Did India escape impact of global slump? No, its poor grew by 34 mn

2.1% Decline In GDP Led To 2.8% Rise In Poverty

    It’s a myth that the global financial crisis left India virtually unscathed. In fact, India is the biggest victim of the slump-induced poverty, according to data obtained by TOI from the United Nations Department of Economic and Social Affairs (UNDESA). Check out these figures.
    The UNDESA data estimates that the number of India’s poor was 33.6 million higher in 2009 than would have been the case if the growth rates of the years from 2004 to 2007 had been maintained. In 2009 alone, an estimated 13.6 million more people in India became poor or remained in poverty than would have been the case at 2008 growth rates.
    In other words, while a dip from the 8.8% growth in GDP averaged from 2004-05 to 2006-07 to the 6.7% estimated for 2008-09 may be nothing like the recession faced by the West, its human consequences for India were probably worse. The 2.1% decline in India’s GDP growth rate has effectively translated into a 2.8% increase in the incidence of poverty.
    According to the UNDESA’s World Economic Situation and Prospects 2010, 47 million more people became poor or remained in poverty globally in 2009 than would have been the case at 2008 growth rates, and 84 million more would have been poor at the 2004-07 growth rates. Of these, 19 and 40 million are in south Asia.

    While the report did not give India-specific figures, these were given to TOI by the UNDESA in response to a request for more information on the numbers pertaining to the country. The numbers come from revised per capita income estimates for 2009. The report uses the World Bank’s definition of poverty, which is people living on less than $1.25 per day in 2005 Purchasing Power Parity (PPP) dollars.
    The estimates assume that there has been no change in income distribution. If inequality grew in India in 2009, the number of poor would be even higher than these projections. HITTING HOME
In 2009, 13.6 m more people in India became poor or remained in poverty than would have been the case at 2008 growth rates 2.1% dip in India’s GDP growth rate (from
8.8% for ’04-05 to
’06-07 to 6.7% in 2008) meant 2.8% increase in incidence of poverty Globally, 84 m more people became or remained poor than would have been the case at 2004-2007 growth rates Jobs linked to exports hit hardest in India
The United Nations Department of Economic and Social Affairs (UNDESA) attributes the increase in poverty to a combination of reduced household incomes, rising unemployment and pressure on public services. Job losses in India were primarily in export-oriented industries like textiles while employment levels in Indian firms catering to the domestic market were largely unaffected, the report says. Monetary and fiscal policy intervention gave Indian growth some resilience, while safety nets like India’s National Rural Employment Guarantee Act (NREGA) helped to mitigate the effects of the slowdown, the report adds.
    “Surveys conducted by the labour bureau did show big job losses through most of 2008, but a pick-up by mid-2009,’’ said economist and Planning Commission member Abhijit Sen, adding the caveat that the construction industry, which was hit badly by the recession and is now recovering, was not covered by those surveys. “It’s true that there has not been anything special for labour in government policy except the general fiscal stimulus,’’ added Sen.
    In addition to job losses, food price inflation is a major factor in a decline in poverty reduction in India, said Sen. “It is not yet clear to what extent the spike in food prices is linked to the global financial situation, the poor monsoon or other factors,’’ he added.
    The report is clear that the situation is picking up, but celebrations would be premature—”global economic recovery is expected to remain sluggish, employment prospects will remain bleak’’. Job creation will lag output growth and as social protection coverage is limited, working poverty levels will rise and be difficult to reverse, the report warns. It is too early for fiscal stimuli to be withdrawn, the report adds.
How many poor people in India?
There is no agreement yet on the number of poor people in India. The last official (National Sample Survey) household expenditure figures are for 2004-5 and the next round (2009-10) is yet to be completed. Further, the definition of poverty remains disputed, the Suresh Tendulkar committee’s recommendation that India move away from calorific norms being the latest iteration. This committee pegged the number of poor in India at 408 million in 2005.