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Poverty in India in the face of Covid-19: Diagnosis and prospects

For decades, poverty in India had been in decline. After an acceleration of economic growth in the mid-1990s, the national poverty rate fell sharply during the early 2000s – almost halving in just seven years, from 40% in 2004/5 to 22% in 2011/12. Experts had predicted a slow-down in poverty reduction over the subsequent period but the devastating impacts of Covid-19 threaten a wholesale reversal in progress. In this paper, we provide new insights into poverty dyanmics in India – household-level movements into and out of poverty over time – and consider what these might mean in the context of the Covid-19 crisis.

To provide detailed insights into poverty dynamics we would ideally use panel data (repeated observations on the same households over time), which is not readily available and is expensive to collect. Instead, our analysis employs innovative statistical approaches to create a ‘synthetic panel’ using data from India’s two most recent cross-sectional national household surveys (2004/05 and 2011/12). In doing so, we can estimate how the situation of different households has changed over time and look at the characteristics that might be associated with these changes.

Our findings suggest a worrying overlap between the poorest, most vulnerable households and those that may be most deeply affected by the longer-term, more indirect effects of the Covid-19 pandemic. We find that households engaged in rural employment, particularly agricultural work, were more likely than average to be persistently poor, vulnerable or downwardly mobile between 2004/5 and 2011/12. Though less affected by the immediate effects of Covid, which was felt accutely among urban workers, rural households were already facing a shortfall in agricultural income. With the pandemic driving large-scale migration back to rural areas due to infection rates, lockdowns and job losses – especially in the informal sector, these same households are likely to have been under increasing financial pressure. Rural migrant workers were more likely to be laid off than both non-migrant workers and urban migrant workers (74% vs 50%).  And rural households are also less well served by healthcare; as infections spread outside cities in the pandemic’s second wave, death rates in rural areas quadrupled.

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