{"id":385818,"date":"2024-08-02T15:22:28","date_gmt":"2024-08-02T09:52:28","guid":{"rendered":"https:\/\/zerodha.com\/z-connect\/?p=385818"},"modified":"2024-08-12T16:47:20","modified_gmt":"2024-08-12T11:17:20","slug":"were-poor-but-we-aint-broke","status":"publish","type":"post","link":"https:\/\/zerodha.com\/z-connect\/subtext\/were-poor-but-we-aint-broke","title":{"rendered":"We\u2019re poor, but we ain\u2019t broke"},"content":{"rendered":"\n

Humanity, to Noah Smith, is caught in a never-ending war against poverty, \u2018the elemental foe<\/em><\/a>\u2019:<\/p>\n\n\n\n

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Humanity is at war \u2014 a war so old, so terrible, and so all-consuming that even World War 3 would be a minor skirmish in comparison. Whether or not we remember it, we are always on death ground. But our intelligence has given us an opportunity not afforded to other animals \u2014 the chance to conceive of our species as a single team, fighting not individually but as an army united against the implacable, elemental foe of poverty and desolation.<\/em><\/p>\n\n\n\n

It is our highest task to push that foe ever backward, to build out the fortress of industrial modernity, to reclaim the Earth for the safety and comfort of beings that think and feel. <\/em><\/p>\n<\/blockquote>\n\n\n\n

If humanity is at war with poverty, India is the bloodiest battleground.<\/p>\n\n\n

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Bengal, 1943<\/em>
Source: <\/em>The Statesman<\/em><\/a><\/figcaption><\/figure>\n<\/div>\n\n\n

India emerged into independence in 1947 as a hollowed, tortured, starving land-mass; simultaneously one of the poorest and one of the most populous countries in the world. In the last half-century of British rule, we had seen plague and famine<\/a> at biblical scales. One of the worst mass-starvations in history was a recent memory. Only five years ago, the people of Bengal were reduced to eating grass<\/a> like cattle \u2014 not because it was nutritious, but because it took up the empty space in their stomachs. <\/p>\n\n\n\n

The country was broke. The people were broke. The government was broke. In those early days, people lived on the mere dream that a free nation could change their fates. When the harvest was good, 65% of the country lived under poverty. When it was bad, we simply didn’t know how to measure how bad things were. <\/p>\n\n\n\n

Mass starvation was always a failed monsoon away. Hunger had become an intractable problem. We made it through, somehow, eating wheat of a quality \u201cfit enough only for pigs<\/em><\/a>\u201d received in charity from the United States. India was constantly on the brink. A single shock could become a humanitarian crisis. In 1965, when war broke out, Prime Minister Shastri publicly pleaded with the entire country to sacrifice one meal a week, if not more. It was only after the Green Revolution began, in 1967, that we learnt how to grow enough food to feed ourselves. <\/p>\n\n\n

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American PL-480 wheat coming into the Madras harbour, 1966<\/em>
Source: <\/em>The Hindu Businessline<\/em><\/a><\/figcaption><\/figure>\n<\/div>\n\n\n

Poverty dropped to around 40% in the 1960s. But then, it refused to budge any lower. Decades of social welfare programs couldn’t bring it down, nor could a famous \u2018garibi hatao<\/em>\u2019 program. Instead, India simply learnt to cope with its stubborn poverty. Its \u2018Public Distribution System,\u2019 initially built to tide over World War II-era food shortages, became an evergreen feature of the Indian state, keeping the country alive, even if on the ventilator. By 1994, poverty was still at ~35%. It was only then, after four-and\u2013a-half decades of penury, that our economic condition finally started to improve. <\/p>\n\n\n\n

All of this is to tell you why you should be deeply proud that, according to the data for 2022-23, India has nearly eliminated absolute poverty.<\/p>\n\n\n\n

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What is poverty, round one: The numbers<\/strong><\/h2>\n\n\n\n

