COMMENTARY
National Account Series with the assu-
Is Extreme Poverty Declining?
Findings from Agricultural Households
in India
Soham Bhattacharya
The latest round of the
Situation Assessment Survey
of Agricultural Households
is used to calculate income
poverty instead of commenting
on consumption poverty across
non-comparable data sets. Using
three different poverty lines,
it is demonstrated that at least
21.1% of agricultural households
are extremely income poor.
Though the so-called “Great
Indian Poverty Debate 2.0,”
with statistical assumptions
on consumption distribution
or relative prices, may provide
certain estimates of poverty,
those seem to be disproportionate
to the actualities of the extremely
poor in recent times.
Soham Bhattacharya (soham.bhattacharya2@
gmail.com) is with the Economic Analysis Unit,
Indian Statistical Institute, Bengaluru Centre.
Economic & Political Weekly EPW DECember 3, 2022
A
recent debate has taken a centre
stage regarding the trend of pov-
erty levels in India. Since 2011–12,
there has been no official Consumer
Expenditure Survey (CES) conducted by
the National Sample Survey Office (NSSO)
which is why attempts are now being
made to estimate poverty levels using
different statistical techniques. For ins-
tance, Subramanian (2019) observed a
rise in poverty by 4%, from 31% in 2011–
12 to 35% during 2017–18 using the
leaked data on grouped distribution of
consumption expenditure. This study
had used the Rangarajan poverty line to
report on the poverty estimate.
Using 2019–20 rounds of Periodic
Labour Force Survey (PLFS) consump-
tion data, Mehrotra and Parida (2021)
found 25.9% as the head count ratio
(HCR) for overall India. Using the Ten-
dulkar poverty line for reaching an esti-
mate of HCR, this study observes a rise in
rural poverty, from 25.7% to 30.5%
translating roughly to 270 million rural
poor in 2019–20. While the HCR has also
increased from 13.7% in 2011–12 to 15.5%
in urban India, translating roughly to 71
million urban poor. All references of
2011–12 in this study refer to the NSSO
CES. A cautionary critique therefore must
be mentioned: information collected on
consumption data in PLFS 2019–20 is not
exactly comparable with the NSSO CES.
There are two other studies; both came
out as working papers that are attempting
to understand levels of poverty in India,
by assuming certain distributional as-
pects of consumption. A commonality of
both these studies is in the statement of
decline in extreme poverty in India.
First, Bhalla et al (2022) used private
final consumption expenditure (PFCE)
from the National Statistical Office (NSO)
vol lVii no 49
mption that distribution of consumption
remained intact in 2011–12. Using this,
they were able to find a remarkable HCR
of 1.4% for 2019–20. The poverty line
they used here is $1.90 purchasing power
parity (PPP).
Second, Roy and van der Weide (2022)
reweighted the Consumer Pyramids
Household Survey (CPHS). This study
finds poverty levels to have declined to
10.2% using the same $1.90 PPP as the
poverty line. As Himanshu (2022), a keen
student of both these above-mentioned
works, summarised,
Their method assumes the external survey
benchmarks to be correct and uses a re-
weighting mechanism to force the CPHS to
arrive at estimates similar to the benchmark
estimates.
In his concluding comments, he further
added that the poverty of data leading
to erroneous assumptions regarding
income and consumption distribution
in India clouded findings in both these
attempts.
In this article, I will attempt to depart
from consumption poverty for this afore-
mentioned reason, and use the latest
round of Situation Assessment Survey
(NSSO 77th round) for Agricultural House-
holds (SAS AH) 2018–19 to understand
the current levels of income poverty in
rural India.
SAS AH: Some Issues
In the latest round of SAS AH (2018–19),
agricultural households are defined as
reportedly having an annual income of
`4,000 per annum from any self-em-
ployment activity in agriculture—a shift
from the qualifying amount of `3,000 in
SAS, 2012–13. This, then, becomes the
first methodological concern in the cal-
culation of poverty. Since this survey by
definition excludes households with an-
nual income earned from self-employ-
ment in agriculture below `4,000, it
does not represent a complete rural in-
come distribution. This shifts the in-
come distribution towards higher values
than actual.
