Chronic Poverty in India: Concepts, Incidence and
Relevance
Amita ShahGujarat Institute of Development Research
May 22, 2009
IGIDR
Structure of the Discussion
* Poverty during Pre and Post Reforms Period: Trends, Evidence, Debates
• Chronic Poverty: Concepts & Measurement
• Policy Options
Poverty in India: Recapitulations of Trends
HCR (URP – 30 Days)
1983 1993-94 2004-05
Rural
Poor 45.76 37.26 29.18
Very Poor 25.52 15.38 9.64
Urban
Poor 42.27 32.56 26.02
Very Poor 22.45 16.00 12.00
All
Poor 44.93 36.02 28.27
Very Poor 24.79 15.54 10.32
Changes in Poverty (URP)
% Points Per Annum
Adjusted for Base Year
83-94 93-05 83-94 93-05
Rural -0.61 -0.73 -1.77 -1.97
Urban -0.92 -0.59 -2.18 -1.81
All -0.85 -0.70 -1.89 -1.94
Reduction of Urban Poor is Slower During the Post Reform Period
Estimates Based on Mixed Reference Period
1993-94 to 1999-2000 0.69
1999-2000 to 2004-05 1.02
Nineties was a Lost Decade for Poverty Reduction Due to:
* High Rate of Inflation
* Jobless Growth
Comparison of 1987-88 to 1993-94 and 1993-94 to1999-2000
• Rate of Decline was higher in the Post-reform period (low base)
• Elasticity of Poverty Reduction with respect to Income had declined
• Increased Inequality, associated with Growth had dampening impact on poverty reduction
• Role of FDI is perceptible despite limited flow; the trickle down effect however, is slow.
Decomposition of Poverty Reduction
Total Change
Due to Growth
Due to Inequality
Rural -8.08 -10.88 2.80
Urban -8.08 -12.40 4.32
Calorie Intake at Official Poverty Line
Poverty Line 2004-05 356.3
Poverty Ratio 2004-05 28.3
Calorie at OPL 1820
Direct (Calorie Based Estimates)
Calorie 1993-94 2004-05
<2400 74.5 87.0
< 2200 58.5 69.5
<1800 20.0 25.0
Debates
• Non-Comparability of Data
• Post Nineties Performed Better
• Why have a Poverty Line
• Whether to Raise Poverty Line
• Line Vs. Identification
Emerging Issues
• Low Poverty with High Levels of Mal-Nutrition
• Chronic Poverty is Hard to Hit• Entry of New Poor due to Structural
Adjustment• Spatial and Social Dimensions of
Concentration of the Poor• Poverty Vs. Multi-Dimensional Deprivation
Chronic Poverty Concepts-1
Extreme Poverty that Persists Over Long Period –years, life, generations
Multidimensional-economic, human capital related, socio-political
Poverty That Causes Preventable Deaths
Important as Analytical Categories
What Causes CP?
• Insecurity Traps
• Limited Citizenship and Voice
• Spatial disadvantages
• Social Discrimination
• Poor Work Environment
Analysis of Poverty Dynamics
• Entry- drivers and maintainers
• Exit
Ideally Need longitudinal-Panel Data Sets
Alternative Approaches-Cohorts based, Recall and Stages Growth
Why CP is Important?
