumption expenditure, then used to estimate poverty. Practically no one in the world uses NAS estimates of consumption. It overestimates consumption. That has never prevented Bhalla from using it.

Second, they don’t use household surveys of consumption expenditure (CES), widely used for estimating poverty (including by the WB, relying upon Living Standard Measurement Surveys). Historically, in India, poverty estimation has used the CES. The last one, in 2017-18, followed demonetisation and a hurried GST, which adversely affected the unorganised sector that employs 85% of non-farm workers. That CES showed contraction of rural consumption by 8% and a mere 2% rise in urban, compared to 2011-12.

Third, they ignore data on inequality, rising unemployment, falling employment rates, falling wage rates and rising food inflation.

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