National Council of Applied Economic Research
Opinion: Sonalde Desai.
India’s growing economy is lifting families out of poverty but often onto a precarious perch. A single disaster can push them right back. Policy, obsessed with counting the poor, ignores the question of helping ‘newly poor’
Two decades ago, controversies around the measurement of in National Sample Surveys set off what became known as the Great Indian Poverty Debate. We seem to have come full circle with new controversies about poverty measurement, leading to the Great Indian Poverty Debate 2. But is counting the exact number of individuals whose incomes fall below the poverty line, located around ₹1,900, as important as understanding the nature of poverty decline and its implications for social policy?
Some estimates based on Household Consumption Expenditure Survey (HCES) place poverty under 5%. Newly collected Wave 3 of India Human Development Survey (IHDS) places it at about 8.5%. HCES probably underestimates poverty due to a change in methodology, while IHDS probably overestimates poverty due to its reliance on an older sampling frame that omits newly growing peri-urban areas. However, both suggest that poverty is declining. The multidimensional poverty index released by Niti Aayog also documents improvements in the conditions under which households live.
But due to an obsession with estimating the exact number of individuals in poverty, implications of this change for the provision of social safety nets are ignored.
India’s approach to social protection was developed when most of its population was impoverished. Unequal access to productive resources such as infra, land and education led to endemic poverty among some sections of the society (such as SCs and STs) and some areas (such as poorest districts like Dahod, Gadchiroli, and Dhubri). Hence, the primary focus was on designating the poorest sections of society as BPL and providing them various benefits, including food grains.
As the economy grows, it presents both opportunities and challenges. rural residents find work as skilled masons, and urban slum-dwellers become drivers for delivery services. While this is a step out of abject poverty, it also places them on a precarious perch where a single accident, natural disaster, or epidemic could push them back into poverty.
IHDS, organised by National Council of Applied Economic Research and University of Maryland, followed more than 40,000 households between 2004 and 2024. Its results suggest that poverty decline is closely coupled with increasing vulnerability. Between 2004-05 and 2011-12, of the total 22.4% who were poor, 8.5% were newly poor.
That is, if BPL cards were given based on poverty in 2004-05, they would miss out on nearly 40% of the individuals who were poor in 2012. This proportion grew between 2011-12 and 2022-24, although overall poverty declined. Of the 8.5% poor in 2022-24, 5.3% are newly poor, reflecting a decline in chronic poverty and growth in transient poverty.
Whereas accidents of birth largely shaped the fortunes of Indian citizens in the 20th century, the 21st century has seen a rising importance of accidents of life. The challenge is that we cannot easily predict this descent into disaster. While the death of a wage earner brings debt and misery to one widow, the other may be able to get a loan from a bank to set up a small shed for raising pigs and support herself, yet another may have a son who is grown up and can help his mother.
Our public discourse must acknowledge and celebrate movement out of poverty, but it must also recognise the precarity of this achievement and work towards building safety nets that protect against unforeseen disasters. This involves developing social policies that provide risk insurance and strengthening institutions that can be mobilised to deliver assistance when needed.
Illness and death pose tremendous risks for vulnerable households. Hence, strengthening public health services and building an efficient health insurance programme are critical. Present programmes such as Ayushman Bharat cover only hospital expenditures, which can easily lead to escalating public expenditures as individuals who can be treated in outpatient clinics resort to hospitalisation because they lack the funds to pay OPD fees.
Dealing with emergencies also requires building sustainable institutions. During the pandemic, PDS ensured that grains could be distributed despite price rises and transportation challenges. This helped avert hunger and starvation while highlighting the exclusion of migrants who did not have proof of residence, giving impetus to setting up the One Nation, One Ration Card programme. Similarly, immediate cash needs during flooding or other disasters can be met through an infusion of funds if we have access to registries that link people’s current residential locations with their bank accounts.
We must move past the futile debate about estimating the exact number of poor individuals and accept that poverty is declining, requiring re-envisioning of our social protection programmes to ensure we don’t fail those who need help the most.
The writer is Professor at National Council of Applied Economic Research & University of Maryland. Views are personal.