Explained National

The Truth Behind ‘8 Crore Poor People’ In India

The discussion on poverty has always had political dimensions, with people resorting to fake news as well. Just a couple of days back, the entire controversy on the ‘wall to hide poverty’ in Ahmedabad from Donald Trump’s view flared up, only to be discredited immediately. It seems that this politics may also take place in the space of academics as well.

A study presented at one of India’s premier economic think tank, National Council for Applied Economic Research (NCAER) has generated a lot of buzz and publicity in the media. However, it seems that there has been cherry picking of the statistics put out. One may perhaps ask why the cherry picking has happened – perhaps because Surjit Bhalla and Arvind Virmani, authors to the study, have been associated with the government at various times under different dispensations.

8 Crore People in India?

The authors of the paper have essentially looked at the definition of poverty that was put out under the infamous Tendulkar Committee during UPA, when Montek Singh Ahluwalia was the Deputy Chairman of the now defunct Planning Commission. As per the Committee report, which came out in 2011, a baseline of ₹27/person/day in rural areas and ₹33/person/day in urban areas was set as a measure for determining the number of poor people in India. Ahluwalia was caught on the wrong footing, as he sought to dismiss concerns on the poverty line. However, it was adopted as a measure of absolute poverty by the then UPA government.

The authors of the study have essentially used these metrics as part of their examination of the consumption data, which included both the junked Annual Consumption Survey as well as other studies and statistical techniques that are common across the world, such as night-time light data technique. It is using this data set that has been used to explain that there has been a decline in ABSOLUTE POVERTY within India between 2011-18, coming down to 8.4 crore people.

Lost in The Din – The Actual Recommendation of the Study

However, the study also puts out other thoughts that have been lost in the din on 8 crore poor people, which have as much implication on the definition of poverty within India. One must, as the authors of the study have stated, note that the World Bank has classified India as a lower middle-income country using the purchasing power parity (PPP) criteria. This essentially reflects a change in the economic reality of the country, implying that the present Tendulkar Committee poverty line definition needs a significant revamp to reflect this new reality. As the others say

‘The way we define poverty has implications for poverty alleviation policies and it is recommended that we move towards a high poverty line.’

The study also highlighted how the rate of poverty reduction in India in fact has been the highest ever between 2011-18, and that consumption survey that was junked was a correct step because the gap between the private consumption expenditure data and the household consumption expenditure, thoroughly discrediting the numbers.

What has Led to a Decline in Absolute Poverty?

The controversy on the real message apart, there are very interesting aspects to the study that certainly deserve attention. The study notes that while GDP increases have definitely contributed to reduction in poverty, a major chunk of the effect has arisen due to three other interesting factors, particularly flagship initiatives.

Reform in the PDS system by linking it to Aadhar based Direct Benefit Transfer (DBT) has enabled targeted subsidies with better impacts. The reforms, initiated under the Narendra Modi government has yielded benefits, with subsidy money being transferred directly into the bank accounts created under the Jan-Dhan Yojana.

Cash support to small and medium farmers under PM Kisan have definitely benefited the farmer. In January 2020, Prime Minister Modi had digitally transferred a total of ₹12,000 Crores into the accounts of 6 crore farmers across India from a public meeting in Karnataka. The system, being transparent and effective, eliminates middlemen, thus reducing pilferage and creating a true, meaningful impact.

Interestingly, another factor that cropped up beneficially was the UJJWALA and SAUBHAGYA schemes. The link of energy access with poverty alleviation has been once again demonstrated by the study, where the clean cooking fuel and electricity have helped reduce times spent, increased activity in the home and neighbourhood in the evenings, and thus helped to boost economically productive activities. With 8 crore beneficiaries of UJJWALA and near universal household electrification thanks to SAUBHAGYA, the schemes have had impacts way beyond the original intended targets.

The study has, instead of focusing on ‘only 8 crore poor people’ has rather focused on the point of reassessing the poverty metrics in India. However, it has also demonstrated that efforts to reduce poverty have created an impact on the poor of the country, making their lives somewhat better. It would be wise that people refrain from calling this study a ‘statistical deletion of the poor’, and instead pay attention to the actual takeaways.