April 14, 2022
Good morning. In today’s either/view, we discuss whether the claims made in a recent IMF report about India’s dwindling poverty levels add up. We also look at the downgrade of Goa University by the National Assessment and Accreditation Council, among other news.
📰 FEATURE STORY
India’s Dwindling Poverty Levels: Fact or Fiction?
Ah, the IMF, more professionally known as the International Monetary Fund. The one economic crisis manager that everybody loves to hate. For India specifically, the name evokes some strong feelings. While it is widely known to be extra harsh on loan-taking developing nations, India has more or less had a decent relationship with it. In fact, India is considered one of the founding members of it.
After a quick turn towards pessimism in 2019-21, the IMF soon decided that the bad vibes were too much and came back to support us from the bleachers. So much so that the fund recently published a report that went over India’s economic successes during the pandemic. What is this success, you ask? Well, that we’ve managed to practically wipe the country clean of extreme poverty.
Context
On 5 April 2022, the IMF published a working paper called “Pandemic, Poverty, and Inequality: Evidence from India”. According to a summary provided on their website, the paper talks about the “estimates of poverty and consumption inequality in India” from 2004 to the pandemic year, i.e. 2020.
As a pleasant surprise and shock to independent economic researchers, the paper claims that India’s extreme poverty levels have actually been rather low since 2019. In 2019, the extreme poverty level was at 0.8%. But after the launch of certain food subsidies and schemes from the Centre, this level dipped even further.
The lowest extreme poverty level India recorded was in 1993-94 when the level was at 0.284%. Now, after all the food subsidies, that level is at 0.294%. This is the closest it has been to the 1993 level in the 21st century, all thanks to the pandemic support measures.
Here’s where things get complicated. Poverty estimates are generally known to be just that, estimates. Even when reports from different organisations show similar trends, the extent of the specificities is always rather suspect. And the picture gets even muddier when those details come from someone described as a “pro-Modi economist”.
Others have also questioned the methodology used in the paper to draw its conclusions as it primarily looks at poverty as a measure of hunger. So, did India actually decrease its extreme poverty level in the same year that the world saw an increase in poverty? There is only one way to find out.
VIEW: Food subsidies actually work
In 2013, the government enacted the National Food Safety Act (NFSA), also known as the Right to Food Act. Its main goal is to provide food grains to around two-thirds of our population at subsidised rates. In March 2020, the Centre took this and kicked it up a notch to maintain social security levels during the pandemic. It was when they launched the Pradhan Mantri Garib Kalyan Yojana (PMGKY), which provides 5 kg of food grains to households every month for free. This is given out on top of the 5 kg of grains distributed at ₹2-3 per kg, as per the NFSA.
According to Surjit S Bhalla, Karan Bhasin and Arvind Virmani, the authors of the working paper, these schemes are what helped phase extreme poverty levels out of India. First of all, what is the poverty line we’re working with? It all comes down to the purchasing power parity (PPP) line, fixed at $1.9 per person. Basically, if somebody has the purchasing power of less than $1.9 per day, they are considered to be extremely poverty-stricken.
The paper says that, back in 2012, the official poverty rate that fell below that PPP line was 12.2% in India. It also says that, overall, the number of people living in extreme poverty around the world has gone up since the pandemic. The authors of this paper argue that using the private final consumption expenditure (PFCE) is actually a better way to measure poverty. Normally, poverty research is done using survey data, but the PFCE is an estimate of actual consumption levels.
When consumption is what we’re looking at, India seems to be doing pretty well. The paper points out that after the enactment of the NFSA, our poverty rates have anyway been on the decline. And the efficiency of targeting the schemes to people via their Aadhaar also added to their general impact. Even though poverty might not have been eradicated in the country, this paper puts forward an interesting argument for policy interventions and the “povertarian mindset”.
COUNTERVIEW: Incorrect methodology
When you look this paper up online, the landing page on the IMF website says that none of the views of the paper’s authors necessarily fit with those of the fund. And that’s an important thing to remember before celebrating these numbers.
First of all, many have pointed out the obvious issues with the methodology used in the paper. According to economist Santosh Mehrotra, even when PFCE is used to measure poverty, the data is supposed to be based on household surveys. The authors of this paper have used national accounts statistics (NAS) to do this. Since NAS overestimates the PFCE, poverty measures derived from this will obviously be less, especially when compared to Consumption Expenditure Surveys. Mehrotra’s own estimates say that poverty levels were at 21% in 2020 and only got worse due to unemployment.
Mahendra Dev, the director and vice-chancellor of the Indira Gandhi Institute of Development Research, says that the wrong poverty line was used in the paper. For India, he suggests the use of the $3.2 poverty line – it’s the one the World Bank proposed in October 2017. In that case, the poverty rate increased from 14.8% in 2019-20 to 18.1% in 2020-21, and this includes the food transfers. It gets much worse without it, starting at 18.5% in 2019-20 to 26.5% in 2020-21.
