Extreme poverty in India fell sharply in 2011-19: World Bank paper | Business Standard News

Clipped from: https://www.business-standard.com/article/economy-policy/extreme-poverty-in-india-fell-sharply-in-2011-19-world-bank-paper-122041800012_1.html

Rural decline steeper than in urban centres

poverty

The World Bank paper, however, did not say that India has almost eliminated extreme poverty as the IMF study showed

Extreme poverty in India declined by 12.3 percentage points to 10.2 per cent in 2019, from 22.5 per cent in 2011, according to a working paper of the World Bank.

The paper, authored by economists Sutirtha Sinha Roy and Roy van der Weide, showed the reduction in abject poverty in rural areas was more pronounced during the period review than in urban areas. The paper showed that rural extreme poverty dropped by 14.7 percentage points during this period, while urban deep poverty fell by 7.9 percentage points.

In between, however, both urban and rural India witnessed a rise in extreme poverty during certain years. Urban deep poverty rose two percentage points in 2016 (coinciding with the demonetisation of high-value currency notes) and rural deep poverty increased 0.1 percentage points in 2019 (coinciding with a slowdown in the economy), the paper said.

Those earning less than $1.9 on purchasing power parity (PPP) basis a day are considered extremely poor. A dollar is currently valued at Rs 20.65 on a PPP basis. The World Bank clarified that the paper carries the views of the authors and does not necessarily represent those of the Bank and its affiliated organisations.

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The World Bank paper comes close on the heels of a similar paper by the Inter­national Monetary Fund, authored by Surjit Bhalla, executive director for India at the Fund, Arvind Virmani, former chief economic advisor, and Karan Bhasin, a policy researcher.

The World Bank paper, however, did not say that India has almost eliminated extreme poverty as the IMF study showed.

The two papers, however, are not strictly comparable since the World Bank study did not go into the economy after the lockdown was announced in 2020; the IMF paper studies 2020-21, the year of the first Covid wave. The IMF study found that extreme poverty fell to 1.42 per cent during 2020-21, from 10.8 per cent during 2011-12, if food transfers by the government are taken into account.

If comparative periods are taken into consideration, the IMF study saw much sharper reduction as it found that extreme poverty came down to just 1.3 per cent during 2019-20, if food transfers were factored in.

It should be noted that poverty estimates are based on the household consumption expenditure surveys carried out by the National Sample Survey Organisation (NSSO), now merged into National Statistics Office (NSO). The latest such survey is available for 2011-12. The other one for 2017-18 was not made public.

A new household consumption survey was introduced in 2014 — the Consumer Pyramid Household Survey (CPHS) — by the Centre for Monitoring Indian Economy (CMIE). There are two limitations of the CPHS — the survey in its current form is not nationally representative and it uses its own measure of consumption expenditure that is not readily comparable to the NSS measure of consumption.

The World Bank paper works on the CPHS to address these two limitations.

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