Covid-19: Claims of a spike in poverty in India patently false, says study

Virendra Pandit

New Delhi: Claims of a spike in poverty and inequality in India during the Covid-19 pandemic period—2020-21—are patently false as they are based on incomparable surveys. In fact, inequality fell across the country during this period.

These are the findings of a paper co-authored by eminent economist Arvind Panagariya, a former Vice-Chairman of NITI Ayog and now a Columbia University Professor, and Vishal More of Interlink Advisors, New Delhi, the media reported on Monday.

The paper, entitled “Poverty and Inequality in India: Before and After Covid-19,”  will be presented at the “Third Columbia Summit on The Indian Economy,” being organized on March 24 and 25 by the Deepak and Neera Raj Center on Indian Economic Policy at Columbia University School of International and Public Affairs.

It analyses poverty and inequality before and after the pandemic, using data on household expenditures reported in the periodic Labour Force Survey (PLFS), conducted by the National Statistical Office (NSO) of India.

The paper’s main findings say that poverty levels derived from the PLFS are not comparable to those derived from Consumer Expenditure Surveys (CESs) conducted in 2011-12 and earlier because of differences in sample design.

“Claims of increase in poverty in 2017-18 based on a comparison of estimates derived from the CES in 2011-12 and the PLFS in 2017-18 or later must be rejected,” it said, adding their sample designs are vastly different.

The paper said that on a quarterly basis, rural poverty rose marginally in the strict lockdown quarter (April-June 2020) but fell below the pre-Covid-19 level soon after and continued to decline. On an annual basis, inequality fell during the post-Covid-19 era in both rural and urban areas and in rural and urban areas combined.

Overall, the “claims of massive increases in poverty and inequality during Covid-19 are patently false. On an annual basis, poverty continued to fall in rural areas during 2019-20 albeit at a significantly lower rate. Rural poverty saw the same sharp decline in 2020-21 as in the pre-Covid year of 2018-19.

“On the quarterly basis, rural poverty saw a modest rise only during the strict lockdown quarter of April-June 2020,” the paper said, adding these results are consistent with the robust performance of agriculture in 2019-20 and 2020-21.

Urban poverty saw a modest rise on an annual basis in 2020-21. On a quarterly basis also, it saw only a modest rise though it lasted for four quarters beginning with the quarter April-June 2020.

“But by the April-June 2021 quarter, the decline in urban poverty had resumed. While the rise in urban poverty for four quarters was consistent with the large decline in the production of contact-intensive industries, free distribution of additional 5 kg food grain perhaps helped arrest the sharper decline in urban poverty,” it said.

The co-authors offered a critique of some studies which claimed that Covid-19 led to a widespread increase in poverty.

One of these studies was the Azim Premji University Report (2021) based on the household income and expenditure survey, namely, Consumer Pyramids Household Survey (CHPS) conducted by the Center for Monitoring Indian Economy (CMIE). It found massive employment losses and an increase in overall poverty and inequality.

The new study, however, noted that rather than measuring poverty and inequality directly from the expenditure survey, the Premji University report “invents an event study to measure them. This is odd and suspect and we do not find it at all persuasive.”

The paper said “there remains a widespread belief that Covid-19 resulted in a massive increase in poverty in India. But this observation sits awkwardly against the fact that the poor in India reside disproportionately in rural areas. They are heavily dependent on agriculture, which showed no deviation from its trend in earlier years and exhibited healthy growth throughout the Covid-19 era. The government was quick to double down on its anti-poverty initiatives soon after the onset of Covid-19.”

The event will be addressed by IMF Executive Director Krishnamurthy Subramanian, Secretary in the Ministry of Health & Family Welfare Rajesh Bhushan, Secretary, Department for Promotion of Industry and Internal Trade Anurag Jain, former US Ambassadors to India Kenneth Juster and Frank Wisner, India’s Consul-General in New York Randhir Jaiswal and NCAER Director General Poonam Gupta, among others.