Various estimates point towards one conclusion – the number of poor Indians swelled in 2020
The newly released World Bank report has estimated that the number of extremely poor people globally went up by nearly 71 million in the year 2020 as compared to 2019 — a 11 percent increase. Between 2019 and 2020, the number of poor swelled by around 56 million in India. It means that about 79 percent of the total people globally who slipped into poverty during the first year of the COVID-19 pandemic belonged to our country.
Globally, the number of extremely poor people climbed from 648 million to 719 million between 2019 and 2020, whereas in India the related numbers grew from 136.81 million to 192.81 million between those two years.
It should be noted that the extreme poverty line of $2.15 per person per day in terms of 2017 Purchasing Power Parity (PPP) prices is equivalent approximately to Rs. 44.4 per person per day, which many experts have considered to be too low.
Poverty estimation methodology of the new World Bank report for India
For estimating the number of extremely poor Indians, the report titled 'Poverty and Shared Prosperity 2022: Correcting Course' has used the data from the Consumer Pyramids Household Survey (CPHS), which is conducted by the Centre for Monitoring Indian Economy (CMIE), a private data company. According to the World Bank report, "[t]he household consumption data used for poverty monitoring is based on an analysis by Sinha Roy and van der Weide (2022) in which the CPHS sample is re-weighted to more closely resemble a nationally representative survey and the consumption aggregate is adjusted to more closely match the consumption aggregate used in the official series."
The latest Poverty and Shared Prosperity report estimates the global and regional poverty on the basis of the new household survey data for India for the years 2015/16, 2016/17, 2017/18, 2018/19, and 2019/20 from the CPHS. It should be noted that Sinha Roy and van der Weide (2022) made several adjustments to the CPHS data because concerns were raised by Jean Drèze and Anmol Somanchi (2021) about the sampling and the fact that the consumption aggregate is not directly comparable with the National Sample Survey (NSS). On comparing the CPHS against the National Family Health Survey-4 & 5 and also the Periodic Labour Force Survey (PLFS), Drèze and Somanchi (2021) had stated in their article that the former is biased towards the better-off households and the bias is growing over time.
Since there is a widespread agreement that microdata from household surveys are essential to credibly measure income (or expenditure) poverty, the latest World Bank report has used the Sinha Roy and van der Weide (2022) methodology. The report, however, mentions clearly that the National Statistical Office i.e., NSO (erstwhile National Sample Survey Office) has started conducting a household survey in 2022 that will provide updated official statistics on poverty for the entire country as well as poverty at the sub-national level. Based on the all-India Household Consumption Expenditure Survey done by the NSO, poverty was officially computed for the last time in 2011-12. The 75th round of the NSS data related to the Household Consumption Expenditure was officially deemed unfit for constructing the new income poverty line and measuring the latest income or expenditure-based poverty.
As per the recent World Bank report, the national poverty headcount ratio at $2.15 per person per day in 2017 purchasing power parity terms (PPP) poverty line in India was 10.01 percent in 2019 — 12 percent in rural areas and 6 percent in urban areas. The report has also made it clear that the poverty data are now expressed in 2017 Purchasing Power Parity (PPP) prices, as opposed to the 2011 PPP in previous editions. The new global poverty lines of PPP $2.15, PPP $3.65, and PPP $6.85 per person per day reflect the typical national poverty lines of low-income, lower-middle-income, and upper-middle-income countries in 2017 prices.
In order to understand the level of poverty in India during various years (using various sources of data and different types of poverty lines), one needs to look at chart-1 below.
Chart 1: Poverty reduction in India over the years using various poverty lines and surveys
Source: Country profile: India, World Bank, please click here and here to access
Note: Please click here to access the poverty data in a spreadsheet
Extreme poverty line of $2.15 per person per day (2017 PPP)
• When the extreme poverty line of $2.15 per person a day (2017 PPP) is considered, one finds that the number of poor people (using the CPHS data) was 245.4 million in 2015, 239.82 million in 2016, 178.92 million in 2017, 149.98 million in 2018 and 136.81 million in 2019.
• Based on the $2.15 per person a day (2017 PPP) poverty line (employing the CPHS data), the headcount ratio was 18.73 percent in 2015, 18.11 percent in 2016, 13.37 percent in 2017, 11.09 percent in 2018 and 10.01 percent in 2019.
