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The World Bank recently released a study titled “Poverty Has Decreased Over the Last Decade, But Not As Much As Previously Thought.” The research comes only days after the International Monetary Fund (IMF) released a working paper claiming that state-funded food handouts had nearly eliminated severe poverty and reduced consumption inequality to its lowest levels in 40 years. Consumption inequality has moderated slightly since 2011, albeit by a lower percentage than the unpublished National Sample Survey 2017.
World Bank Report: Extreme Poverty in India Eased 12.3 Percentage Points
Based on increases in private final consumption spending indicated in national account data, the level of poverty reduction between 2015 and 2019 is expected to be significantly lower than prior forecasts. Extreme poverty, according to the World Bank, is defined as living on less than USD 1.90 per person per day.
Poverty reduction in rural India was larger than in urban India, with rural poverty falling from 26.3 percent in 2011 to 11.6 percent in 2019, while urban poverty fell from 14.2 percent to 6.3 percent in the same period.
Between 2011 and 2019, poverty in rural and urban areas fell by 14.7 and 7.9 percentage points, respectively.
India’s urban poverty increased by 2% in 2016, coinciding with demonetisation, and rural poverty increased by 10% in 2019. Small Farmers: Income growth has been higher for smallholder farmers. Between the two survey rounds 2013 and 2019, real earnings for farmers with the lowest landholdings increased by 10% in annualised terms, compared to 2% for farmers with the biggest landholdings.
The rise in earnings of the smallest landowners in rural regions adds to the evidence of income disparities in rural areas being moderated. The poorest people are disproportionately represented by the smallest landowners. Wages, net receipts from agricultural production, net receipts from animal farming, and net receipts from non-farm businesses are all included in this revenue. Land rental income has been exempted from taxation.
Sharp Decline in Extreme Poverty. The poverty headcount rate in India has dropped from 22.5 percent in 2011 to 10.2 percent in 2019, with a considerably faster decline in rural regions. Between 2011 and 2019, the poverty rate in rural and urban areas fell by 14.7 and 7.9 percentage points, respectively. While rural poverty fell to 11.6 percent in 2019, urban poverty remained at 6.3 percent.
According to the study, farmers with smaller landholding sizes had higher revenue growth. Between the two survey rounds 2013 and 2019, real earnings for farmers with the lowest landholdings increased by 10% in annualised terms, compared to a 2% increase for farmers with the highest landholding.
Between 1993 and 2011, consumption inequality increased, but between 2011 and 2019, it decreased. The World Bank has defined severe poverty as persons who live on less than $1.90 per day, as assessed by the international poverty line, since 2015. This is the second working paper to be issued this month, after the International Monetary Fund’s (IMF) assessment of India’s poverty reduction.
What the IMF Paper says? According to a recent IMF working paper, India’s severe poverty rate was as low as 0.8 percent in 2019, and the government managed to maintain it in 2020 despite the epidemic by relying on food assistance under the Pradhan Mantri Garib Kalyan Yojana.
While the IMF’s paper is based on data from the National Sample Survey Organisation’s (NSSO) 2011-12 consumption expenditure survey, the World Bank’s new paper is based on the Consumer Pyramid Household Survey (CPHS) of the Centre for Monitoring Indian Economy (CMIE), which has been conducted at four-month intervals since 2014.
While the IMF projected poverty reduction following the pandemic, the World Bank focused on the situation prior to the Covid epidemic. The research from the World Bank is crucial since India lacks official estimates for recent decades.
The National Sample Study Organisation (NSSO) issued the most recent spending survey in 2011, at the same time that the government released official poverty and inequality data.
Conclusion
Between 2011 and 2019, poverty in rural and urban areas fell by 14.7 and 7.9 percentage points, respectively. Poverty reduction in rural India was larger than in urban India, with rural poverty falling from 26.3 percent in 2011 to 11.6 percent in 2019, while urban poverty fell from 14.2 percent to 6.3 percent in the same period.