Where do we draw the line? <\/em><\/strong><\/h3>\n\n\n\n

How poor are we as a country? <\/p>\n\n\n\n

To answer that, you first need to ask: what does it mean to be poor? <\/strong><\/em> Not having enough money? Sure. But nobody ever thinks they have enough<\/em> money. Here\u2019s what the World Bank<\/a> says: <\/p>\n\n\n\n

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To be poor is to be hungry, to lack shelter and clothing, to be sick and not cared for, to be illiterate and not schooled. But for poor people, living in poverty is more than this. Poor people are particularly vulnerable to adverse events outside their control. They are often treated badly by the institutions of state and society and excluded from voice and power in those institutions. <\/em><\/p>\n<\/blockquote>\n\n\n\n

Is it gut-wrenching? Yes. Does it help you figure out if someone\u2019s poor? Not exactly. <\/p>\n\n\n\n

Well, if one has no food or clothing at all, or lives on the street, they\u2019re definitely poor. But what if they have some <\/em>food, and some <\/em>clothes, and have a place to stay, even if it isn\u2019t very pleasant? What if they\u2019re entitled to basic schooling and healthcare, but it\u2019s all ten kilometres away and the quality is terrible? At what point do we draw the line and say: hey, you have enough now that we no longer think you\u2019re poor?<\/em><\/p>\n\n\n\n

There are many such lines, it turns out. <\/p>\n\n\n\n

The World Bank has an \u2018extreme poverty\u2019 line: you\u2019re extremely <\/em>poor if you live on less than $2.15 (on a purchasing power parity basis) per day, on 2017 prices. That is, what you spend on an average day buys you less stuff than what an American could buy for $2.15 back in 2017. (Previously, the World Bank had drawn this line at $1.9 a day at 2011 prices. You might see references to that number as well, later in this post.) Right now, that\u2019s roughly \u20b965 a day. <\/p>\n\n\n\n

India also uses its own \u2018Tendulkar Line\u2019, which comes close. In prices from 2004-5, you’d be poor if you lived on less than \u20b9447 a month in villages, and \u20b9579 in cities. Factoring in inflation, today, that\u2019s around \u20b91,630 in villages and \u20b92,000 in cities.\u00a0<\/p>\n\n\n

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Dr. Suresh Tendulkar, head of the \u2018Tendulkar Committee\u2019<\/em>, which determined the poverty line<\/em>
Source: <\/em>Wikimedia<\/em><\/a><\/figcaption><\/figure>\n<\/div>\n\n\n

Some lines are more ambitious. Aside from the Tendulkar line, we also have the \u2018Rangarajan Line\u2019: which, today, comes to around \u20b91,940 in villages, and \u20b92,820 in cities. Similarly, the World Bank, apart from defining \u2018extreme poverty\u2019, asks lower-middle income countries to judge themselves against a higher bar \u2014<\/em> a higher poverty line of $3.2 (again, adjusted for purchasing power parity), at 2011 prices. <\/p>\n\n\n\n

If you want to know how poor India is, you need to know which line to point to. <\/p>\n\n\n\n

At long last, data!<\/em><\/strong><\/h3>\n\n\n\n

Once you\u2019ve chosen the line you want to look at, though, it\u2019s still hard to know how poor India really is. That\u2019s a really tough puzzle to crack, honestly: you need to guess at how 1.4 billion different people live, after all. <\/p>\n\n\n\n

If you want to be in the right ball-park, you need to collect gargantuan amounts of data, fit it into elaborate models, and then make assumptions which may or may not be justified. No matter how careful you are, you can make many different kinds <\/em>of mistakes, which is why such exercises are extremely controversial. If you have the time to get into it, this<\/a> is a great place to look.<\/p>\n\n\n\n