Extreme poverty line of $3.65 per person per day (2017 PPP)
• When the extreme poverty line of $3.65 per person a day (2017 PPP) is considered, one finds that the number of poor people (using the CPHS data) was 798.36 million in 2015, 792.44 million in 2016, 727.54 million in 2017, 633.57 million in 2018 and 611.94 million in 2019.
• Based on the $3.65 per person a day (2017 PPP) poverty line (employing the CPHS data), the headcount ratio was 60.94 percent in 2015, 59.83 percent in 2016, 54.35 percent in 2017, 46.84 percent in 2018 and 44.78 percent in 2019.
Extreme poverty line of $6.85 per person per day (2017 PPP)
• When the extreme poverty line of $6.85 per person a day (2017 PPP) is considered, one finds that the number of poor people (using the CPHS data) was 1164.73 million in 2015, 1174.86 million in 2016, 1142.46 million in 2017, 1116.77 million in 2018 and 1145.43 million in 2019.
• Based on the $6.85 per person a day (2017 PPP) poverty line (employing the CPHS data), the headcount ratio was 88.90 percent in 2015, 88.70 percent in 2016, 85.34 percent in 2017, 82.56 percent in 2018 and 83.83 percent in 2019.
Other major findings
From the latest Poverty and Shared Prosperity report, one also gets the following:
• The number of poor people globally swelled from 648 million to 719 million between 2019 and 2020. The global poverty rate for 2030 is projected to be 7 percent, equivalent to 574 million people still living on less than US$2.15 per person per day in 2030.
• The pandemic increased the global extreme poverty rate to an estimated 9.3 percent in 2020 — up from 8.4 percent in 2019.
• By the end of 2022, as many as 685 million people could still be living in extreme poverty. This would make 2022 the second-worst year for poverty reduction in the past two decades (after 2020).
What do the other studies tell us about poverty in India?
Prior to the recent World Bank estimate, Sinha Roy and van der Weide (2022) had estimated that the poverty headcount rate in India is estimated to have declined by 12.3 percentage points since 2011. The poverty headcount ratio fell from 22.5 percent in 2011 to 10.2 percent in 2019. Extreme poverty in the country fell by 12.3 percentage points between 2011 and 2019 but at a rate that is significantly lower than observed over the 2004-2011 period. The reductions of poverty in rural areas are more pronounced than in urban areas. Rural poverty fell by 14.7 percentage points, whereas urban poverty fell by 7.9 percentage points during 2011-2019. The extent of poverty reduction during 2015-2019 is estimated to be notably lower than earlier projections based on growth in private final consumption expenditure reported in National Accounts Statistics (NAS).
The Bhalla, Bhasin and Virmani's (2022) study uses a mixed approach, largely relying on the gross domestic product (GDP) growth rate along with corollary assumptions to make poverty projections from the 2011/12 NSS data. In the words of Dr. Himanshu, who teaches economics at JNU, the study by Bhalla, Bhasin and Virmani (2022) uses the methodology of adjusting the NSO (i.e., National Statistical Office) consumption aggregates with the estimates of Private Final Consumption Expenditure (PFCE) of the National Accounts System (NAS). Using the PPP $1.9 per person per day extreme poverty line based on the Modified Mixed Recall Period (MMRP) distribution of consumption expenditure, they have observed a sharp decline in poverty in the country, from 12.2 percent to 1.4 percent between 2011 and 2019, which escalated to 2.5 percent in 2020 when the COVID-19 pandemic hit us. Please have a look at table-1.
Table 1: Poverty (in %) and Gini Estimates for India -Traditional, No Food Transfers
Source: Bhalla, Bhasin and Virmani (2022), International Monetary Fund, released in April 2022, please click here to access
On using the consumption aggregates from the State Domestic Product (SDP) series, after making necessary adjustment, the study by Bhalla, Bhasin and Virmani (2022) detects that poverty (based on extreme poverty line of PPP 1.9$ per person per day) fell from 12.2 percent to 2.2 percent between 2011 and 2019, which jumped to 4.1 percent in 2020.
