Poverty-decline claims need rigorous scrutiny - Hindustan Times

Poverty-decline claims need rigorous scrutiny

Apr 01, 2024 08:09 AM IST

In the face of these facts, the rhetoric of sharp poverty reduction, let alone of its disappearance, can only stand on presumptions, not facts.

Certain economists and government institutions have recently proclaimed the elimination of extreme poverty and reduction in inequality in India. Their assertion, based on a selective interpretation of macroeconomic data, paints a picture of prosperity based on the recent Household Consumption Expenditure Survey (HCES). However, ground-level realities reveal a starkly different narrative, one marred by persistent deprivation. Contrary to the claims, the government’s own Periodic Labour Force Survey (PLFS) 2022-23 data highlights the enduring prevalence of extreme earnings poverty, particularly in rural areas.

The assertion of extreme poverty elimination obscures the lived experiences of millions who continue to grapple with poverty daily.(Shutterstock) PREMIUM
The assertion of extreme poverty elimination obscures the lived experiences of millions who continue to grapple with poverty daily.(Shutterstock)

PLFS finds that 24.6% of the rural workforce earns less than 100 a day (nominal), a staggering proportion. About 10% of the urban workforce faces similar circumstances, underscoring the widespread nature of poverty, and debunking the notion of its eradication.

PLFS wage data reveal another concerning trend: A significant portion of the workforce falls within the precarious wage bracket of 100-200 per day. Shockingly, 17% of rural self-employed (own account workers) and 12% of regular salaried workers earn wages within this range, highlighting their precarity. For them, the spectre of poverty looms large.

Moreover, the workforce, particularly in rural areas, continues to grapple with the burden of unpaid family labour (about 22% and 6.6% in rural and urban workforces, respectively). While, till 2019, the absolute number of unpaid family labour was dropping, 50 million were added to the unpaid family worker category of workers in just three years (2020 to 2023) in rural areas, and another five million were added in urban areas. About 25% of the workforce in rural India and 12.4% in urban India work as daily wage workers/casual labour, at wages mostly at the levels noted here. This shows that many individuals (especially women in rural areas) are forced to toil without compensation, perpetuating cycles of deprivation.

Covid-19 exacerbated economic vulnerabilities, with a surge in casualisation of the workforce. Facing urban unemployment, 60 million were compelled to return to agriculture, seeking refuge in a sector where 42% of India’s workforce was already employed in 2019 producing 15% of India’s Gross Domestic Product (GDP). This suggests widespread under-employment. Worse still, in 2020, 35 million workers were added to agriculture in 2020 alone, with a further 25 million added between 2021-22 and 2022-23 (PLFS).

The resurgence of agricultural employment represents a stark reversal of the structural transformation envisioned by proponents of Make in India. In this context, the increased participation of women in agriculture is both a testament to their resilience and a reflection of systemic inequalities. As traditional gender roles intersect with economic necessity, women are assuming greater responsibilities in farm labour. This underscores the lack of viable alternatives for women in the face of economic hardship.

Hence, the assertion of extreme poverty elimination obscures the lived experiences of millions who continue to grapple with poverty daily. The claims of “India has achieved less than 5% poverty” based on the latest HCES need examination. Poverty dropped in absolute terms, with the Planning Commission having estimated that nearly 140 million pulled above the Tendulkar poverty line between 2004-5 and 2011-12. This occurred due to three factors. First, millions were pulled out of agriculture, where numbers fell in absolute terms for the first time in independent India’s history, and obtained construction/other non-farm jobs. Second, manufacturing total employment grew from 53 million to 60 million, and services total employment rose. Third, real wages rose consistently.

However, each of those trends were reversed after 2013. First, non-farm job growth fell in all sectors — construction, manufacturing and services — even before the Covid shock, because of the twin shocks (demonetisation and badly designed and implemented Goods and Services Tax ). The GDP growth rate fell for almost three years, and investment rates dropped below 30% and never recovered their pre-2014 level. Merchandise exports also contracted as the unorganised sector contracted.

Second, the third shock came with a strict lockdown — India’s economy contracted by nearly twice as much as the global economic contraction of 3.1% in FY21. Reverse migration plus distress-driven unpaid family labour by women added 60 million workers to agriculture in three years to 2023 (raising the Labour Force Participation Rate and apparently reducing the unemployment rate, which government economists claimed as “jobful growth”). They ignored the drop in manufacturing employment from 60 million to 55 million over a five-year period (before recovering in 2022 and 2023), and the sustained rise in agricultural employment. So, real jobs fell, while the so-called jobs in agriculture rose.

Third, and devastatingly for the poverty/inequality decline narrative, real wages across the economy stagnated for six years (2017-18 to 2022-23, PLFS).

If any of this evidence needed further proof, the new study on Income and Wealth Inequality in India, 1922-2023: The Rise of the Billionaire Raj from Harvard and Paris economists put paid to any claims about poverty being eliminated. Their estimates suggest that inequality declined post-Independence till the early 1980s, after which it began rising and skyrocketed since the early 2000s. Between 2014 and 2023, the income and wealth shares (22.6% and 40%) of the top 1% of the population are at historical highs. Meanwhile, in 1990, the share of the bottom 50% stood at 22.6%, which, in 2022, had fallen to 15%. This is consistent with the wage data cited here.

The fast economic recovery post-Covid has itself been K-shaped — without the structural crisis disappearing, without jobs growth, and with real wage stagnation. In the face of these facts, the rhetoric of sharp poverty reduction, let alone of its disappearance, can only stand on presumptions, not facts.

Santosh Mehrotra is visiting professor, University of Bath, the United Kingdom, and Jajati Parida is associate professor of Economics, Central University of Hyderabad. The views expressed are personal

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