The Persistent Decline In Poverty in India

Context

The recent release of NFHS-5 data for 2019-21 enables a detailed analysis of progress in reducing absolute poverty and related determinants such as nutrition. The article examines the relative decline in poverty from 2004 to 2013 and 2014 to 2021, arguing that India’s economic growth was the most inclusive between 2014 and 2019.

Relevance

GS Paper 2: Poverty and Hunger

Mains question

“Poverty Is A Condition of Social and Political Exclusion As Well As Economic Deficiency.” Substantiate. (250 words)

Demonstration of declined poverty

The two time periods under consideration in the article, 2005 to 2011 (P-1) and 2011 to 2021 (P-2) are separated by declining per capita income growth in the world (2.8 to 2.2 percent) and in India (from 6.3 to 4.4 per cent).

The National Family Health Survey (NFHS)

• Description: The National Family Health Survey (NFHS) is a large-scale, multi-round survey conducted in a representative sample of households across India.
  • The NFHS surveys are part of a global effort to estimate a multidimensional poverty index.
• Calculation: It is based on poverty estimates based on ten different indicators (see table).
  • The deprivation index for each indicator is the percentage of the poor (deprived) according to that indicator, and aggregating the ten indicators into one index involves legitimate weighting issues.

Facts about poverty from 2005 to 2011 (P-1) and 2011 to 2021 (P-2)

• Poverty decline: According to NFHS estimates, poverty fell sharply after 2011, based on these two periods, P-1 and P-2, as shown below:
• Illustration: Multidimensional poverty fell at a compounded annual average rate of 4.8% per year in P-1 and more than doubled to 10.3% per year in P-2.
  • The average equally weighted decline for nine indicators in P-1 was 1.9 percent per year, compared to a rate of 6% per year in P-2, which was more than eight times higher.
  • This unambiguous and strong conclusion, however, requires further investigation into what made growth in P-2 so inclusive.
• Supporting evidence: The Demographic and Health Surveys (DHS) nutrition index improved at a 2.5 percent rate between 2005 and 2011, and at a more than five times faster rate between 2020 and 2011.
  • DHS Information: The DHS are nationally representative household surveys that provide data for a wide range of population, health, and nutrition monitoring and impact evaluation indicators.
  • A similar improvement can be found in nutrition deprivation, which has decreased by 11.6 percent CAGR since 2015.
• Contrasting findings: On the other hand, the recently released Global Hunger Index (GHI) depicted a worsening of hunger in India between 2014 and 2021, contradicting the large improvement documented in the NFHS data.
  • It ranked India 107th out of 123 countries, down from 101st in 2021, and placed it in the “serious” category, trailing all South Asian countries except war-torn Afghanistan.
• Unlike the GHI, however, the NFHS provides comparative state-level data, including the key indicators that determine health and nutrition.

A viewpoint on inclusive growth

• Reduction in Consumption Inequality: From 2011 to 2021, consumption inequality decreased in every single household survey or analysis (P-2).
  • According to a recently published International Monetary Fund (IMF) working paper, consumption inequality in India during the pandemic (2020-21) fell to near 40-year lows, owing primarily to free food distribution to 800 million people.
• Reasons for the inclusive nature of growth during P-2: The focus of government policies on each of the individual indicators of a dignified standard of living, as well as a sharp departure from the “entitlements”-based approach used between 2004 and 2013, accelerated inclusive growth.
  • Additionally, proactive fiscal policy combined with effective targeting.

Exemplification of inclusive growth

• Toilet access: The current government’s Swachh Bharat mission in P-2 built over 110 million toilets.
• Access to electricity: Until 2014, nearly one-third of Indians lacked access to electricity. However, with the help of the Saubhagya Yojana, India was able to electrify every village and, eventually, every household.
  • Electricity deprivation decreased by 28.2 percent after 2014, but it was close to zero from 2005 to 2011 (P-1).
• Financial inclusion: The Jan Dhan Yojana, which provides basic banking services to the poor, has made financial inclusion a reality in India, particularly for women.
  • It currently has over 472 million accounts with deposits totaling over 1.75 lakh crore.
• Access to modern cooking fuel: In just five years, the Ujjwala Yojana reduced deprivation by nearly half, from 26% to 14%. The previous halving took ten years (from 2005/6 to 2015/16).
• Awas Yojana provides affordable housing to less than 14% of the population, down from three times that number in 2011/12.
• Clean water: More recently, after 2019, India launched the Jal Jeevan Mission, which aims to provide universal access to piped water.
  • Rural piped water coverage was slightly less than 17% in 2019, but is now well above 54% and expected to be close to, if not meet, the 100% target by 2024.

Conclusion

• Policymakers and academics have prioritised the poverty-reducing properties of inclusive growth over growth per se. Given the estimated decline in poverty in India, it is time to change our economic policies and focus on what causes growth rather than what causes poverty to decline.
• Poverty now includes not only food but also living conditions such as sanitation, housing, piped water, electricity, education, health, and employment. And, in each of these areas, the emphasis should be on quality rather than quantity.