Further, in the recent round of SAS AH,
there are six major sources of income
13
COMMENTARY
Table 1: Incidence of Extreme Poverty among Agricultural Households, Rural India, 2018–19,
Proportion in Per Cent and Absolute Number of Households in Millions
Proportion (%)
Poverty Lines Actual Household Size
$1.9 PPP 40.6
$2.15 PPP 45.9
Minimum wage line 54.1
Modified OECD method takes weightage 1 for first adult, then 0.5 for all other adult members aged above 14 years, and
0.3 for all members below 14 years. Absolute number of household is generated using estimated 93.094 million as total
agricultural households in SAS 2018–19.
Source: Author’s calculation from SAS 77th round unit-level data.
reported to calculate household income.
These sources are: income from crop
cultivation, income from livestock acti-
vities, income from non-farm businesses,
income from wages and salaries, income
from leasing out land, and income
earned from pension and remittances.
Of these, the first two, that is, informa-
tion on crop income and livestock inc-
ome, is calculated through inclusion of
both imputed values and paid-out cost.
However, the cost component does not
collect information on depreciation of
capital, marketing expenses, land reve-
nue, overlooking the Commission for
Agricultural Costs and Prices’ fuller defi-
nition of A2 cost (Sarkar 2017). This for-
mulation then suggests that income
earned from crop cultivation is made
higher by definition than actual since
their cost components are missing from
the cost of cultivation data, collected
through SAS AH.
Finally, household incomes are not
strictly comparable with the SAS 70th
round conducted in 2012–13. This is be-
cause incomes earned from leasing out
land and from pension and remittances
were not collected in its previous rounds.
Therefore, as a cautionary note, one
must take poverty estimates that can
arise out of SAS AH with a pinch of salt as
these problems are associated with the
survey definition. In this analysis, I have
used both visits of unit-level SAS data by
solely looking at the agricultural house-
holds to arrive at a few measures that
need to be taken vis-à-vis poverty in
rural India.
Definitions of Income Poverty
Since the definition of extreme poverty
from $1.90 PPP to $2.15 PPP has been
subjected to multiple revisions, I have
used, both measures for 2018–19 data.
As mentioned before, the SAS AH defi-
nition of agricultural households had
14
against poverty. In this formulation,
then, the monthly per capita poverty line
Absolute Households (millions)
Modified OECD Actual Household Size Modified OECD becomes the required wage line that is
21.1 37.8 19.6 appropriately derived from the fixed
24.5 42.7 22.8 minimum wage requirement.
30.2 50.3 28.1
Incidence of Poverty
There are two methodological clarifica-
tions to mention before arriving at the
shifted the distribution rightward. As a income poverty line. First, instead of only
contrarian, I am introducing another using the size of the household to arrive
poverty line to understand income pov- at per capita income, I have also taken
erty. In 2018–19, for a majority of small the modified score of equivalence, as sug-
and marginal farmers, wage income had gested in the Organisation for Economic
become their most important source of Co-operation and Development (OECD).
income rather than crop income or inc- Second, in 2018–19, weighted mean for
ome from cost of cultivation. Munjal MGNREGA wages at the all-India level was
(2021) has shown that between 2012–13 `196 per day at current prices (Aggarwal
and 2018–19, the share of wage income and Paikra 2020). For this study, I have
in the total income had increased from assumed employment generation for all
38% to 46%. Following this pattern of 100 days. Ideally then, at the current
over-dependence on wage income for rate, it should provide an annual in-
agricultural households, I have used a come of `19,600, that is, `1,633 per capi-
method of minimum wage line, earlier ta per month. In a comparison to this,
adopted by Baksi and Modak (in Swami- $1.9 is `1,201 per capita per month and
nathan and Baksi 2017). $2.15 is `1,359 per capita per month in
Here, I have taken the third measure PPP 2019.