• If not addressed immediately, it becomes more intractable and costlier
• Increased Period under CP reduces chances of exit• Worsens vicious cycle bet. Material Deprivation
and Investment in Human Capital• Political Resistance may take a shape that may
result into negative impact• Environmental degradation and CC• Demographic Window having Short Span
Global Magnitude: Countries and Consistent Improvers
Indicators Full CDCs
Full Cls
Number of countries 32 11
Population (% of total) 10 33
Child mortality (% of total) 36 6
Infant mortality (% of total) 30 11
US$ 1/day poverty (% of total) 17 22
US$ 2/day poverty (% of total) 13 28
Undernourishment (% of total) 23 23
Aid in 2002 (% of total) 29 14
CP in India-(Panel Data)
• CP reduced from 28.4% to 24.3% during 1970/1-1980/1 to 1980/1-1998/9
• Over the entire period CP was 38%; TP 40%; NP 21%
• CP as % to Poor Declined from 43% to 38.6% during the two sub-periods
• CP was 38.6 % among SC; 27.9% in ST; and 22.2 among Others during 1980/1-1998/9
CP in India (Panel Data 1981-98)
Always Poor (CP)
Transient Poor
(Poor at one Point)
Non-Poor All
S.C 38.6 40.0 20.9 100
S.T 27.9 44.4 27.6 100
O.C 22.2 37.8 39.9 100
Total 24.3 38.6 37.1 100
Explanatory Factors
• Caste alone has Marginal Impact• Composition vs. Size of the HHs is Important• Local level Infrastructure and Urban-linked
Employment was the Most Significant Factor• CP Declined Initially and then Increased-Due to
Declining Land Holding Size (?)• The Factors thus, vary Over Time
Stages of Growth (Rural)
• Food• Clothing• House Repairing• Education• Debt Payment• Buying a Small Piece of Land
Health Missing in all ALTERNATIVE trajectories
Distribution of Households Across Four Categories by States (% of hhs)
HHS Categories Rajasthan (35 Vill-
ages)
Gujarat (20
Villages)
Andhra Pradesh
A. Remained Poor 17.8 49.8 NA
B. Escaping Poverty 11.1 9.2 14
C. Descended into
Poverty
8.0 7.3 12
D. Remained Non-poor 63.2 `33.6 NA
Reasons for Escaping Poverty
Reasons % of HHs
Rajasthan Gujarat Andhra Pradesh
Health related 60 88 74
Social expenses 31 68 69
Funeral expenses 34 49 28
Interest payment 72 52 60
Drought/ Crop failure 18 - 44
Land exhaustion - - -
Vulnerability: 2004-05 Sengupta et. al)
Categories of Poor % of Pop. AV. DPCE (US$)
Current Price
Extremely Poor & Poor 21.8 1.1
Marginal &Vulnerable 55.0 1.8
Middle Income 19.3 3.7
High Income 4.0 9.3
All 100 2.3
1983 2004-05
States HCR Rank % share HCR Rank % Share
Orissa 65.31 1 5.70 47.07 1 6.03
Bihar 62.71 2 14.64 41.53 2 16.53
Madhya Pradesh 49.23 5 8.61 37.21 3 10.79
Maharashtra 43.13 7 9.04 29.95 5 10.36
Uttar Pradesh 46.94 5 17.42 33.25 4 20.93
Tamil Nadu 53.48 4 8.47 28.31 6 6.10
West Bengal 53.60 4 9.77 25.67 7 7.23
All India 44.93 100 28.27 100
Table 1: Concentration of Poverty among Major States in India
Sr. No.
Regions in Descending Order Category of Region
1 Orissa-Southern Forest-based
2 Madhya Pradesh-South Central Forest-based
3 Madhya Pradesh-Chhatisgadh Forest-based
4 Orissa-Northern Forest-based
5 Madhya Pradesh-South western Forest-based
6 Maharashtra-Eastern Forest-based
7 Bihar-Southern Forest-based
8 Madhya Pradesh-Central Other
9 Bihar-Central Dry land
10 Uttar Pradesh-Central Other
11 Tamilnadu-Coastal Northern Forest-based
12 Bihar-Northern Other
13 Madhya Pradesh-Vindhya Forest-based
14 Madhya Pradesh-Malwa Platau Other
15 Uttar Pradesh-Eastern Dry land
Table 3: List of 15 Regions Appearing in the Three NSSO-Rounds
III. Way Forward
• Inclusive Growth: XI Plan: More of the Same? (Fiscal, Financial, Trade Policies; Institutions; Broad-based Growth)
• Focus on Agriculture Growth: Neglect of Dry Land Areas
• NREGS and Universal PDS• Social Protection & Transfer of Minimum Income• Right to Decent Life
THANKS