Escape From Poverty
A new report from Niti Aayog reconfirms India's staggering success in lifting 415 million out of poverty in the 16 years ended 2021. EPISODE #135
Dear Reader,
A very Happy Monday to you.
Last week Niti Aayog, the erstwhile Planning Commission, released the latest edition of its national Multidimensional Poverty Index (MPI). The report confirmed what the United Nations Development Programme (UNDP) told us last year: India has successfully lifted 415 million out of poverty.
This week I revisit this staggering success and the attendant implications. Do read and share your feedback.
The cover picture is generated by DALL-E using Artificial Intelligence. Fascinating to see it generate an image from a text input. You should try it out too; happy to consider it for the cover picture of the newsletter.
A big shoutout to Debu, Niranjan, Monica, Gautam, Rajeev, Balesh, Abhijit, Vandana and Premasundaran for your informed responses, kind appreciation and amplification of last week’s column. Once again, grateful for the conversation initiated by all you readers. Gratitude also to all those who responded on Twitter and Linkedin.
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PovertyNomics
Last week the NITI (National Institution for Transforming India) Aayog released its national Multidimensional Poverty Index (MPI) for 2023. The big takeaway was that between 2015-16 and 2019-21 about 13.5 crore people were lifted out of poverty.
The MPI provides poverty estimates for the 36 states and union territories and the 707 districts in the country.
Adopting the norms followed by the United Nations for Development Programmes (UNDP), the MPI measures multidimensional poverty—measuring simultaneous deprivations across the three equally weighted dimensions of health, education, and the standard of living.
These include metrics like access to nutrition, child and adolescent mortality, maternal health, years of schooling, school attendance, cooking fuel, sanitation, drinking water, electricity, housing, assets, and bank accounts. In short, it measures the ability of the poverty alleviation programmes to address the legacy deficits prevailing for the first seven decades since Independence.
The fastest reduction in the proportion of multidimensional poor was observed in Uttar Pradesh, Bihar, Madhya Pradesh, Odisha, and Rajasthan. Remarkably, Uttar Pradesh registered the largest decline in number of poor with 3.43 crore people escaping multidimensional poverty.
It reconfirms the findings shared by the UNDP last year, when it recorded that India had managed to lift a staggering 415 million people out of poverty between 2005-06 and 2019-21.
Undoubtedly, this is an incredible achievement.
Yes We Can
The above picture shows the distribution of multidimensional poverty in 2015-16. Please pay attention to the colour palette—the problem of poverty is the worst across central, north and east of India.
And then comes the transformation. Check out the picture below:
Barring Bihar, Jharkhand and Meghalaya, the rest of the country—swathed in different hues of green—has crossed the tipping point in the fight against poverty. These two graphics sum up India’s dramatic success in alleviating poverty.
Viewed over a longer period, the battle against poverty comes across even more impressively.
In 2005-06, more than one in two Indians were considered to be poor. And, in 2019-21, this proportion has dropped dramatically to 16.4%.
The Metrics
The above graphic sums up the metrics employed in computing the MPI.
From the turn of the Millennium, India has been targeting various deprivations—like building rural roads, education for all, creation of a rural social safety net by guaranteeing jobs for those who demanded it and developing a broadband fibre network for regions outside the metros. The rollout of these social welfare initiatives achieved unprecedented acceleration in the last decade.
Even better, using Aadhaar, the 12-digit unique identity, India was able to target welfare spending through Direct Benefits Transfer (DBT). Not only did it ensure benefits reached the target group, but DBT also saved the national exchequer Rs2.73 lakh crore in leakages at the end of March this year!
As the UNDP report disclosed, bulk of the poor suffered because of one or more deprivations in the three verticals: health, education and standard of living.
Eight years ago public policy was tweaked to prioritise the alleviation of these deprivations. Initially this was done in clusters—financial inclusion, cooking gas, housing and toilets—and individual deprivations—like electricity, drinking water—were added progressively.
