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Economy

Has India’s Rural Poverty Rate Increased in the Last Six Years?

A new analysis by business newspaper Mint, based on NSO consumer expenditure data, argues that 30 million people fell below India’s official poverty line and joined the ranks of the poor over the past six years.

New Delhi: India’s rural poverty rate may have increased by four percentage points between 2011-12 and 2017-18, according to a new analysis of recent consumer expenditure data.

The analysis, carried out by business newspaper Mint, notes that an accompanying decrease in urban poverty rates means that effectively 30 million “fell below India’s official poverty line and joined the ranks of the poor” in that six-year period.

“Given the higher weight of the rural population, the estimated overall poverty rate went up nearly a percentage point to 23 percent in 2017-18. The rise implies that 30 million people fell below India’s official poverty line and joined the ranks of the poor over the past six years,” the report notes.

The term ‘poverty rate’ here is defined as the share of the population (percentage) that lies below the poverty line. If the report’s calculations are accurate, it would imply that India’s poverty rate has risen for the first time in decades.

The data for this analysis comes from the National Statistical Office’s last consumer expenditure survey, which became controversial after the Narendra Modi government decided to not release the results citing data quality issues.

Mint notes that its analysis comes from the main ‘key indicators’ report which was first reported by Business Standard and not the raw consumption survey data as that hasn’t been made public yet.

Also read: Share of Young People in MGNREGA Workforce Rises, Pointing to Rural Distress

The report notes that while there is a slight rise in overall poverty rates at the national level, most south Indian states have managed to bring down the overall number of poor in their region.

As the analysis points out:

“Several states in the east and north-east have witnessed a sharp rise in poverty over the past few years even as southern states (barring Karnataka) managed to bring down poverty rates.

Among large states, Bihar saw the greatest rise in poverty between 2011-12 and 2017-18, with poverty rate rising by a whopping 17 percentage points to 50.47 percent. Jharkhand (8.6 percentage points or ppts increase) and Odisha (8.1 ppts increase) are the other large states which saw big increases in the poverty rate. The poverty rate refers to the (percentage) share of the population that lies below the poverty line. More than 40 percent of both Jharkhand and Odisha fall below the poverty line.

West Bengal (6 ppts fall), Gujarat (5 ppts fall), and Tamil Nadu (5 ppts fall) saw the biggest declines in poverty among the large states in the period between 2011-12 and 2017-18. Among prosperous states, Maharashtra saw the biggest increase in poverty (roughly 5 ppts) over the same period.”

The report’s assessment is based on the “inflation-adjusted state-wise poverty lines for rural and urban areas” that was reported by the Planning Commission in 2013. The commission’s figures were in turn based on the methodology suggested by the 2009 Tendulkar committee on poverty.

“If one were to adopt a higher poverty line (such as the one recommended by Rangarajan committee), the extent of the rise in rural poverty is likely to be higher while the extent of the decline in urban poverty is likely to be lower,” the media report notes.

Household survey data on consumer expenditure has of late become controversial in India’s public policy circles.

Also read: Rural Demand Slides to Lowest in Seven Years: Report

Critics argue that the NSO’s surveys don’t line up with other major micro and macroeconomic indicators, while government officials have also pointed out that household surveys may no longer be effective due to the policies that the Narendra Modi government has adopted. 

On the other hand, economists who are supporters of household surveys note that official growth figures often fail to capture trends in India’s rural and informal economic activity. And therefore, consumption surveys shed important light on a crucial part of the economy that may not be recorded otherwise.

Mint notes that given the fact that these issues “involve enormous public funds”, the government should make sure that the “raw data collected by the surveyors… be opened up to the public”.

“A large number of independent researchers can then go through the numbers and assess scientifically which of the survey findings we should pay heed to, and which we could ignore,” the analysis points out.