Ending poverty statistically

Bhalla

India’s poor were delighted yesterday, to read in the newspaper, that India’s Executive Director to the International Monetary Fund – the celebrated data scientist Surjit Bhalla, assesses India’s poor to have reduced from 21.2 per cent in 2011 to just 6.3 per cent by 2018.
He also asserts that the fastest reduction in poverty happened during the period fiscal 2012 to fiscal 2018 –most of which was when Narendra Modi has been at the helm.

Sometimes things are not what they seem to be

Those poor for whom nothing has changed – and there still seem to be many – just shrugged and accepted that growth must have just by-passed them. This is not uncommon in India’s development history. Schemes are mostly implemented on hope and hit or miss expectations, since there is always another year or sometimes even five, to make up for past mistakes.

Poverty lines and their limitations

More generally, poverty is believed to be around 14 per cent by 2018. But poverty specialists are quick to add that measuring poverty merely by adding up the headcount below a poverty line is not very honest.

After all, by definition, the poor have no reserves and get by on what they can earn or scrounge. Ill health of the wage earner; riots; shutdowns; natural calamities or just the loss of a low paying part-time job is enough to push someone located marginally above the poverty line, back into poverty. Similarly, anyone below the line can rise above it, if fortune favors them with say a job or the absence of catastrophe.

Poverty is not a line separating two segments of the population. It is a corrosive, sticky, ecosystem of prejudice, exclusion and low endowments which extends to some depth on both sides of any “poverty line”.

The commonly accepted thumb rule is that there will be as many people vulnerable to lapsing back into poverty as there will be below it. If 14 per cent of the population is poor, an additional 14 per cent is vulnerable to becoming poor due to economic shocks. This means the target group for alleviating poverty in India is around 28 per cent and not 14 per cent as the poverty line suggests.

Why is government hiding the good news that poverty is rapidly reducing and is at marginal now

That the poverty ratio was just 6.3 per cent in 2018 or a mere 84 million people is headline news. Incidentally, this number of people at the very bottom is not very different from the those at the very top – 58 million individuals filed income tax returns in fiscal 2019 of which just 15 million self-declared themselves as being taxable.

Economic pundits in NCAER – a reputed, economic think-tank in New Delhi, where Surjit Bhalla is a Board member, have, expectedly, refuted this welcome surprise of vanishing Indian poverty based on a mélange of private sources, including the World Bank “night lights data” as being statistically unsound.

Statistical dogfights are not new. The economic survey 2019-20 statistically debunked the previous Chief Economic Advisor – Arvind Subramanian’s – growth estimate rethink after leaving the job, using high frequency indicators. These had persuaded him that the real Indian growth rate was 1 to 2 percentage points lower than the official GDP growth rate during 2014 to 2019 when he was in office.

Others support the Bhalla statistical outcome. It aligns with the government narrative that growth has been buoyant since 2014; that demonetization was good for the economy and that the negative outcomes of GST even though it failed to pull in tax buoyancy, are overdone by “vested interests”- read small and medium industry who operate outside the formal banked economy and have either shut down since or limp along with a reduced top line and weak bottom lines.

NITI targets poverty at 10.4% by 2030 in SDG1 – so are things going to become worse?

But one thing is clear. Neither the NITI Ayog nor the government agree with Bhalla’s rosy view on poverty reduction. As evidence, look no further than the goals adopted in 2018 for SDG 1 – poverty reduction- which target a poverty level of 10.4 per cent by 2030 even as, along the way, the economy would have grown from $2.9 trillion to $5 trillion sometime after FY 2025 and even as the population growth rate slows down further to the replacement rate.

The Bhalla paper implicitly suggests that the government is projecting poverty to be a bigger problem than it is. This aligns with the Prime Ministers “muscular” branding of India as a giant which has nearly arrived.

Bhalla aligns with President Trump’s view that India is no longer poor.

USA

Sadly, the Bhalla paper hits the headlines at an inconvenient time. The Ministry of External Affairs is burning the midnight oil to convince the US government that poor India “deserves” a continuation of the Generalized System of Preferences (GSP) under which $6.3 billion of Indian exports used to enter the US duty free.

These concessions lapsed in June 2019 when the Trump government scatter-gun attacked countries – including China and India – for supposedly subjecting specialty imports from the US to high import duties.

It would have been more convenient, at this stage, to remain poor statistically. Dr. Bhalla – a one-time member of Prime Minister’s Economic Advisory Council also dismissed, as junk, a 2017-18 consumption expenditure survey done by the Ministry of Statistics which found that consumer spending fell by 3.5 per cent.

India’s statistical establishment seems irrevocably broken. This comes on the back of a global disenchantment with data spinning economists and a growing distrust of non-transparent artificial intelligence. The Luddites never had it so good!

Also available at TOI Blogs Feb 19, 2020 https://timesofindia.indiatimes.com/blogs/opinion-india/surjit-bhalla-deletes-indian-poverty-statistically/

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