Jobs should drive India’s growth story

The recent estimate by the World Bank says that the number of people in India living in extreme poverty declined from 344 million in 2011-12 to 75 million in 2022-23. That is 269 million people crossing the threshold of extreme poverty over 11 years. That is quite impressive and laudable. Extreme poverty has a technical definition in terms of purchasing power-adjusted poverty line, updated to 2021. It is now at $3 per day. This update was necessitated for mythological consistency, a closer connection with another related concept of penury called the multi-dimensional poverty index (MPI), and also to take cognisance of India’s improvement in the accuracy of collecting consumption data through an upgraded survey. In non-technical terms, the World Bank’s extreme poverty classification covers individuals having such a low income that it cannot even meet their basic needs of food, clean water, shelter, and basic healthcare.

The manifestation of such a low income is chronic hunger or undernourishment, lack of access to sanitation, and no access to basic primary education or primary healthcare. In an extreme form, it also means the prevalence of starvation deaths. By these rather grim benchmarks, India’s extreme poverty rate stands at 5.3% of the population. As an aside, one should note that since India has not had a population census since 2011, the exact number on the poverty-denominator ratio is unavailable. But one can make reasonable estimates. The world has around 838 million living in extreme poverty of which India’s 75 million make up 9%. Given that India’s share of the global population is twice that number, it is comforting that in tackling extreme poverty, India is ahead of global averages. But in the number of people living in extreme poverty, India is only second to Nigeria. That is unsurprising given India’s population. However, remember that China’s ratio is close to zero percent.

A more comprehensive measure is the MPI developed jointly by UNDP and Oxford University’s Poverty & Human Development Initiative (OPHI). It uses ten metrics covering health, education, and living standards. They include specific indicators such as child mortality, cooking fuel used, access to sanitation and drinking water. NITI Aayog uses 12 indicators instead of 10 to measure MPI, adding maternal health and access to a bank account. As per NITI Aayog’s research, India’s MPI dropped from 29% in 2013-14 to 11.3% in 2022-23. According to this analysis (and with the caveat of an unavailable census number), nearly 248 million people escaped MPI poverty. As per the MPI computed by UNDP with ten indicators and which is used for international comparisons, India’s MPI poverty rate during 2019-21 was 15%, almost 4% higher than that computed by NITI Aayog. Since comprehensive consumption survey data is missing for 2017-18, it is not possible to resolve this discrepancy.

India’s global rank as per the UNDP MPI headcount ratio in 2021-22 was 66 out of 109 countries. The World Bank has not released a consistent global ranking for its latest data on extreme poverty. The higher MPI shown by UNDP as against NITI Aayog’s numbers for MPI poverty rate led to a controversy. The use of additional indicators such as electricity or bank accounts, which are nearing universal access, skews the index and makes it look more optimistic. On the other hand, corroboration from intensive surveys such as the National Family Health Surveys shows deterioration in indicators such as anaemia and malnutrition, which surely affect the MPI.

An even spread

The United Nations announced Sustainable Development Goals in 2015, of which the very first goal was the elimination of extreme poverty by 2030 – we have five years left. But let us go beyond the numbers and controversies, some of which could seem like nitpicking. High economic growth is leading to the betterment of lives for all people.

The World Bank notes that two-thirds of all the people counted living in extreme poverty came from five states. These are Uttar Pradesh, Bihar, Madhya Pradesh, West Bengal, and Maharashtra. So clearly, the vast improvement over the next 12 years was due to intensive and successful efforts in these states. The free food grain given to 810 million people for the past five years, and extended by another five, is surely a big factor in poverty alleviation. So is the effect of universal schemes such as health insurance and the drinking water mission.

It must be noted that crossing over to above the poverty line does not mean you cannot fall back. If livelihoods are precarious, one adverse shock like an illness or death in the family, or a job loss, can push it back into poverty. Hence, we need to simultaneously build meaningful and universal social security. Fiscal resources are limited and the government’s debt cannot balloon; hence some re-orientation of expenditure is necessary to expand social security – and social security is not the same as populism. The only long-term way is to enable large-scale job creation which can improve livelihoods in a sustained fashion. Job creation implies the continuous creation of thousands of small enterprises, and large-scale skilling and training.

All these have to be achieved with new challenges from Artificial Intelligence, robotics, and automation, which are now threatening jobs. From absolute terms, we will soon need to focus on reducing relative poverty and inequality too, since the spoils of high economic growth cannot be cornered by a few at the top. The elimination of extreme poverty in the next five years is a good shot in the arm, but in the journey towards a developed nation, we have much work to do.

(The writer is an economist;
Syndicate: The Billion Press)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.