The Impact of COVID-19 on Poverty in India and Issues Regarding Its Estimates

Poverty in urban India saw a modest rise on an annual basis in 2020-21 but began to decline by April-June 2021.

The imposition of 21-day nationwide lockdown to break the coronavirus transmission chain has triggered large-scale migration of jobless daily wagers.

(Photo: PTI/altered by The Quint)

Our previous essay in this series discussed the different poverty estimates that emerged from studies on poverty in their post-2012 period assessment of ‘poverty’ in India.

This essay - from part two of our analysis - provides a detailed analysis of the impact of COVID-19 on India's economy, the subsequent increase in poverty rates, coping strategies employed by households, the decline in food/nutritional intake, and the contrasting findings (made available) in rural and urban poverty trends.

The COVID-19 Context

The State of Working India Study conducted by Azim Premji University offers valuable insights into the impact of COVID-19 on Indian households. The study reveals that from March to October 2020, households experienced a significant loss of income, with an average decline of 22 percent in cumulative income.

However, the income loss was more pronounced among poorer households, resulting in a substantial increase in poverty rates across the country.

Furthermore, the conclusions arrived at in this university do seem to offer a credible analysis basis the data used to analyze the impact. The APU analysis primarily relies on monthly household income data from the CMIE-CPHS, along with data from the India Working Survey (IWS) and the Azim Premji University Covid Livelihoods Phone Survey (CLIPS).

The CMIE-CPHS method refers to the Consumer Pyramids Households Survey (CPHS) which is a comprehensive and nationally representative survey conducted by the Centre for Monitoring the Indian Economy since 2014.

Disproportionate Impact of COVID on Poorer Households

An analysis of household income data analyzed by APU revealed that the decline in incomes during the COVID-19 period was higher for lower-income percentiles and gradually decreased for higher percentiles. The bottom 10 percentiles experienced a significant 27 percent drop in incomes, while the decline was 23 percent for the 40th to 50th percentiles and 22 percent for the top 10 percentiles.

Furthermore, there was a 15-percentage point increase in rural areas and nearly 20 percentage points in urban areas.

Although the income declines in urban areas were relatively higher compared to rural areas, the difference between poor and relatively well-off households may seem small in percentage points. However, it represents a significant decline in absolute terms, exacerbating the challenges faced by vulnerable populations.

Decline in Food Intake During COVID

According to the Hunger Watch national survey of the Right to Food campaign, a crisis emerged in December 2021 - January. 2022 due to declining incomes and severe food insecurity, especially among the economically vulnerable and marginalized sections of society:

● 80 percent of people reported some form of food insecurity, and 25 percent reported severe food insecurity, such as skipping meals, cutting back on food, running out of food, not eating throughout the day and going to bed hungry

● 41 percent of respondents said the nutritional value of their diet had worsened compared to  pre-pandemic times

● 67 percent of people could not afford cooking gas in the month before the survey, further reducing their ability to cook

While there are numerous studies covering the impact of COVID-19 on poverty and it is seemingly impossible for one to simultaneously study all of them to assess the true impact, it is imperative that poverty has seen a steady increase with the rise of COVID. Infosphere finds it relevant to also include the study by Pew Research Centre that shows drastic impacts of COVID on income levels across households.

Further, a report by Pew Research Centre highlights that around 75 million more people in India fell into poverty last year because of the pandemic-induced economic recession, compared with what it would have been without the outbreak. That number for India accounts for nearly 60 percent of the global increase in poverty in 2020. It defined the poor as people who live on $2 or less daily.

Source - Infosphere CNES (Data from Pew Research Centre)

Contrasting Findings in Poverty Assessment Post COVID

According to a paper authored by Arvind Panagariya, Poverty and Inequality in India: Before and After COVID-19, contrasting findings have been revealed with respect to poverty estimates observed during COVID.

According to Panagriya et al, rural poverty as a percentage of the total rural population exhibited a continuous decline every quarter starting from July-September 2020. The findings contradict widespread claims of a significant rise in poverty in both rural and urban India post the pandemic.