The outcomes were more than impressive. The National Family Health Survey-5 reveals a surge in the use of cooking gas, toilets, access to electricity and ownership of bank accounts and homes by women.
The All India Debt and Investment Survey conducted in 2019 corroborates the financial inclusion trends captured by the NFHS-5. It found that nearly three in four Indians, living in rural or urban areas, now own a bank account—in 2010, 430 million people did not own a bank account.
New Goalposts
The debate over India’s gains in poverty have followed the predictable binary. So, not surprising then that the rhetorical exchanges in public often leave us confused.
Where the two sides agree though is about the reduction in poverty. They differ on the quantum of reduction.
The official measure of poverty—based on the Tendulkar and Rangarajan led panels—employ the metric of consumption expenditure. The challenge is that this data is not available for 2021. As a result, proxy measures, captured in the various surveys like the NFHS are being used.
In my view, we can avoid the binary trap of this rhetorical debate. We can do so by first accepting that poverty is declining fast. However, it now begs the question as to how can this be made sustainable—that is, public policy ensure that no one falls back into poverty. Remember that pulling people out of poverty is relatively easier than keeping them out—the difference between handing people free fish and teaching them how to fish.
It will help if we view this as a new stage of growth for India, wherein people are taught how to fish—in other words, the expansion of the cohort of the middle class. For this India will have to ensure that the gains of the last decade are not reversed, but also that these individuals are provided the wherewithal to strike out on their own. This is easier said than done.
The next set of challenges include nutrition, skilling, protection against the fallout of climate change and building resilience to withstand shocks like the covid-19 pandemic. Yes, none of this is easy. Neither is it impossible.
Remember, for seven decades India’s calling card was poverty. Worse, the country had the dubious record of 600 million people openly defecating. Today, the latter is an exception. And, poverty as we discussed, is on the mend.
Nothing is impossible.
Recommended Viewing
Sharing the latest post of Capital Calculus on StratNews Global.
I picked up from last week’s newsletter on Tax Overreach and reached out to Rameesh Kailasam, CEO of IndiaTech.Org—a lobby agency for home grown tech companies. The episode has a provocative title: Return of the Babu Raj.
In a very candid conversation Rameesh fleshed out the contradictions in India’s tax laws and how they are undermining both ease of doing business and the ease of living.
According to him, this flows from an old mindset of the bureaucracy to micromanage. I would add that it is also the outcome of a flawed belief that everyone in India is likely to engage in corruption—a case of missing the woods for the trees.
Sharing the link below. Do watch and share your thoughts.
After watching the latest episode if you still harboured doubts about micromanagement by babus, then check out the Times of India story below:
Ludicrous to say the least. As I argued earlier, a profound idea is under siege from within. I rest my case.
Till we meet again next week, stay safe.
Dear Anil,
Another very well written article!! Although the poverty in India is declining but some glaring issues remain. Prevalence of undernourishment within India is on the rise-and well above the global prevelance.People in India are unable to afford quality food.The government providing additional free food grains to more than 800 million people after the pandemic was a policy recognition of this grim reality. Affordability of a balanced and healthy diet remains the key challenge in ensuring food security.
The gap between the rich and the poor continues to widen.Todays Newspaper has given the data that top 5% of richest Indians own 53% of all ACs!! This is just one example,we see disparity and inequality all around us everyday .The government has to implement its poverty alleviation programs effectively to bring a real change in the society.
Although this wonderful achievement has been mentioned by you earlier Anil, this article is a comprehensive coverage of the progress made and the reasons that have brought about this rapid change in the last 15 years or so. For me the central point is the will of the present government to emerge as a developed nation in the next decade or so and to do so, the lives of the people in the lower half of the pyramid, had to be changed. The realization that this was the path to progress, led to surprising initiatives like Swachh Bharat. Toilets and tap water for all. Electrification of all villages, to name a few. We can only go ahead as a complete nation together and not the top half steaming ahead, which is not possible. A lot of work still needs to be done, as the income gap between the rich and poor, continues to widen. Great write up.