Finally, the Head of the Centre for Sustainable Employment at Azim Premji University, Amit Basole, told Bloomberg that the paper makes many impractical assumptions to draw the conclusion they have published. One, it assumes that consumption grew at the same pace as it did in the PFCE. While this is not impossible, it is highly improbable given the several shocks the economy has had to handle, from demonetisation to the goods and services tax. Two, it assumes that GDP growth impacts all sections equally, i.e. the income of the poor grew at the same rate as that of the rich.
When we look at the on-ground impact of the food schemes too, things don’t look too great. As 30 villages across Odisha and Chattisgarh report, the food schemes had barely any impact on their level of poverty. It is also strange that the paper focuses solely on hunger as a measure of poverty, which is decidedly way more complicated than that.
What’s your opinion on this?
(Only subscribers can participate in polls)
a) The claims made in the IMF report about India’s dwindling poverty levels do add up.
b) The claims made in the IMF report about India’s dwindling poverty levels do not add up.
🕵️ BEYOND ECHO CHAMBERS
For the Right:
India’s Brahmins, Baniyas gained from English. BJP-RSS want to deny that to Dalit, Adivasis
For the Left:
Political violence, internal factions — Mamata Banerjee’s TMC is its own opposition in Bengal
🏴 STATE OF THE STATES
Notice on sewage cleaning incident (Haryana) – The National Human Rights Commission (NHRC), India, has issued a notice to the state government and the Palwal civic body over an incident that happened while a sewage tank was being cleaned. One person died, and three others were taken to hospital in serious condition. The Municipal Council was doing the work through a private company that contracted it to another company. The workers were allegedly not given any safety equipment. The NHRC has requested a report within six weeks.
Why it matters: The NHRC stated that several similar incidents have taken place over a short period. Last month, two workers died while cleaning a sewage line in Sector 14. They were working for a private contractor. The commission has tried to educate local authorities on the dangers and take the necessary precautions while carrying out such work. The NHRC previously warned the state of similar incidents in the past citing court judgments on ensuring worker safety.
App for government services (Kerala) – There’ll soon be an app available to the public to access online services offered by local self-government institutions. It’s being launched as part of the citizen service portal initiative. The portal, citizen.lsgkerala.gov.in, has more than 900 panchayats linked with it. Once municipalities and corporations are integrated, people can avail services like obtaining licenses and certificates and property tax payment mechanisms, etc.
Why it matters: In October, more than 500 government services went online with the e-sevanam and the m-sevanam app. These services were related to 58 government departments. This was part of the Chief Minister’s promise in the Left Democratic Front manifesto. For rural areas and villages, the e-service was launched 10 months ago with 309 panchayats. So far, more than 2 lakh applications have been received on the portal.
Chief Minister as Dalit messiah (West Bengal) – In May, an all-India Dalit convention will be held in West Bengal to highlight Chief Minister Mamata Banerjee’s welfare measures for Dalits. The aim is to project the TMC as Dalit-friendly. West Bengal Namasudra Welfare Board, Mukul Chandra Bairagya, said no other chief minister has done as much for Dalits. In 2018, the state government formed the welfare board as the BJP was looking to win over the Rajbanshis and Matuas – two of the largest scheduled caste groups.
Why it matters: SCs make up 23% of the state’s population and are an important voting bloc. Caste politics is a new reality in the state, and the convention will further reinforce it. Since 2011, the TMC has introduced identity politics based on caste and religion by courting Muslims and Namasudras. It was a plan to thwart the CPI(M)’s strategy, which has denied the existence of a caste divide in the state.
University downgrade (Goa) – In a shock to Goa University, the National Assessment and Accreditation Council (NAAC) gave it a B++ grade in its latest assessment cycle. Officials said they found discrepancies in the NAAC report and plan to appeal before the council. The new grade with a 2.86 CPGA based on a 4-point scale represents a sharp drop in its performance. The NAAC recently altered its assessment process to give 30% weightage to a peer team report and the remaining to quantitative aspects.
Why it matters: In the previous assessment cycle, the university received an A grade with a 3.09 CGPA. In September 2019, the university was to apply for its next cycle of re-accreditation. It delayed that as it wanted to address some issues like faculty shortages. It could submit itself only in July 2021 due to the pandemic and the end of the previous vice-chancellor’s term. The university was able to fill more than 90% of its vacancies.
An olive branch to insurgents (Arunachal Pradesh) – Chief Minister Prem Khandu appealed to the indigenous youngsters of the Tirap, Changlang, and Longding districts to not stray into insurgency activities. He cited the state’s surrender policy where those who return will be rehabilitated. He urged them not to join any insurgent groups as the region has seen enough bloodshed as civilians have been killed in anti-insurgency operations. He said peace talks are ongoing between all parties, and they hoped for a peaceful resolution.
Why it matters: The TCL region, according to Khandu, has the potential to become a tourist destination. He asked local entrepreneurs and businessmen to invest in the region for its betterment. The current government has taken a tough stand against insurgency in the region. As of November 2021, more than 130 insurgents were apprehended or surrendered. Part of this plan was to upgrade the capacity of the police department and its personnel.
🔢 KEY NUMBER
₹7.5 lakh crores – The base price recommended by the Telecom Regulatory Authority of India (TRAI) for the sale of over 1 lakh Mhz of spectrum for 5G. The auctions are expected to happen later this year.