The analysis is based on household expenditures reported in the Periodic Labour Force Survey (PLFS 2020-21). The PLFS was launched by the National Statistical Office (NSO) in April 2017 to estimate employment and unemployment indicators.

The analysis of this data reveals that while rural poverty experienced a modest increase during the strict lockdown period (April-June 2020), it subsequently fell for the entire year of 2019-20 at a significantly lower rate.

Furthermore, rural poverty witnessed a sharp decline in 2020-21, like the pre-COVID year of 2018-19. These trends align with the robust performance of agriculture during 2019-20 and 2020-21, as well as the significant expansion of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and the free distribution of 5 kg of food grains per person per month under the Food Security Act.

In contrast, poverty in urban India experienced a modest rise on an annual basis in 2020-21 but began to decline by April-June 2021.

The increase in urban poverty observed over four quarters from April-June 2020 was consistent with the significant decline in the production of contact-intensive industries. The free distribution of an additional 5 kg of food grains played a role in mitigating a sharper increase in urban poverty.

The divergence between these findings of declining poverty and earlier claims of rising poverty can be attributed to differences in sample design between the Current Employment Statistics (CES 2011-12) and Periodic Labour Force Survey (2017-18).

These differences render poverty estimates derived from the two sources entirely non-comparable, indicating the importance of interpreting and comparing poverty data with caution (refer to this essay by Ghatak et al on the poverty assessment debate to understand the key issues behind these contrasting-rather confusing results).

Another way to expand the debate’s scope and purview is to critically assess, how, after COVID-19, as of 2023, India’s progress can be observed towards its goal of achieving ‘SDG1’ by 2030.

Need for Alternative Methods/Indices

Poverty estimates, as rightly argued by Himanshu, “are not just an academic exercise but are crucial parameters to judge policy outcomes and the overall functioning of the government”.

Our own Centre’s research team, while creating the Access Equality Index (AEI) had discussed the wider implications of states across India being asymmetrically ranked on providing ‘access’ to basic social, economic services (from food, healthcare, education, job security, finance, legal recourse-to name a few). See an extension discussion on our work produced here.

Further, to assess progress towards nine out of the 17 SDGs, a few researchers also looked at 33 indicators of health and socioeconomic determinants of health using data from India's National Family Health Survey conducted in 2016 and 2021.

The recommendation made by the study's authors was that a strategy roadmap should be developed to increase the momentum on four of SDGs: ‘No Poverty’, ‘Zero Hunger’, ‘Good Health and Well-Being’, and ‘Gender Equality’.

The current Indian administration’s macro-track record in achieving each of these goals, over the last 9 years, have remained far from satisfactory, which is deeply troubling.

Over 75 percent of Indian districts are off target for eight crucial indicators which include poverty. There is an urgent need for improved policymaking, but, as argued, in part one of this essay series, a greater politicization of numbers-and poverty assessment studies, crowd out critical thought and reason.

One of us argued earlier how this is also true of GDP data calculation and interpretations, on which there are subsequently endless debates (belonging to a polarised rhetorical axis), leading to more noise than concrete answers.

Poverty and income distribution are issues for public discussion as much as they are instruments of governance and public policy for an economy which still has a substantial population that’s financially vulnerable even if not officially poor.

Unless we take conscious measures, at the level of state-authority, to consciously depoliticize data and encourage independent critical scrutiny of existing (and new) methodologies of public data accounting/analysis, there is little hope on what we might do on both social and economic policy. The policy-making framework and those behind social policy evaluation can do better in making the ‘discourse’ more analytically coherent than operate under constant cycles of confusion.

(Deepanshu Mohan is a Professor of Economics and Director, Centre for New Economics Studies (CNES), Jindal School of Liberal Arts and Humanities. He is currently a Visiting Professor to the School of International Development and Global Studies, Faculty of Social Sciences, University of Ottawa. Yuvaraj Mandal, Amisha Singh, Nishit Patel, Aditi Desai, and Amisha Mittal are all Research Analysts with CNES and members of the InfoSphere Team. This is an opinion piece and the views expressed are the author’s own. The Quint neither endorses nor is responsible for them.)