Chronic Poverty in India: Concepts, Incidence and Relevance Amita Shah Gujarat 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) Rural Poor Very Poor Urban Poor Very Poor All Poor Very Poor

Changes in Poverty (URP) % Points Per Annum Adjusted for Base Year Rural Urban All Reduction of Urban Poor is Slower During the Post Reform Period

Estimates Based on Mixed Reference Period to to Nineties was a Lost Decade for Poverty Reduction Due to: * High Rate of Inflation * Jobless Growth

Comparison of to and to 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 Urban

Calorie Intake at Official Poverty Line Poverty Line Poverty Ratio Calorie at OPL1820 Direct (Calorie Based Estimates) Calorie < < <

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 IndicatorsFull CDCs Full Cls Number of countries3211 Population (% of total)1033 Child mortality (% of total)366 Infant mortality (% of total)3011 US$ 1/day poverty (% of total)1722 US$ 2/day poverty (% of total)1328 Undernourishment (% of total)23 Aid in 2002 (% of total)2914

CP in India-(Panel Data) CP reduced from 28.4% to 24.3% during 1970/ /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 ) Always Poor (CP) Transient Poor (Poor at one Point) Non-PoorAll S.C S.T O.C Total

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 CategoriesRajasthan (35 Vill- ages) Gujarat (20 Villages) Andhra Pradesh A. Remained Poor NA B. Escaping Poverty C.Descended into Poverty D. Remained Non-poor63.2`33.6NA

Reasons for Escaping Poverty Reasons% of HHs RajasthanGujaratAndhra Pradesh Health related Social expenses Funeral expenses Interest payment Drought/ Crop failure18-44 Land exhaustion---

Vulnerability: Sengupta et. al) Categories of Poor% of Pop.AV. DPCE (US$) Current Price Extremely Poor & Poor Marginal &Vulnerable Middle Income High Income All1002.3

StatesHCRRank% shareHCRRank% Share Orissa Bihar Madhya Pradesh Maharashtra Uttar Pradesh Tamil Nadu West Bengal All India Table 1: Concentration of Poverty among Major States in India

Sr. No. Regions in Descending OrderCategory of Region 1Orissa-SouthernForest-based 2Madhya Pradesh-South CentralForest-based 3Madhya Pradesh-ChhatisgadhForest-based 4Orissa-NorthernForest-based 5Madhya Pradesh-South westernForest-based 6Maharashtra-EasternForest-based 7Bihar-SouthernForest-based 8Madhya Pradesh-CentralOther 9Bihar-CentralDry land 10Uttar Pradesh-CentralOther 11Tamilnadu-Coastal NorthernForest-based 12Bihar-NorthernOther 13Madhya Pradesh-VindhyaForest-based 14Madhya Pradesh-Malwa PlatauOther 15Uttar Pradesh-EasternDry 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

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