A recent International Monetary Fund (IMF) paper claiming that India’s poverty rates are declining and extreme poverty is being eradicated is deeply misleading, and lowers the credibility of the international institution. In fact, India’s share of the world’s extreme poor is higher than its share of the world population.
India accounts for 139 million of the total 689 million people (20.17%) living in extreme poverty in 2017 (World Bank figures), while its population is 17.8% of the world population (World Bank estimate). The number of poor in India is estimated to have increased by 75 million because of the Covid-19 pandemic, accounting for nearly 60% of the global increase in poverty.
Close to 66 million people who were in the middle-class group, defined as earning between US$10 and $20 per day, have fallen back into the poverty bracket because of the pandemic and harsh lockdowns. Draconian Covid restrictions worsened the lives and livelihoods of the middle-class population. This exposed the vulnerability of a populace in which there are virtually no safety nets.
Across India, 84% of households reported a fall in income due to the lockdowns. This is consistent with the sharp increase in unemployment and the sharp decrease in labor-force participation.
India was already performing poorly on the Global Hunger Index (GHI), ranking 94th among 107 countries in 2020, and with sharply rising poverty and unemployment, its ranking will likely decline even further.
According to the GHI, nearly 35% of India’s children below the age of five suffer from stunting, a classic indicator of extreme malnourishment. There are nearly 30 million children who do not have a digital device to access education online, according to data presented by the Indian Ministry of Education in Parliament last August 2.
A government of India release says that 800 million vulnerable people were provided free food grains under PMGKAY (Pradhan Mantri Garib Kalyan Anna Yojana-Prime Minister’s Poverty Welfare scheme) in 2020-21. This program is meant to ensure food security to the vulnerable poor section of the population. If extreme poverty has been eradicated, what is the point of providing free food grains to such huge population?
The story does not end here. In December 2021, the Centre for Monitoring Indian Economy (CMIE) estimated that nearly 53 million Indians were unemployed. This is way higher than anything seen in India for at least the last three decades, including the big economic crisis of 1991.
The Pradhan Mantri Kisan Samman Nidhi (PM-Kisan) has around 111.5 million enrolled beneficiaries, with an average of 102 million-plus getting payments during 2020-21 of 6,000 rupees ($79) annually. If farmers have become so well off, why is there a need for the government to provide such a tiny cash amount for their daily survival?
There are about 100 million internal migrant workers in India, and most of them daily-wage laborers who have traveled from such states as Uttar Pradesh, Bihar, Jharkhand, Odisha, and West Bengal to other states in search of unskilled or semi-skilled jobs. Based on data obtained from the National Sample Survey (NSS) 2007-08, of the total workforce in India, about 28.3% were migrants.
According to the 2011 census, about 37% of India’s total population were found to be migrants. This was an increase of 139 million from what was reported in the 2001 census. With so many migrant workers in the country, struggling to survive on daily wages, how can we say that we have eradicated extreme poverty?
Where there is extreme poverty and extreme unemployment, one can see an increase of communal unrest. The cases of communal or religious rioting in 2020 nearly doubled from 2019 according to latest government data. In its annual report, the National Crime Records Bureau (NCRB) stated that 857 cases of communal or religious rioting were reported in the country in 2020.
Another indicator of the sharp increase in household debts in the pandemic-stricken financial year 2020-21 is a worrying feature indicating a rise in debt stress, according to a report by the State Bank of India (SBI). According to an SBI paper, household debt as a percentage of gross domestic product (GDP) jumped from 32.5% in financial year 2020 to 37.3% in FY21, mainly on account of the adverse financial impact of the Covid-19 pandemic.
The debt burden on households has been constantly on the rise since FY18. Falling savings rates and rising household debt stress are a clear indication of falling financial savings.
What more data does the government need to reject the IMF paper that says India has eradicated extreme poverty?