India's poverty rate slipped to 6.3% in FY18, says Surjit Bhalla

Only 6.3 per cent people were poor in India in 2017-18, down from 22.2 per cent in 2011-12, said Surjit Bhalla, former part-time member of the Prime Minister’s Economic Advisory Council (PMEAC), on Monday, adding that the 2011-2018 period recorded the steepest decline in poverty in the country. 

Bhalla is currently the executive director for India, Nepal and Bhutan at the International Monetary Fund (IMF). According to the definition of poverty given by the Tendulkar Committee of 2009 ($1.9 per person per day), 22.2 per cent of Indians were poor in 2011-12, while the poverty rate was 37.7 per cent in 2004-05.

“The 2011-2018 period saw the fastest decline in poverty in India, propelled by faster growth in the gross domestic product (GDP), affordability of food, and social sector subsidies,” Bhalla said while presenting the abstract of an upcoming research paper at the National Centre for Applied Economic Research (NCAER) in New Delhi on Monday. 

Former chief economic advisor Arvind Virmani (2007-2009) and Swarajya magazine’s Karan Bhasin have co-authored of the research paper.

This level of poverty would mean that the number of poor in India — or the poverty headcount — has declined to 84 million in the 1,300 million-strong demography, down from 270 million in 2011-12 (population: 1,200 million).

According to the World Bank’s international poverty line definition of $3.2 per person per day, poverty rate declined from 64.7 per cent in 2011-12 to 46.6 per cent in 2017-18, the abstract says.

Bhalla and others have used multiple data sets — national accounts statistics (NAS) from the National Statistical Office (NSO), night lights data from the World Bank, India Human Development Survey (IHDS) by the University of Maryland and NCAER, and others — and statistical modelling to arrive at these conclusions.

As estimates for individual incomes are not available in India, poverty estimation is based on consumer spending data, which is available from the national sample surveys carried out by the NSO.

Bhalla has termed the consumption expenditure survey (CES) for 2017-18, which was recently scrapped by the government, as “junk”, and has not used the available reported data for his analysis. The CES 2017-18 had shown a decline of 3.5 per cent in consumer spending in real terms, biggest decline in five decades.
 

Bhalla, instead, has used two sets of data to assess consumption growth in 2017-18, the migration survey conducted in three states for five months under the IHDS that captured consumer spending as an additional data point, and the volume growth (production) in food and non-food items of consumption.

While one part of the IHDS 2017 — with a sample size of 4,828 — has concluded that consumer spending grew by 2.7 per cent per year from 2011 to 2017, the other part has shown the growth to be even higher at 4.9 per cent per year, as against the contraction of 3.5 per cent shown by the CES 2017-18.

Similarly, the second set of data has shown a 2.9 per cent increase in consumption by volume. Using these, the authors have argued an unprecedented decline in poverty in India.

Sudipto Mundle, distinguished fellow at NCAER, said the impact of demonetisation on the informal sector is not captured in the data used by the authors. He also said data has been used selectively.

Gurucharan Manna, former director general at the erstwhile Central Statistical Office (subsumed into the NSO) and currently a senior adviser at NCAER, said the estimation of poverty headcount in the paper may be erroneous, as even small changes such as using different methodology for spending on fruits and vegetables results in large changes in poverty rates.

Bhalla and others also argued that this decline in poverty has been propelled mostly by the strong economic growth and the massive expansion of the public food distribution system under the food security law.