The time of higher poverty line in India

The time has come for India to raise its current poverty line from the current extreme poverty line of $ 1.90 per person per day to the lower-middle income (LMI) poverty line of $ 3.20, which is about 68 percent higher. It may seem strange to wish for something that is not even in the first year after the epidemic, but that is the main message coming out of our recent IMF working paper. “Epidemics, Poverty and Inequality: Evidence from India

No one should be surprised at this need for higher poverty. In the twenty years from 1983 to 2003, the average per capita GDP growth in India was 3.5 percent. Rapid growth (5.3 percent per annum) and an improved method of cost measurement (modified mixed withdrawal period (MMRP) instead of the Uniform Recall Period (URP)), resulted in HCR reaching lower adolescence in 2011-12. Then the poverty line should have been increased Valla (2010) Arguably most countries change from the concept of absolute poverty to relative poverty when they are rich, and so should India. Relative povertySubject to minor controversyMost choose to refer to the HCR level of about one-fourth or one-third of the population. So, the $ 1.90 poverty line in 2011-12 was already very low and today it is very low

The HCR (Figure 1) of the 90 1.90 poverty line has fallen sharply since 2004 প্রায় from about one-third of the population in 2004 to less than 1.5 percent in 2019. These numbers are lower than the numbers shown in the World Bank’s Povcal database, the most widely used source, because the misleading uniforms used by Povcal do not correct for recall periods or for food subsidies.

Figure 1. Poverty rate in India has declined sharply since 2004

Poverty rate graph in India

Source: NSS 2011-12 MMRP data; Personal Final Expenditure (PFCE) growth rate for estimating monthly per capita expenditure; The authors count.

According to our estimates, in pre-epidemic 2019, extreme poverty was already below 1 percent and despite the significant economic downturn in India in 2020, we believe that the impact on poverty was minimal. This is because we estimate poverty (HCR) after including the benefits of the general food (wheat and rice) subsidy for an estimated 800 million people (75 percent rural and 50 percent urban). These food subsidies were not small and increased to close to 14 percent of the poverty line for the average subsidy recipient in 2020 (Figure 2). This was enough to contain any increase in poverty even in the year 2020 epidemic.

Figure 2. Food subsidies contain any increase in poverty

Food subsidies contain any increase in the poverty graph

Source: NSS 2011-12 MMRP data; Personal Final Expenditure (PFCE) growth rate for estimating monthly per capita expenditure; The Indian poverty line is very close to $ 1.9 per capita per month; The authors count.

A notable feature of the epidemic response was the provision of free additional 5 kg of wheat or rice per month. Prime Minister’s Poor Welfare Scheme (PMGKY) Program Plus Pulses 1 kg. This was in addition to the existing food transfer of 5 kg per head of wheat or rice per month at subsidized prices. The total amount of subsidized food grains in 2020 was 10 kg, which is the average level of per capita food consumption (wheat and rice) consumed by Indian citizens. Three decades.

Excess food subsidies There was an epidemic-Centralized response. We would assume that a cross-country comparative study could show that this policy response was probably the most effective in the world. Thus, the Indian experience can provide lessons for individual countries and multilateral organizations involved in effective redistribution of income.

The last official consumption survey (based on poverty measurement) in India was conducted in 2011-12. The following survey conducted in 2017-18 Generated results that have not been officially released, On the basis that the data was not of acceptable quality. Our paper contains a detailed discussion of the validity of the evidence regarding this controversial decision where we have come to the conclusion that the information is indeed of unreliable and highly questionable quality and therefore should not be disclosed. A very recent World Bank survey by April 2022 And Adochi. Al Offer support for our conclusions and assumptions.

Our research paper presents a series of periods of poverty and (real) inequality in India for each of the years 2004-2020. Our estimates of real inequality (Figure 3) show that consumption inequality has also decreased and is very close to the historic low of 0.28 in 2020. The tendency to poverty and inequality can be emotional, controversial and confusing. Consumption inequality is less than income inequality, which is less than wealth inequality. And each can show different trends. Dimensions and trends vary, and mixed use will carry a caution about this when discussing “inequality”.

Figure 3. Consumption inequality has decreased in India

The graph of consumption inequality in India has decreased

Source: NSS 2011-12 MMRP data; Personal Final Expenditure (PFCE) growth rate for estimating monthly per capita expenditure; The authors count.

Our results differ from most interpretations and analyzes of India’s poverty. All estimates have been made in the absence of an official survey since 2011-12 A large part of the explanation of the difference in results is due to differences in definition. Makes a strong case for the acceptability of our paper Official Cost definition (adopted by most countries and recommended by the World Bank); It should be measured according to the classification of costs according to the nature of the product or service received. This is the MMRP method for obtaining usage costs. The Government of India has officially adopted this approach, and the aforementioned “unfortunate” 2017-18 survey was the first time that the National Statistics Agency measured expenditure (and poverty) exclusively as defined by the MMRP.

However, many studies now rely on the unconventional uniform reference period (URP or 30-day recall for all items) method. For example, a very recent one World Bank research The HCR is projected to be around 10 percent in 2019; It uses the old (URP) definition of use and does not adjust for food subsidies. Incidentally, in both 2009-10 and 2011-12, the URP and MMRP poverty estimates evolved by about 10 percentage points, as did their respective average spending estimates. Thus, given the approximate extent of the definitional differences observed in both 2009-10 and 2011-12 and the adjustments required for food subsidies, the World Bank’s Poverty Estimates for 2019 may be very close to our estimates.

Inclusive growth is a very relevant policy goal for all economies. With the epidemic declining and the IMF’s expected growth for India returning sharply for three consecutive years from 2021-23, Indian policy makers will soon face a policy choice.How long should they keep the extra PMGKY subsidy? This question is part of a huge success story in poverty reduction. Additionally, another question is whether policies should move towards targeted cash transfers instead of subsidized food grains.

In the past, the main argument in favor of changing policy on cash transfers was to reduce leaks, but our results indicate that leaks have decreased significantly in the last decade, even in in-kind food transfer schemes. Indeed, the recent food transfer program has been a very successful intervention, especially during epidemics when the supply chain was breaking down and there was high uncertainty. Under normal circumstances, cash transfers may be more efficient, and they maintain broadly the same allocation results as food transfers. So the debate should now be on the trade-off of skills associated with the use of in-kind or cash transfer as the main tool for poverty alleviation.

These debates are significant because of the improvement in migration targets and in line with the objective of building a modern social security architecture in developing countries.

Gathering all the evidence, the strong conclusion from our work is that Indian policy has effectively provided both growth and inclusion and has faithfully followed the Rolls-Royce Maximin policy in the fundamental sense.To maximize the welfare of the poorest people.

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