For a long time, though, everyone’s biggest complaint was that we simply had no<\/em> data at all. A good place to look for data is the \u2018Household Consumption Expenditure Survey\u2019 (HCES), which the government is supposed to conduct every five years. Only, no survey results had been released for more than a decade. Not because there was no survey, mind you \u2014<\/em> the government did collect the data in 2017-18; it just didn\u2019t release any. We\u2019re not sure why, but it might be because it contained a lot of bad news<\/a>. (The government pointed to \u2018data quality issues<\/a>\u2019, for its part.)<\/p>\n\n\n\n

Now, though, we have new numbers. The government conducted another HCES in 2022 and 2023. This time around, the results were released<\/a>. If early analyses are to be believed, what the survey says is astonishing<\/em>. (though you should add salt<\/a> to taste<\/a>.) At some point in the last decade, we’ve practically eliminated extreme poverty<\/em>.<\/p>\n\n\n\n

The best news we\u2019ve ever heard<\/em><\/strong><\/h3>\n\n\n\n

For the first time since we started collecting data (and perhaps for the first time in our history), almost all of India \u2014 more than 97% of our population \u2014 is above both the World Bank\u2019s \u2018extreme poverty\u2019 line and the Tendulkar line. <\/p>\n\n\n

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Source: EPW (<\/em>Bhalla & Bhasin<\/em><\/a>)<\/em><\/figcaption><\/figure>\n<\/div>\n\n\n

In most states of India, extreme poverty is practically absent.<\/p>\n\n\n

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Source: EPW (<\/em>Bhalla & Bhasin<\/em><\/a>)<\/em><\/figcaption><\/figure>\n<\/div>\n\n\n

Across the board, Indians are consuming more than they did before. <\/p>\n\n\n

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Source: NCAER (<\/em>Desai et al.<\/em><\/a>)<\/em><\/figcaption><\/figure>\n<\/div>\n\n\n

How did we get here? For one, liberalisation just made our economy much, much larger. But the government has played its part as well. <\/p>\n\n\n\n

For all its flaws, the Indian government has waged a genuinely valiant campaign against poverty. Whatever else you may think of subsidies and welfare, it\u2019s clear that the government\u2019s many schemes \u2014 free grain, free housing, free piped water, free cooking gas, free toilet construction, and more \u2014 have made an actual difference in people\u2019s lives. Our recent successes coincide quite neatly with a massive uptick in the government benefits people receive: <\/p>\n\n\n

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Source: NCAER (<\/em>Desai et al.<\/em><\/a>)<\/em><\/figcaption><\/figure>\n<\/div>\n\n\n

In fact, the subsidies the poor receive account for more and more of what they need. <\/p>\n\n\n

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Source: Brookings Institution (<\/em>Bhalla et al.<\/em><\/a>)<\/em><\/figcaption><\/figure>\n<\/div>\n\n\n

Let\u2019s not overstate what has happened. There are many Indians who still live just<\/em> above the \u2018extreme poverty\u2019 line. Their lives are, for all practical purposes, just as desperate as the \u2018extremely poor\u2019. They\u2019re at constant risk of falling back under the poverty line. India is still one of the poorest places in the world; a large part of our country still resembles Sub-Saharan Africa.<\/p>\n\n\n\n

With all those caveats in place, though: in the last eleven years, we\u2019ve done more to reduce poverty than in the thirty <\/em>years that came before. This is, make no mistake, one of the most dramatic reductions of poverty the world has ever seen. <\/p>\n\n\n\n

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What is poverty, round two: Our poverty hits different<\/strong><\/h2>\n\n\n\n

Is there more than one way of being poor?<\/em><\/strong><\/h3>\n\n\n\n

Of every six \u2018extremely poor\u2019 people in 2011, roughly speaking, five have clawed their way out of poverty by now. That is remarkable in itself. But it\u2019s not as though only their lives that have changed. When an economy goes through such a big change, the lives of everyone <\/em>are affected.<\/p>\n\n\n\n

Over time, there\u2019s been a big shift in why<\/em> people are poor. To understand that, though, we need to go back to our original question: what does it mean to be poor?<\/strong><\/em><\/p>\n\n\n\n

Consider two people:<\/p>\n\n\n\n