No extreme poverty in India now, say 2 Brookings economists

Extreme poverty

Rama Krishna Sangem

Extreme poverty in India is over, say two of Brookings Institute economists. This mean, India has crossed the long talked line of utter poverty, that haunted our country for over decades, or for that matter centuries. This is too good to believe news, for most of us in India. We have been fed an image of India as a developing country where poor are in majority and that hunger still a problem here.

For the last several decades,Left parties of all hues, in our country have been saying that India is a poor country and that the poor are becoming utter poor while rich are becoming super rich. But the two economists of Brookings Ibnstitute – Dr Surjit Bhalla and Karan Bhasin – have last week concluded that extreme poverty in India has disappeared. So, now we can say India is a middle class country? This is debatable.

What’s extreme poverty? Anyone living on 1.90 US dollars per day. That is equivalent to Rs 152 per day. This is the yardstick fixed by the United Nations to decide extreme poverty. The latest Consumption Expenditure Data for 2022-23 data is t he basis for their conclusion. As per the data, extreme poverty in India currently is at or less than 2 per cent, down from 12 per cent a decade ago.


Economic inequalities narrowing down

Anything less than 5 per cent of extreme poverty is almost negligible and it is assumed that extreme poverty has almost ended. Another interesting interpretation of this data is that economic inequalities in India are fast narrowing down – that more equality is coming. This is also goes against to the long held views of Left and the Left of the Centre experts not only in our country, but abroad too.

This is based on Gini coefficient (a criteria to measure inequalities). As per this Gini quotient, the gap between rural and urban households is narrowing, compared to in the past. If the Gini quotient of rural houses is 27 , the same of the urban areas is 31.9. In 2011-12, this Gini number was 36.7 in urban areas and 28. 7 in rural areas. The more the figures come down, more the gap narrows down.


What is Brookings Institute? 

Brookings Institute is an American Think-Tank, based in Massachusetts in the US. This 108 year institute researches on various subjects including economics, foreign policy, food security and  of course geopolitics too. Dr Bhalla and Dr Bhasin presented a commentary on the India’s household consumption data. In a way, at least for those who want to cheer India’s progress, this is a good news.

For others, of course, this interpretation of disappearance of extreme poverty will not be acceptable. Noted columnist on economic affairs Swaminathan Aiyer in The Sunday Times of India raised many questions over authenticity of the data. He termed the data as dubious too. Any self-reported survey data is not fully reliable, he argued. This applies not only to India but also to the developed countries like the US, he said.

But, the major areas of his disagreement with Dr Bhalla is not ending of extreme poverty, but narrowing down of economic inequalities in India. Swami rubbished how can the monthly consumption expenditure of an urban person like Mukehsh Ambani and that of a villagers be close to each other? The gap must be huge. India’s top 5 per cent rich are far ahead of the bottom poor, is the core of his argument.

He maybe right. The dispute about the data could be about economic inequalities narrowing in India. But definitely, not about ending of extreme poverty. So, now India should increase the limits of poverty criteria. This 1.9 US dollars is based on 2011 purchase power parity (PPP) data. Not based on the latest one. So, we can revised it to the current levels – of 2024-25 when our census is held.

Even Dr Bhalla to feels that the threshold of poverty line should be increased to 3.2 US dollars at current prices. That maybe a realistic criteria.

Till then, we can celebrate disappearance of extreme poverty in India.

Rama Krishna Sangem

Ramakrishna chief editor of excel India online magazine and website

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Rama Krishna Sangem

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