Arvind Panagariya’s new paper: ‘After pandemic, poverty kept falling every quarter from July-Sept 2020’

“These results are consistent with the robust performance of agriculture in 2019-20 and 2020-21, significant expansion of NREGA, and free distribution of 5 kg food grain per person per month on top of the same amount sold at highly subsidized prices under the Food Security Act,” the authors noted in their paper titled ‘Poverty and Inequality in India: Before and After Covid-19’.

Poverty in urban India, however, saw a modest rise on an annual basis in 2020-21; it started to decline by April-June 2021. “On a quarterly basis, it (urban poverty) saw only a modest rise, though the increase lasted for four quarters beginning with the strict lockdown quarter of April-June 2020. But by April-June 2021 quarter, decline in urban poverty had resumed,” the paper said.

The rise in urban poverty for four quarters beginning April-June 2020 compared with the corresponding quarters in the previous year was consistent with the large decline in the production of contact-intensive industries, the paper said. The free distribution of additional 5 kg food grain perhaps helped arrest a sharper rise in urban poverty, it noted.

Panagariya and More used the data on household expenditures reported in the Periodic Labour Force Survey (PLFS) conducted by the National Statistical Office (NSO). The paper was presented at the 3rd Columbia Summit on Indian Economy held at Columbia University on March 24-25, 2023.

In India, the official poverty definition and numbers are estimated based on the Consumption Expenditure Survey (CES) conducted by the National Statistical Office (NSO). The last published data of CES is available for 2011-12. The government had junked the CES conducted in 2017-18.

Observing that differences in sample design between the CES and PLFS make poverty estimates derived from the two sources entirely non-comparable, Panagariya said, “Claims of increase in poverty in 2017-18 and later based on a comparison of estimates derived from the CES in 2011-12 and the PLFS in 2017-18 or later must be rejected.”

The data available in the paper shows that rural poverty increased to 36.4 per cent (of the total rural population) in April-June 2020 as compared to 34.9 per cent in the same quarter a year ago. The figure was also higher as compared to 33.5 per cent in the January-March quarter of 2020. However, rural poverty started seeing a decline from July-September 2020 (33.5 per cent) onwards to 26.1 per cent in April-June 2021.

As per the data given in the paper, urban poverty increased to 20.2 per cent of the total urban population during April-June 2020 from 19 per cent during the same quarter a year ago and 16.3 per cent in the preceding quarter (January-March 2020). It continued to remain higher in the following three quarters—July-September 2020 (21.9 per cent), October-December 2020 (20.4 per cent) and January-March 2021 (21.5 per cent)— compared with the corresponding quarters of the previous year. However, urban poverty declined to 19.7 per cent in April-June 2021.

The data is not available for the following quarters after April-June 2021.

According to the paper, nationwide poverty increased only in one quarter i.e., April-June 2020. It rose to 31.7 per cent of the country’s total population during April-June 2020 as compared with 30 per cent in the same quarter a year ago and 28.2 per cent in the preceding quarter (January-March 2020). It witnessed a decline from July-September 2020 (30.1 per cent) onwards to 24.3 per cent in April-June 2021.

The paper’s finding that the decline in urban poverty resumed from April-June 2021 stands at odds with the devastation caused by the Delta wave of Covid-19 during the first quarter of financial year 2021-22.

When contacted, Panagariya told The Indian Express, “It is amazing that everyone made these claims of huge rise in poverty and inequality whereas the PLFS survey provides solid evidence that rural poverty continued to fall except in the strict lockdown quarter of April-June quarter of 2020 and urban poverty rose by just 2.3 percentage points in the survey year 2020-21 (July 1 to June 30). By the April-June 2021 quarter, even urban poverty had resumed its downward movement. Inequality actually fell in rural and urban areas and the nation as a whole.”

In the paper, Panagariya and More point to two studies, one by Azim Premji University (2021) and the other by Arpit Gupta, Anup Malani and Bartosz Woda (2021), which reached the conclusion that Covid-19 led to widespread increase in poverty.