Analyzing COVID-19’s Impact on Poverty in India and Exploring Pathways for Recovery

Context:

• This article is based on an Editorial “A grainy picture: Tough to measure Covid’s impact on poverty without data” which was published in The Hindu. According to World Bank Estimates, the number of people who fell into poverty in India in 2020-21 was approximately 29.5 million.

World Bank Estimates Show Decline in Extreme Poverty in India

• According to fresh estimates by the World Bank, extreme poverty in India further declined to 11.3 per cent in 2022-23, but that was still above the pre-pandemic level of 11.09 per cent recorded in 2018-19.  
• In the absence of Household Consumer Expenditure Survey data from the government after 2011-12, the multilateral lending institution used data from the Consumer Pyramids Household Survey (CPHS) conducted by the Centre for Monitoring Indian Economy to estimate poverty for India.  
• The impact of the pandemic on pov­erty and inequality in India has been a contested issue in the absence of govern­ment data. 

Understanding Poverty in India: Definitions and Perspectives

• Poverty can be defined as a condition in which an individual or household lacks the financial resources to afford a basic minimum standard of living. 
• However, the perception regarding what constitutes poverty may vary over time and across countries. 

Exploring Poverty Classifications: Absolute vs. Relative Poverty in India

• Absolute Poverty: – It is the complete lack of the means necessary to meet basic personal needs, such as food, clothing and shelter. 
• Relative Poverty: – It is the condition in which people lack the minimum amount of income needed in order to maintain the average standard of living in the society in which they live. 

Measuring Poverty in India: Approaches and Recommendations in India

• The conventional approach to measuring poverty is to specify a minimum expenditure (or income) required to purchase a basket of goods and services necessary to satisfy basic human needs. This expenditure is called the poverty line.
• Poverty in India can be measured in terms of the number of people living below this line (with the incidence of poverty expressed as the head count ratio). 
• Six official committees have so far estimated the number of people living in poverty in India — the working group of 1962; V N Dandekar and N Rath in 1971; Y K Alagh in 1979; D T Lakdawala in 1993; Suresh Tendulkar in 2009; and C Rangarajan in 2014.
• Arvind Panagariya Task Force on Elimination of Poverty in India (2015): 
  • Key Recommendations: Government to Focus on Bottom 30% in Poverty Alleviation Efforts
    • It has recommended to the PMO that a new committee be set up, which will work on the definition to identify BPL population, and this will include active participation from the states.
    • Continue with the Tendulkar poverty line. 
    • Track progress over time of the bottom 30 percent of the population and last, track progress along specific components of poverty such as nutrition, housing, drinking water, sanitation, electricity and connectivity.

COVID-19’s Impact on India’s Poor: Job Losses, Income Decline, and Rural Hardship

• Impact of First wave: In India, the lockdown accentuated crisis caused several industries to collapse and shut down, leaving millions of informal workers stranded.
  • Centre for Monitoring Indian Economy (CMIE) estimates that there is a net loss of 7 million jobs between February 2020 and February 2021. The biggest loss in jobs is suffered by the non-farm workers (11.6 million) followed by salaried employees (4.2 million), daily wage earners (4.2 million) and businesspersons (3 million). 
  • Decline in the condition of employment:. The employment (particularly re-allocated one) was not as fruitful as compared to the employment from the pre-crisis times. 
    • Workers experienced a decline in the number of working hours and wage cuts in their reinstated jobs.
  • Informality of the jobs has increased: With nearly half of the salaried workers moving into the informal sector .As a consequence, there was a fall on an average of 12% in household income during 2020–2021.
    • Geographical coverage of Economic woes: The COVID-19 problems in India were once thought to be an urban phenomena, but due to backward and forward economic linkages across the sectors, their negative economic effects swiftly expanded to the rural sector.
    • Effect on Agriculture:The unplanned and hurriedly carried out lockdown of the year 2020 not only caused a large migration of people from the countryside to the cities, but it also brought agriculture and related activities to a halt, leaving millions of rural laborers trapped and in hardship.
    • Effect of Lack of Movement on Rural Income: The urban restrictions in terms of movement of labor, primary, intermediate and final goods, particularly perishable goods (horticulture and others), severely affected rural income and production.Impact of second wave:  Although, at this time, the lockdown was not imposed at the national level in the manner it was imposed last year, in terms of stringency and duration, yet the impact in terms of loss of lives and hence the loss of livelihood is severe.
• Compounding problems of Poverty in India:With the increasing job informality and unemployment, exceedingly high out-of-pocket expenditure (OOP), health expenditure and the apprehensions of the third wave restricting household spending, the second wave resulted in compounding problems of poverty and impoverishment for the country.

Way Forward: New Strategies for the Post-COVID Era

• Reevaluating Poverty Lines: Poverty lines have to be recalibrated depending on changes in income, consumption patterns and prices. 
  • The usual poverty line used in narratives is 1.90 international dollars a day, but the World Bank has two others—$3.20 per day for middle-income countries and $5.50 per day for rich countries.
• Navigating India’s Transition: Adapting Political and Policy Frameworks for Middle-Income Dynamics: The Indian policy and administrative systems have to adjust to the new realities of the transition to a middle- income country, in which poverty does not mean living at the edge of hunger but, rather, lack of income to take a Advantage of the opportunities thrown up by a growing economy
  • The focus of government spending should be on the provision of public goods rather than subsidies. 

• Agricultural Growth and Poverty Alleviation: Agricultural growth has been recognised as an important factor that contributes to marked reduction in poverty in India.
  • For Example:  A study made by Montek Singh Ahluwalia, former member of Planning Commission, brought out clearly that agricultural growth and poverty are inversely related; higher agricultural growth leads to lower poverty ratio. 
  • The experience of Punjab and Haryana in the late sixties and in the seventies confirmed this inverse relation between agriculture growth and poverty in India. 
• Growth of Non-Farm Employment  in the rural areas:Non-farm employment is created in marketing (i.e., petty trade), transportation, handicrafts, dairying, and forestry, processing of food and other agricultural products, repair workshops. 
  • A study of poverty alleviation in Haryana brings out that significant reduction in rural poverty in Haryana in spite of a reduction in employment opportunities in agriculture was due to the remarkable increase in non-farm employment. 
• Hybrid Approach to Measuring Poverty in India: A hybrid approach which would measure poverty from the perspective of a common global standard of living and relative poverty within countries. 

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