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Silicosis can be effectively stopped at its source by implementing straightforward dust control measures. Photograph: (Institute for Global Labour and Human Rights/Flickr)
In recent years, the narrative surrounding poverty in India has been shaped by optimistic reports suggesting significant progress in reducing poverty levels. Government officials and research institutions have pointed to studies claiming poverty in India has fallen to historic lows.
Recent reports suggest poverty decline
A new study in The Journal of the Foundation for Agrarian Studies (FAS) presents a starkly different picture, asserting that the reality of poverty in India is far more pressing than official claims suggest.
According to this study, around 26.4% of India's population lives below the poverty line, casting doubt on the accuracy of more favourable estimates. This raises questions about the methods used to measure poverty and the true extent of economic inequality in India, which has witnessed rapid growth but still grapples with poverty and inequality challenges.
The study’s findings challenge the optimistic claims that poverty in India is declining. Ruling party politicians pointed to a State Bank of India (SBI) survey suggesting poverty had fallen to less than 5% in urban and rural areas.
The SBI estimate and projections from the National Council of Applied Economic Research (NCAER), suggesting poverty dipped below 10% in 2023, have been circulated and praised by government representatives. However, these claims have been met with skepticism by economists and experts, who argue that the real picture of poverty in India is more complex.
Over a quarter live impoverished
The FAS paper analyses poverty levels in India, estimating over a quarter of the population lives below the poverty line. Using the Rangarajan method, the authors calculated the poverty line at Rs 2,515 per month in rural areas and Rs 3,639 in urban areas. This method considers the cost of food and essential non-food items for basic living standards.
As per the study, the method was used in a C. Rangarajan Committee report in 2014 to provide a more accurate estimate of poverty. It contrasts with methods used by the SBI, which have been criticised for underestimating poverty in India.
India hasn’t released official poverty estimates from the HCES 2022–23 data, despite the survey being conducted in 2022 and the results available in 2024. However, the government has supported studies from SBI and NCAER suggesting a dramatic decrease in poverty levels.
Poverty measurements, income growth, disparities
According to these studies, the percentage of people living in poverty has drastically fallen since 2011–12, the last official estimate in India. The SBI report claims less than 5% of Indians are now living in poverty, contrasting with the FAS estimate of 26.4%.
The Rangarajan method in the FAS study uses a more thorough and sound approach to measuring poverty. The authors argue that previous estimates, like those from the Tendulkar Committee and adjusted by the SBI, are flawed because they relied on the Consumer Price Index (CPI) to adjust the 2011-12 poverty line for inflation.
The CPI measures average price changes over time, but it doesn’t accurately capture the consumption patterns of the poor, who need assistance. The poor spend their limited resources on food and necessities, and their consumption patterns differ from wealthier individuals. Using the CPI to adjust for inflation has overstated the improvement in living standards for the poor.
The FAS paper authors argue that the Rangarajan method better reflects India’s poverty situation. This method uses data from the HCES 2022-23 survey to calculate the poverty line based on a nuanced understanding of consumption patterns.
The study found poverty levels are higher than suggested, with nearly 26.4% of the population living below the poverty line.
Rural income growth remains slow
Besides methodological concerns, the FAS paper highlights the stagnation of rural incomes over the past decade. Data from the Situation Assessment Surveys of Agricultural Households (2012-13 and 2018-19) show that the average monthly income of agricultural households has increased by only 2.44% per year between these years, from Rs 8,843 to Rs 10,218.
The slow income growth is concerning given the rising cost of living and limited economic advancement opportunities in rural areas. The authors argue that despite claims of economic growth, rural poverty remains a persistent problem in India.
The authors raise concerns about the methodology used by other researchers estimating poverty in India. Rangarajan and Dev, who used the CPI to adjust the 2011-12 poverty line for inflation, have been criticised for underestimating poverty.
While their method suggests India’s poverty rate is around 10%, the FAS paper argues this estimate fails to account for rural poverty and stagnant income growth in rural areas. The paper’s authors argue their methodology, based on the Rangarajan method, is likely to underestimate poverty rather than overestimate it.
The FAS paper notes that the 2022-23 HCES survey differs significantly from earlier surveys, making comparisons problematic. For example, the HCES 2022-23 included new consumption categories, such as free rice and sugar from the Public Distribution System, not included in previous surveys.
The HCES 2022-23 used a different data collection method, including multiple household visits and a detailed questionnaire. These differences make it difficult to compare the 2022-23 data directly with earlier surveys, complicating efforts to track poverty changes over time.
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