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The Truth Behind the Government’s Claim That Poverty Has Fallen to Just 5%

While no reason for this has been provided, what is certain is that no sooner was the factsheet released than the narrative started to build about the government's success in ending poverty.
Representative image. Photo: Tobias Leeger/Flickr CC BY-NC-ND 2.0 DEED

After more than a decade, we finally have a Household Consumption Expenditure Survey 2022-23 (HCES). The survey data was made public even though the media had earlier been told that the results of the HCES would be released only after the general elections.

Somewhere along the line, there appears to have been a last minute change of heart, evidenced by the publication of a 27-page factsheet before the election.

While no reason for this has been provided, what is certain is that no sooner was the factsheet released than the narrative started to build about the government’s success in ending poverty. The Niti Aayog stated that poverty had declined to less than 5% and applauded the government for achieving this feat.

It is prudent to understand that the 27-pager HCES [PDF] says nothing about the poverty decline in 2022-23 as compared to 2011-12. Rather it goes ahead and cautions readers about the change in methodology in the current HCES as compared to earlier ones. The factsheet lists various “Issues related to Comparability”.

Given that HCES 2022-23 has undergone methodological changes, its results ought not to be compared with the previous Consumption Expenditure Survey (CES). In fact, the National Survey Organisation (NSO), which conducts these surveys, has personally informed one of the authors that the HCES is not comparable with the earlier CES.

Nevertheless, the Niti Aayog CEO, who also knows this surely, went ahead and compared the current survey with earlier ones in claiming poverty reduction. Bear inn mind that the Niti Aayog has no current poverty line by – unlike the erstwhile Planning Commission – by which to measure the current level of poverty. Additionally, it would be curious to argue that consumption expenditure is rising when real wages have been stagnating in recent years; yet that is exactly what representatives of the government have used HCES 2023 data to argue.

In HCES 2022-23, the sampling methodology has undergone significant change. Second stage stratum classification is now made on land for rural areas and car availability for urban areas, unlike the previous survey where the divisions were made based on household status and household activity for rural areas and monthly per-capita income for urban areas.

In a country where agricultural labourers outnumber cultivators, access to land remains limited let alone possessing land amongst the highest order as classified in the top two second-stage stratum. For urban areas, households were classified based on the availability of four-wheeler cars, with a price of more than Rs 10 Lakh, price less than Rs 10 lakh and households without cars. In a country where 8% of households own a car, the urban second stratum will be among the wealthiest households. Thus, there seems to be a higher representation of the well-off groups in the HCES 2022-23 sampling approach, thereby resulting in higher consumption expenditure.

The HCES 2022-23 factsheet lists various methodological changes as well. The number of items covered has increased from 347 to 405 items. Instead of a single questionnaire, HCES 2022-23 uses four separate questionnaires to be canvassed in three separate monthly visits in a quarter instead of the usual practice of a single visit. Therefore on account of methodological changes alone, the results of the current HCES are not strictly comparable with the 2011-12 CES or the earlier CES.

HCES 2022-23 states that the average monthly per-capita consumption expenditure (MPCE) at current prices has increased to Rs 3,773 for rural households and Rs 6,459 for urban households. These numbers have been used in order to claim that poverty in India has fallen to just 5%, even though the factsheet does not make any reference to poverty eradication, nor is there any poverty line given by the HCES. So how has this claim that poverty has fallen been made?

The 27-page factsheet is mostly based on ratios and proportions. There are no comparisons with real amounts. From the comparative perspective, a Consumer Price Index needs to be used to deflate current expenditure to arrive at real expenditure. In making comparisons over the years, there is a lack of data on real expenditure and quantity of consumption. Additionally, HCES 2022-23 takes into account the imputed value of social-welfare programmes, though the same was not undertaken for the earlier years.

With economic growth and progress, the share of food expenditure in total household expenditure is bound to come down. The current level of food expenditure in India – 46.38% (for rural households) and 39.17% (for urban households) – remains comparatively very high as compared to 6.4% for USA and 6.9% for Singapore, and thus cannot be taken as a sign of economic development.

Above all, how can poverty have fallen when job growth and real wages have come down? While from 2004-05 to 2011-12 there was an unmistakable and sustained rise in real wages, wages have stagnated between 2013 and 2017. Additionally, joblessness grew from 10 million in 2011-12 to nearly 38 million in 2022.

Moreover, 190 million workers (2021-22) in India are earning just up to Rs. 100 per day (in real terms at 2010 prices) which can be categorised as absolute poor, as compared to just 106.1 million workers in 2011-12. There has been a massive surge in the number of poor workers in recent times. There are 144.0 million workers (2021-22) that are earning between Rs 100 and Rs 200 per day which can be categorised as poor and vulnerable. Additionally, there are still 127.5 million workers (2021-22) who earn between Rs 200 and Rs 300 per day, which can be categorised as non-poor but definitely vulnerable.

The number of working poor and the decline in real wages indicate the need for interrogating labour market conditions in India, before jumping to the conclusion that India has been able to end poverty. The CES 2022-23 is being read to mean what cannot be found in it nor inferred from it either.

Santosh Mehrotra is Visiting Professor of Development Economics, Centre for Development Studies, University of Bath, UK.

Rakesh Ranjan Kumar is Senior Research Fellow, International Institute for Migration and Development, Trivandrum.

This piece was first published on The India Cable – a premium newsletter from The Wire & Galileo Ideas – and has been updated and republished here. To subscribe to The India Cable, click here.

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