Himanshu: India needs official poverty data for effective policymaking
Summary
World Bank estimates are confusing, with two widely different sets of data published by it. India once had its own measure of the country’s poverty ratio and we must re-adopt one. It’s time to set up a panel of experts for this purpose.Last week, the World Bank released its latest estimates of poverty for India. According to its Poverty and Equity Briefs, poverty in India declined from 16.2% in fiscal year 2011-12 to 2.3% in 2022-23, with 171 million people lifted out of it in 11 years—or 15.5 million persons per year. These estimates are based on its $2.15-per-day poverty line used to measure extreme poverty.
These numbers differ from the World Bank’s estimates of poverty using the same $2.15 poverty line on its Poverty and Inequality Platform (PIP). Indian poverty, according to this, was at 22.9% in 2011-12 and fell to 13% in 2021-22, with the number of poor falling by 107 million, or 10.7 million persons per year. Not just the level of poverty, the extent of its decline also varies vastly.
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Part of the reason for the Bank’s sharp downward revision in poverty was its use of the recently-released 2022-23 Household Consumer Expenditure Survey (HCES). However, its PIP estimates for 2021-22 were made through a survey-to-survey imputation using the ‘consumer pyramids’ data of the Centre for Monitoring Indian Economy.
The World Bank acknowledges problems in using HCES 2022-23 data for poverty and inequality measurements, given the substantial changes it underwent, but it has still used it. This is strange. The last time it found data on consumption expenditure non-comparable with past data was in 1999-00, and it did not use it for poverty estimation. None of its reports has Indian poverty estimates for 1999-00.
The use of HCES 2022-23 is also responsible for the downward revision of the Bank’s poverty estimates for 2011-12, the data of which is not controversial. Its new estimates as well as the PIP ones use the 2011-12 consumption survey of the NSSO and the same poverty line of $2.15. The downward revision is a result of a shift from the earlier estimates of consumption expenditure in 2011-12 that were based on a uniform recall period (URP) of 30 days to the modified mixed recall period (MMRP), which uses a mix of 7-day, 30-day and 365-day recall periods.
These two sets of estimates are not comparable, with MMRP estimates pegging consumption expenditure significantly higher than URP estimates. As a result, using the same poverty line, estimated poverty using the MMRP method is only 16.2% in 2011-12, far less than 22.9% estimated earlier for the same year.
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The fact that there are now two World Bank estimates of poverty using the same poverty line is problematic in the context of assessing India’s poverty reduction. It also raises basic questions over the World Bank’s methodology of estimating poverty for countries with non-comparable data on consumption expenditure. The appropriate method would have been to use a poverty line that takes into account changes in the recall period such that the poverty estimates remain the same. After all, the number of poor in a country is a given fact and a methodology shift should not result in such a different poverty ratio.
But even with the changes, both these World Bank estimates suggest a sharp deceleration in poverty reduction efforts. By its estimates, India managed to lift 175 million persons out of poverty between 2004-05 and 2011-12 using the same $2.15 poverty line. So an annual 25 million persons were lifted out of poverty. This declined after 2011-12 to only 10.7 million per year, if we go by the PIP estimates, and 15.5 million per year by the new estimates.
While there are issues with the Bank’s poverty estimates that stem from comparability and its choice of poverty line, as well as deflators and the implicit inter-temporal inflation used for arriving at rupee-equivalent poverty lines, these have never been relevant for policy analysis in India.
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India has been a pioneer in defining national poverty lines since independence. These have been used by several other countries to define and estimate poverty in their own countries. Unfortunately, there is no official poverty line for India currently, despite the Rangarajan panel that was set up to look into poverty estimation having submitted its report in 2014. Although there is consumption data available for 2022-23 and 2023-24, issues surrounding its robustness and comparability with earlier survey rounds warrant setting up a new committee to examine the data and suggest a national poverty line.
With a significant proportion of India’s population still living in poverty, its estimation simply cannot be left to international agencies. The country needs an official poverty estimate to aid policymaking and determine poverty trends after 2011-12.
The author is associate professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humaines, New Delhi.
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