Poverty Reduc-on in India: Issues and Policies Comments. Stephen C. Smith, GWU Nov Presenta-on by Prof. S. Mahendra Dev

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1 Poverty Reduc-on in India: Issues and Policies Comments Stephen C. Smith, GWU Nov Presenta-on by Prof. S. Mahendra Dev

2 Some ques-ons Very interes-ng and useful exposi-on of factors driving rapid fall in poverty headcounts Appears driven by increases in employment, in some periods more agriculture-related, others more manufacturing & services 1 Poverty reduc-on impact of ag twice that of non-ag; how does India differ from other countries and over -me? 2 Are these jobs formal, semi-formal, or completely informal? Relevant for sustainability, expected growth and risk profile over -me, as well as for pushing over the poverty line with current income 3 Are people moving into the space between a dollar a day and two dollars a day and gexng stuck? 2 How do factors explaining movements over two dollars a day differ from those presented here for moving over a dollar a day? Thus - Selec-ng the relevant Poverty line is important:

3 Selec-ng the Income Poverty Line Response from the Proverbial Back of the Envelope Clearly, general trends in India s headcount poverty reduc-on are very encouraging and impressive and hold at several poverty lines examined However, it seems that the standard Poverty line and sensi-vity analysis adjustments of it are quite low; from the back of my envelope this morning: 1060 Rps per month average of the four commission poverty lines 12,717 yearly; about 34 Rps per day; at exchange rates, close to $.50: ~34/~68 We can debate the correct PPP ra-o; maybe under 3, certainly not much over 3 So this line is ~ $1.50 well below the $1.90 (current adjusted dollar a day ) In any case, less than 4/5 the interna-onal extreme poverty line which already was defined based on poverty standards of the poorest dozen or so countries So the highest poverty-line sensi-vity test, given as 25% above the line, actually brings us only up to to this global standard poverty line Tradi-onally we looked also at $2 a day (now $3.80 per day) as a poverty line And, India is hardly a least-developed country! As sensi-vity tests I d suggest also trends at a higher level than $1.90: e.g., $2.85 per day (i.e. 50% over the updated dollar a day), and or $3.80 per day

4 Severe and Ultra-poverty Below 50% PL we have less than 5% popula-on Is this a large or small number? Certainly seems to be a large number, given the severity of poverty that it represents If all these people are not pulled fully out of poverty India will not meet the SDG of zero poverty Even as defined by the World Bank elimina-ng poverty is up to 3% Consider focusing on severity and or Ultrapoverty measures Headcount and severity may move in same direc-on with a line of $1.50, but may not s-ll hold using a line of $3

5 Figure 5.13 Global and Regional Poverty Trends,

6 Compara-ve MPI vs Income Poverty; MD Headcount vs MD Intensity Worth no-ng - India is a country with a significantly, if moderately, greater incidence of mul-dimensional poverty than income poverty And a somewhat higher intensity of mul-dimensional poverty than predicted by its headcount mul-dimensional poverty (globally) Note: Topics covered later in presenta-on, such as women s empowerment, would seem to be natural for a mul-dimensional measurement framework, though discussed in those sec-ons in terms of income poverty line

7 OPHI data show India has a higher MD headcount than income headcount 100% 90% MPI Poor $1.25 a day 80% 70% 60% 50% 40% 30% 20% 10% 0% Slovenia Slovakia Belarus Serbia Kazakhstan Armenia Bosnia and Herzegovina United Arab Emirates Macedonia, The former Yugoslav Republic of Georgia Tunisia Russian Federation Albania Occupied Palestinian Territory Montenegro Latvia Thailand Uruguay Moldova, Republic of Ukraine Ecuador Uzbekistan Jordan Brazil Mexico Argentina Czech Republic Viet Nam Croatia Hungary Dominican Republic Belize Kyrgyzstan Maldives Azerbaijan Sri Lanka Colombia Syrian Arab Republic Trinidad and Tobago Suriname Egypt Turkey Estonia Guyana Peru Morocco South Africa Iraq China Tajikistan Paraguay Philippines Indonesia Mongolia Honduras Nicaragua Gabon Swaziland Bolivia, Plurinational State of Guatemala Bhutan Djibouti Vanuatu Ghana Lao People's Democratic Republic Sao Tome and Principe Lesotho Zimbabwe Namibia Congo, Republic of Nigeria Pakistan Nepal Cambodia Cameroon Kenya Haiti Togo Bangladesh Yemen India Cote d'ivoire Gambia Mauritania Chad Zambia Tanzania, United Republic of Afghanistan Malawi Madagascar Timor-Leste Rwanda Mozambique Uganda Benin Sierra Leone Congo, Democratic Republic of the Senegal Guinea-Bissau Central African Republic Burundi Somalia Guinea Liberia Burkina Faso Mali Ethiopia Niger Percentage of the Population

8 Incidence and Intensity by Country: India somewhat worse performing on intensity trend 75% Poorest Countries, Highest MPI Average Intensity of Poverty (A) 70% 65% 60% 55% 50% 45% 40% 35% 30% Brazil China Indonesia Tajikistan Argentina Lao Guatemala Nepal Namibia Ghana Nigeria India Cambodia Zimbabwe Guinea-Bissau Afghanistan Mozambique Benin Gambia Bangladesh Somalia Ethiopia Liberia Burundi Congo DR Tanzania Rwanda Malawi Niger The size of the bubbles is a proportional representation of the total number of MPI poor in each country 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percentage of People Considered Poor (H)

9 Contribu-on of Agriculture: Importance possibly even stronger than suggested As Prof. Dev Notes, ag important for nearly 50% of workers; while Small and marginal farmers who cons-tute 85% of the farmers. We can also note that today only a small frac-on of India s workers are in export oriented manufactures (much smaller than total in sector) Domes-c oriented manufactures produc-on may not be beper than focused agriculture development strategy With low base overall, s-ll long -me before could pull most out of poverty Also the demand side: if not focused on foreign markets, need higher domes-c incomes, which may require agriculture produc-vity and incomes Even with growth rates like those of China, would be at least a couple of decades un-l could give less apen-on to agriculture in a poverty strategy Focus needed with other emerging shocks to produc-vity such as: Falling groundwater tables Salina-on and other soil deteriora-on Climate change shocks: threats to monsoon paperns, loss due to high heat General reduc-on in growth rates of agricultural produc-vity globally

10 Value chain development also important Men-oned importance of raising food prices this is tricky This may harm the poorest Depending on how implemented such programs may reduce efficiency However, if point is to receive higher prices at farm gate (other than through inefficient price regula-on) that is poten-ally different! Can be achieved by adding more value before sale Poten-al strategies to break monopsony power

11 Observa-ons on Iden-fying the Poor with Exclusion and Inclusion Criteria Some criteria-sets used for proxy means for income-poverty programs As used here it seems more explicitly mul-dimensional in intent (As with NGOs, e.g. Grameen 10 ques-ons; BRAC TUP 3 and 5 criteria Either way, their use raises ques-ons for considera-on: What are (what we could call) criteria for exclusion criteria? (And criteria for inclusion criteria; and for selec-ng other indicators?) Automa-c inclusion: Why not e.g. Child stun-ng, malnutri-on? (This is a widely discussed dimension in which India seems different) Why not at least included on list of 7 other depriva-ons for ranking? Other indicators striking by omission - child labor; Child not in school? How sensi-ve are results to other or addi-onal indicators; e.g. what would adding child labor do to results? And, are the best indicators likely to be the same in all parts of India? E.g. in some states nutri-on ok, educa-on poor; others vice-versa

12 Very Informa-ve and Important Work! Thank you!