SIGNIFICANT DECLINE IN POVERTY IN INDIA: NCAER PAPER

TAG: GS 2: SOCIAL JUSTICE

THE CONTEXT: According to a research paper by the National Council of Applied Economic Research (NCAER), poverty in India has seen a substantial decline from 21.2% in 2011-12 to 8.5% in 2022-24.

EXPLANATION:

  • This paper, titled “Rethinking Social Safety Nets in a Changing Society,” is authored by Sonalde Desai and utilizes data from the newly completed Wave 3 of the India Human Development Survey (IHDS) alongside data from Waves 1 and 2.

Historical Context and Current Trends

  • The decline from 2004-2005 to 2011-12
    • The IHDS findings indicate a significant reduction in poverty between 2004-2005 and 2011-12, with the headcount ratio dropping from 38.6% to 21.2%.
    • This trend continued in the following decade despite the adverse impacts of the COVID-19 pandemic.
  • Continued Decline to 2022-24
    • Between 2011-12 and 2022-24, poverty further decreased from 21.2% to 8.5%.
    • This sustained reduction highlights India’s progress in improving economic conditions and mitigating poverty, even amid global health crises.

Factors Contributing to Poverty Reduction

  • Economic Growth
    • Economic growth has played a crucial role in poverty reduction.
    • As the economy expands, more opportunities arise, lifting people out of poverty and improving living standards across both rural and urban areas.
  • Social Protection Programs
    • The paper emphasizes the need for nimble social protection programs that can adapt to the dynamic economic climate.
    • Traditional strategies aimed at chronic poverty may no longer be as effective as newer challenges emerge.
    • Ensuring that social protection systems evolve with societal changes is essential for equitable development.

Challenges and Future Directions

  • Shift from Chronic to Transitory Poverty
    • The paper notes a shift in the nature of poverty from long-term, chronic poverty to more transitory forms caused by “accidents of life” such as natural disasters, illnesses, deaths, and changes in occupational opportunities.
    • This shift underscores the need for social protection systems that can address these transient yet impactful events.
  • Ensuring Inclusivity in Social Safety Nets
    • As India progresses towards greater economic prosperity, the challenge lies in ensuring that social safety nets remain inclusive and effective.
    • Policymakers must consider how to adapt these programs to continue supporting those in need, especially as traditional poverty determinants become less prevalent.

Government and Institutional Perspectives

  • NITI Aayog’s Observations
    • Earlier this year, NITI Aayog CEO highlighted that the latest consumer expenditure survey indicates poverty has further declined to around 5%.
    • This suggests a growing prosperity in both rural and urban areas.
    • The consumption levels of the lowest economic segments are similar to the poverty line adjusted for current prices, indicating minimal poverty presence in the 0-5% group.
  • NSSO Data on Household Consumption
    • The National Sample Survey Office (NSSO) released data on household consumption expenditure for 2022-23, showing that per capita monthly household expenditure has more than doubled compared to 2011-12.
    • This increase in consumption reflects improved economic conditions and higher living standards.
  • Poverty Line Adjustments
    • The poverty line, as recommended by the Tendulkar Committee Report, was set at Rs 447 for rural areas and Rs 579 for urban areas in 2004-2005.
    • These thresholds were later adjusted by the Planning Commission to Rs 860 and Rs 1,000, respectively, for 2011-12.
    • Such adjustments are crucial for accurately measuring and addressing poverty in changing economic contexts.

IHDS Wave 1 (2004-05)

  • The first round of the IHDS survey was conducted in 2004-05.
  • It covered 41,554 households in 1,503 villages and 971 urban neighbourhoods across India.
  • The survey collected data on a wide range of topics, including caste, consumption, income, agriculture, education, health, gender relations, and more.
  • The goal of IHDS was to document changes in the daily lives of Indian households during a period of rapid social and economic transformation.

IHDS Wave 2 (2011-12)

  • The second round of the IHDS survey, known as IHDS-II, was conducted in 2011-12.
  • It re-interviewed 42,152 of the original households from the first wave, achieving an 85% re-interview rate.
  • The IHDS is a unique panel survey that allows researchers to study changes in the lives of Indian households over time.
  • IHDS-II continued to collect data on the same broad range of topics as the first wave.

IHDS Wave 3 (Ongoing)

  • IHDS-3 is the third round of the India Human Development Survey, currently under construction with fieldwork beginning in May 2022.
  • The expected Wave 3 will sample more than 41,000 households comprising over 200,000 individuals across India.
  • IHDS-3 aims to assess changes in individuals’ life courses as well as the impact of economic changes and public policies on household well-being, studying different dimensions of human development like education, health, caste, and gender relations.
  • IHDS-3 will be a Computer Assisted Personal Interviewing (CAPI) survey, which is expected to improve data quality through skip patterns, logic checks, and validations.
  • IHDS-3 is a collaborative effort between NCAER, the University of Maryland, the University of Michigan, and Indiana University Bloomington.

National Council of Applied Economic Research (NCAER)

  • National Council of Applied Economic Research (NCAER) is India’s oldest and largest independent, non-profit, economic policy research think tank.
  • Established in New Delhi in 1956, it acquired considerable national and international standing within only a few decades of its founding.
  • It is one of a handful of think tanks globally that combine rigorous analysis and policy outreach with deep data collection capabilities, especially for household surveys.
  • NCAER’s roots lie in Prime Minister Nehru’s early vision of a newly-independent India needing independent institutions as sounding boards for the government and the private sector.
  • Remarkably for its time, NCAER was started in 1956 as a public-private partnership, both catering to and funded by the government and private industry.
  • NCAER’s first Governing Body included the entire Cabinet of Economics Ministers and the leading lights of the private sector, including names like C.D. Deshmukh, J.R.D. Tata, John Mathai, and Asoka Mehta.
  • The Ford Foundation provided strong financial support in the early years, combined with support from the Finance Ministry and Tata Sons.

SOURCE:https://economictimes.indiatimes.com/news/economy/indicators/not-politics-not-interest-rates-indias-surging-economy-at-risk-from-water/articleshow/111475763.cms

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