ExplainSpeaking-Economy is a weekly newsletter by Udit Misra, delivered in your inbox every Monday morning. Click here to subscribe
In a webinar organised by RSS-affiliate Swadeshi Jagran Manch, RSS general secretary Dattatreya Hosabale flagged issues of poverty, unemployment and rising inequality in the country.
What did Hosabale say?
“The poverty in the country is standing like a demon in front of us. It is important that we slay this demon. That 20 crore people are still below the poverty line is a figure that should make us very sad. As many as 23 crore people have less than Rs 375 income per day,” he said on poverty. Quoting United Nations observations on poverty and development, Hosabale said: “A large part of the country still does not have access to clean water and nutritious food. Civil strife and the poor level of education are also a reason for poverty”.
He also commented on the high levels of inequality in the country.
“One figure says that India is among the top six economies of the world. But is this a good situation? Top 1 per cent of India’s population has one-fifth (20%) of the nation’s income. At the same time, 50% of the country’s population has only 13% of the country’s income,” he said.
Lastly, he also highlighted the widespread unemployment in the country.
“There are four crore unemployed people in the country. The labour force survey says we have an unemployment rate of 7.6 per cent,” he stated.
Why is this important?
Both official (when available) and unofficial estimates suggest that India has been sliding on these key metrics — poverty, inequality and unemployment — for a while now. However, the incumbent BJP government has more often than not chosen to either deny such reports or ignore them.
For instance, when in early 2019, it was reported that the government’s own Periodic Labour Force Survey (PLFS) for 2017-18 had found that unemployment hit a 45-year high of 6.1%, the government flatly refused to accept the findings. For the longest time everyone from then Finance Minister Arun Jaitley to CEO of Niti Aayog Amitabh Kant kept arguing that India cannot be growing at over 7% without creating jobs. After the general elections of 2019, however, the government accepted the very same findings.
The truth is that India’s growth process has failed to create a commensurate number of jobs and that is why the stress of unemployment keeps rising each passing year. Not to mention that India’s GDP growth itself had decelerated sharply since the start of 2017; notably in 2019-20, that is, just before the Covid pandemic, India’s GDP grew by just 3.7%. The rosy growth numbers — India’s GDP grew by 8.7% in the last financial year and is expected to grow at 7% in the current year — benefit from the low base effect thanks to the contraction in GDP during 2020.
Similarly on inequalities, too, the government has chosen to question the findings. The World Inequality Report 2022 released in December last year found that India is one of the worst when it came to rising inequalities and stated the following: “India stands out as a poor and very unequal country, with an affluent elite”.
However, Finance Minister Nirmala Sitharaman rubbished the findings by claiming that the report was “flawed” and used “questionable methodology”.
Similarly on poverty, too, the government is guilty of ignoring the evidence. For instance, when the Global Hunger Index ranked India at 101 (out of 116 countries) in October 2021, the Ministry of Women and Child Development claimed that the methodology used was unscientific. “It is shocking to find that the Global Hunger Report 2021 has lowered the rank of India on the basis of FAO estimate on proportion of undernourished population, which is found to be devoid of ground reality and facts and suffers from serious methodological issues. The publishing agencies…have not done their due diligence before releasing the report,” said the Ministry.
Hosabale is the deputy to RSS chief Mohan Bhagwat and his comments suggest that there is growing acknowledgement within the RSS of economic distress in the country.
What is the status of poverty, inequality and unemployment?
Officially, India used to estimate poverty rate by looking at the consumption expenditure of people in relation to the official poverty line.
The last revision of the poverty line was done by the Prof Suresh Tendulkar-led committee more than a decade ago. The Tendulkar poverty line was a consumption expenditure of Rs 29 per day per person in urban areas and Rs 22 per day per person in rural areas. Before Tendulkar’s revision, India’s poverty line was Rs 12 for rural areas and Rs 17 for urban areas.
The consumption expenditure data was taken from “Consumption Expenditure Survey” conducted by National Sample Survey (NSS) organisation, which comes under the Ministry of Statistics and Programme Implementation. These CES is conducted once every five years and the data is used to update the poverty estimates.
Since 2011, however, there has been no update on poverty rate. That’s because the Indian government disregarded the findings of the last CES (for 2017-18), much like it did at that time with the findings of unemployment (PLFS for 2017-18).
The CES 2017-18 had shown that consumption expenditure had fallen for the first time in four decades. In other words, if CES 2017-18 data was used, poverty estimates would have risen sharply.
In 2019, two academics, Santosh Mehrotra and Jajati Parida, used the consumption expenditure data from PLFS to estimate the status of poverty level in the country.
A look at Table 1 shows two noteworthy trends.
One, as a proportion of the whole population, India has been able to bring about a sharp reduction in poverty — from around 55% in 1973 to just 20% in 2019.
However, the period between 2011 and 2019 saw an increase in the absolute number of people below the poverty line. Using only the Tendulkar poverty line, the total number of poor people fell by 137.4 million between 2004 and 2011 and then rose by 76.5 million between 2011 and 2019.
India is one of the most unequal countries in the world. Table 2 alongside shows the prevailing income inequality according to the World Inequality Report 2022. It shows that the incomes of the top 10% of India’s population is 22 times that of the incomes of the bottom 50%. An annual income of Rs 12 lakh would place an individual in India in the top 10% of the income earners because the country average is just Rs 2 lakh. The top 1%, however, have an average annual income of well over Rs 44 lakh.
Such inequalities are not, of course, limited to income. They pervade all aspects of Indian society be it health or education or gender.
For instance, when India’s Human Development Index (HDI) score, which is ranked 132 out of 191 countries, is adjusted for inequality, it falls by a whopping 25%. Globally this fall is 19%, in China (ranked 79) it falls by 15% and in Switzerland (which is ranked number 1 in HDI) it falls by 7%.
India has been witnessing widespread unemployment. But apart from high unemployment rates, India also suffers from a declining labour force participation rate (LFPR). The LFPR gives the total number of people demanding jobs. Unemployment rate is just the total number of people who failed to get a job as a proportion of the total number of people demanding jobs. But since India also has sharply falling LFPR, unemployment rate (which is expressed as a % of LFPR) often fails to capture the stress in the labour market.
The better metric to look at is Worker-Population Ratio (WPR), which is the percentage of persons employed among the persons in the population. As can be seen from Chart 3, the WPR was largely stagnant between 1978 and 2005 and then fell sharply between 2005 and 2018; suggesting that India’s fast growth did not create as many jobs as the growing population needed. Since 2018, however, the WPR has started inching upwards.
The key question, however, is: Does economic distress have any political relevance?
What do you think? Share your views and queries at firstname.lastname@example.org
Before I go, let me urge you to watch this episode of The Express Economist. It features Adam Tooze, Professor of History in Columbia University and one of the leading thinkers of our time. I asked him a whole bunch of questions ranging from the UK’s financial crisis to the future of neoliberal policies and from India’s future as an economic power to whether central banks worsen inequalities when lower (or raise) interest rates. Hope you enjoy the episode
See you next week,