of poverty as if the household member Table 1 shows the incidence of poverty
earned the average daily wage at the among agricultural households in rural
level of average all-India wage from India. Using three poverty lines, I dem-
Mahatma Gandhi National Rural Employ- onstrate that at least 21.1% of agricultur-
ment Guarantee Act (MGNREGA) and al households are extremely income
were provided with 100 days of work. poor. Even if we are not strictly follow-
That income should act as a safeguard ing any of these indices, figures in this
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DECember 3, 2022 vol lVii no 49 EPW Economic & Political Weekly

study suggest that extreme poverty is far
from being over in India. At least 19.6
million agricultural households could be
categorised as extremely income poor in
2018–19. Although official poverty lines
in India do take actual household size as
the denominator, which would suggest a
little more than 40% of rural agricultur-
al households are extremely income
poor which translates into 37.8 million
agricultural households being income
poor. Even if one takes the average
household size from SAS AH and the least
of the poverty estimate within the rang-
es available, that is, 19.6 million house-
holds with an average of five members:
roughly 98 million rural individuals will
be extremely income poor at the least.
Rural Wage Income Levels
Beyond the actual estimates, there are
other ways of looking into the direction
at which income poverty proceeds,
through rural wages. Though not apt to
compare income levels between the two
rounds of SAS, one can still attempt to
understand changes in the levels of casual
wage income earned among the agri-
cultural households. As Patnaik (2021)
and Himanshu (2022) have both argued,
changes in average wage income of cas-
ual wage earning can often provide a di-
rection to which poverty levels are head-
ed. Using consumer price index for agri-
cultural labour (CPI–AL) data for defla-
tion at the all-India level, I have com-
pared casual wage incomes earned by
wage workers in agricultural households
in these two rounds. Here, casual wage
income refers to the incomes earned by
individuals under activity status 41, 42,
and 51, including both principal and sub-
sidiary status (UPSS).
Table 2 shows, in real terms, the month-
ly wage incomes earned in kharif (July–
December) and rabi (January–June) crop
seasons between 2012–13 and 2018–19.
There are two important concerns
regarding rural wage income among the
agricultural households: First, in both
seasons, casual wage levels have grown
at meagre 2% rate annually. Second, if
agricultural households have over the time
becoming more dependent on wage inc-
ome (Narayanamoorthy and Sujitha 2022),
and if wage income has not grown beyond
Economic & Political Weekly EPW DECember 3, 2022
Table 2: Changes in Per Capita Monthly Casual
Wage Income for Agricultural Households, by
Seasons, Rural India, 2012–19, Real Values
Kharif Rabi
2012–13 2,584 2,392
2018–19 2,920 2,664
CAGR (%) 2.1 1.8
Real values of wages are calculated by deflating 2018–19
numbers using 2012 CPI–AL series and inflating 2012–13
numbers using the same.
Source: Author’s calculation from SAS 70th and 77th
round data.
2%, then it remains suspicious that pub-
lic distribution system alone had caused
consumption poverty to fall so sharply as
has been argued by Bhalla et al (2022).
It is expected that data on poverty in
India, once available, might provide us with
more accurate incidences of poverty. Since
the economic crisis of livelihood during
the COVID-19 pandemic, the comparable
data on the levels of income at the pre-
pandemic levels are yet to be made avail-
able. Though the so-called “Great Indian
Poverty Debate 2.0,” with statistical as-
sumptions on consumption distribution
or relative prices, may provide certain
estimates of poverty, those seem to be
disproportionate to the actualities of the
extremely poor in recent times.
If not as a remedy, in this analysis, I
have used a range of poverty lines rather
than being overly sensitive to an exact
HCR employing a singular definition. This
suggests that despite the limitations of
SAS data and degrees of underestima-
tion, at least 19 million households re-
main income poor in rural India. A deni-
al of this fact, then, becomes a denial of
well-being to the country’s rural masses.
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vol lVii no 49
COMMENTARY
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