Did India’s poverty decline miraculously between 2009-10 and 2011-12?
If poverty data is to be taken seriously, an awful lot of explaining needs to be done
Premium
The Planning Commission’s ridiculously low threshold for computing poverty has drawn a lot of criticism and there is undoubtedly an unholy desire to put a political spin on the reduction in the poverty numbers. But, as the planners point out, even if a higher cut-off point for the poverty line is drawn, “while the absolute levels of poverty would be higher, the rate of decline would be similar".
Between 2004-05 and 2011-12, the percentage of people below the Tendulkar Committee’s poverty line declined from 37.2% to 21.9%. Contrast that with the much lower decline from 45.3% to 37.2% between 1993-94 and 2004-05, using the same methodology. But this higher rate of reduction in poverty is easily explained as being the result of higher growth, particularly during the boom years 2004-05 to 2007-08.
What is much more interesting, though, is the steep decline in the poverty ratio that occurred between 2009-10 and 2011-12. In 2009-10, the percentage of Indians below the poverty line was 29.8% in terms of the Tendulkar Committee norms, which means that the decline in the poverty headcount was 7.9 percentage points in the two years between 2009-10 and 2011-12. Contrast that to the decline in poverty of 7.4 percentage points in the five years between 2004-05 and 2009-10.
Why was the decline in poverty so sharp in those two years, that too when average growth was lower than during the earlier five-year period?
Perhaps social welfare programmes were responsible? Let’s take a look at the Mahatma Gandhi National Rural Employment Guarantee Scheme, the government’s flagship welfare programme. The inconvenient truth is that, according to the government’s own statistics, the total person days of work under the scheme declined from 2.83 billion in 2009-10 to 2.16 billion in 2011-12. So it wasn’t the make-work programme that led to an accelerated reduction in poverty.
A more plausible reason is the growth in employment during the two-year period. The period between 2004-05 and 2009-10 was, according to the National Sample Survey data, a period of jobless growth. That trend was reversed in the next two years and the latest data show net increase in employment of 13.9 million between 2009-10 and 2011-12, far higher than the net job growth of just 1.1 million during 2004-05 to 2009-10. One reason for the rise in employment could be the sharp rise in export growth during the two years 2010-11 and 2011-12. Labour-intensive exports certainly help create more jobs.
The other reason may be the improved agricultural growth during these two years. Average growth in agriculture was 6.4% compared to an average of 3.2% in the preceding five years. That could account for the rise in real wages among the poor during 2009-10 to 2011-12. So perhaps it may indeed be true that a combination of higher agricultural growth and more jobs led to a large decrease in poverty during the two years.
But then, a closer look at the disaggregated numbers does not inspire much confidence about their accuracy. Take the curious fact that poverty in Bihar declined from 53.5% of the population in 2009-10 to 33.74% in 2011-12. This is a drop of 19.76 percentage points. To put that in perspective, consider that the entire drop in poverty in Bihar between 1993-94 and 2009-10 was seven percentage points. No other state shows a sharp decrease in the poverty percentage between 2009-10 and 2011-12.
Could it have been an improvement in governance? But Bihar’s poverty rate declined only marginally from 54.4% in 2004-05 to 53.5% in 2009-10, when the state had the same government in power. What magic wand did Nitish Kumar wave in the two years 2009-10 to 2011-12 to drive the poverty rate so much lower?
True, Bihar’s average real per capita income growth during those two years was a very high 10.6%, well above the 6.5% average for the previous five years. But did two years of prosperity make such a huge difference to poverty? Maharashtra’s per capita income grew by 9.5% during those two years and poverty fell by a comparatively tepid 7.15 percentage points. Yes, Bihar is far more dependent on agriculture and labour-intensive construction for its growth, but that was true even for the period 2004-05 to 2009-10.
It’s also worth considering Chhattisgarh, where the poverty percentage fell from 50.9% in 1993-94 to 48.7% by 2009-10, a negligible decrease. But suddenly, in the two years between 2009-10 and 2011-12, the percentage came down to 39.9%. There has been no change of government in Chhattisgarh during those years, nor does it have the excuse of sharply higher per capita growth.
The northeast of the country seems to be neglected not just economically and politically, but statistically as well, in terms of data collection. Is it really true that the percentage of people living in poverty in Mizoram, according to the Tendulkar committee’s calculations, has gone up from 11.8% in 1993-94 to 20.4% by 2011-12? Is it really the case that poverty in Arunachal Pradesh went up from 31.4% in 2004-05 and from 25.9% in 2009-10 to 34.67% in 2011-12? Does Nagaland suffer from bipolar growth disorder? Why else should its poverty headcount decline from 20.4% in 1993-94 to 8.8% in 2004-05 and then move up again to 18.88% in 2011-12? And why does the poverty percentage in Manipur fluctuate wildly from 65.1% in 1993-94 to 37.9% in 2004-05 to 47.1% in 2009-10 and now to 36.89% in 2011-12?
If they really want us to take the poverty numbers seriously, they have an awful lot of explaining to do.
Manas Chakravarty looks at trends and issues in the financial markets. Your comments are welcome at capitalaccount@livemint.com
"Exciting news! Mint is now on WhatsApp Channels 🚀 Subscribe today by clicking the link and stay updated with the latest financial insights!" Click here!