Using the PPP $3.2 per person per day poverty line based on the MMRP distribution of consumption expenditure, Bhalla, Bhasin and Virmani's (2022) study estimates poverty of 73.8 percent in 2004, 53.6 percent in 2011, 18.5 percent in 2019 and 26.5 percent in 2020 (after making PFCE adjustments). In addition, using the PPP $3.2 per person per day poverty line based on the Uniform Recall Period distribution of consumption expenditure, their study estimates poverty to the tune of 80.8 percent in 2004, 64.0 percent in 2011, 30.4 percent in 2019 and 38.9 percent in 2020 (after making PFCE adjustments).
Please have a look at table-1 to know the trends in poverty on the basis of PPP $3.2 per person per day poverty line when the consumption aggregates from the SDP series are used, after making adjustment.
Using the PPP $3.2 per person per day poverty line based on the MMRP distribution of consumption expenditure, their study estimates poverty rate with food transfers to the extent of 73.5 percent in 2004, 52.2 percent in 2011, 14.8 percent in 2019 and 18.1 percent in 2020. So, even with food transfer, the number of poor people in India swelled by 44 million between 2019 and 2020, assuming a population of 1340 million.
In the opinion of Dr. Himanshu, the working paper by Bhalla, Bhasin and Virmani's (2022) prefers to use the PPP $3.2 per person per day poverty line for measuring poverty in India. It is because when the PPP $1.9 per person per day poverty line is used, then it leads to the conclusion of almost no poverty in India. Their paper also finds the positive impact of the in-kind transfers of extra foodgrains (under the Pradhan Mantri Garib Kalyan Anna Yojana i.e., PMGKAY) through the Public Distribution System (PDS) on poverty.
Please go through the references section below in order to access the original papers and for understanding the methodological differences among these poverty estimation studies.
Poverty and Shared Prosperity 2022: Correcting Course, World Bank, released in October, 2022, please click here and here to access
Country profile: India, World Bank, https://pip.worldbank.org/country-profiles/IND
Fact Sheet: An Adjustment to Global Poverty Lines, please click here to access
Working Paper: Pandemic, Poverty, and Inequality: Evidence from India, authored by Surjit Bhalla, Karan Bhasin and Arvind Virmani, International Monetary Fund, released in April 2022, please click here to access
Sinha Roy, Sutirtha, and Roy van der Weide. 2022. “Poverty in India Has Declined over the Last Decade but Not as Much as Previously Thought.” Policy Research Working Paper 9994, World Bank, Washington, DC, please click here to access
Purchasing power parities (PPP), Total, National currency units/US dollar, 2000 – 2021, OECD, please click here to access
Press release: Household Consumer Expenditure Survey, released on November 15, 2019, Press Information Bureau, Ministry of Statistics & Programme Implementation, please click here to access
Measuring poverty in the absence of Consumption Expenditure Survey data -Surjit Bhalla and Karan Bhasin, Ideas for India, published on 10 October, 2022, please click here to access
56 mn Indians may have turned poor in 2020 due to pandemic: World Bank -Asit Ranjan Mishra, Business Standard, 6 October, 2022, please click here to access
Do We Know What has Happened to Poverty since 2011-12? -Himanshu, The India Forum, June 16, 2022, please click here to access
What’s falling: Poverty or quality of analysis? -Santosh Mehrotra, Deccan Herald, 23 May, 2022, please click here to access
Statistics of poverty suffer from the country’s poverty of statistics -Himanshu, Livemint.com, 6 May, 2022, please click here to access
Poor Economics: Has India’s poverty really fallen? -Santosh Mehrotra & Jajati Parida, Financial Express, 30 April, 2022, please click here to access
Poverty in India is on the rise again -Santosh Mehrotra and Jajati Keshari Parida, The Hindu, 4 August, 2021, please click here to access
Drèze, Jean, and Anmol Somanchi (2021): “View: New Barometer of India’s Economy Fails to Reflect Deprivations of Poor Households.” Economic Times, June. please click here to access
Tagged with: CES CMIE Consumption Expenditure Survey CPHS Headcount Ratio Income Poverty NAS National Accounts System National Sample Survey National Statistical Office NSO NSS Poverty Headcount Ratio Poverty Line PPP private final consumption expenditure Purchasing Power Parity World Bank