Author : Renita D'souza

Expert Speak India Matters
Published on Nov 27, 2021
The government needs to invest in measures such as education and employment that can make the population more resilient in the face of a crisis
India’s new poor: Strategy for resilience This article is part of the series Colaba Edit 2021.

The impact of the COVID-19 pandemic on poverty has been so unprecedented as to have prompted a distinct nomenclature to address the same: The new poor. The new poor include those who were expected to be above the poverty threshold in 2020 (and onwards) prior to the pandemic but are now expected to be below it. In India, if the poor were to be defined as those who lie below the national minimum wage (NMW) threshold as delineated by the Satpathy committee, then the number of the working poor that have been dragged into poverty thanks to the pandemic would stand at 230 million. Including those who were rendered poor by being jobless or due to their dependence on the working poor and the newly unemployed, the number of the new poor in India stood at more than 230 million as of May 2021. The 230-million figure includes the 50 million workers who would have moved above the NMW threshold and the remainder refer to those who were anyway supposed to be above this threshold.

Including those who were rendered poor by being jobless or due to their dependence on the working poor and the newly unemployed, the number of the new poor in India stood at more than 230 million as of May 2021.

While the profile of the Indian new poor mirror that of their global counterpart in many ways, there are also distinctions between them that are critical to explaining the emergence of the new poor in the Indian context. Both the Indian and the global new poor are predominantly urban, women, young (in their twenties on an average), informally employed, with a sizeable proportion engaged in the construction sector. The divergences relate to the ways in which the new poor differ from the chronic poor in the global context vis-à-vis India.

In the global landscape, while 32 percent, 60 percent, and 32 percent of the chronic poor have access to electricity, improved water, and improved sanitation respectively, these figures stood at 51 percent, 74 percent, and 45 percent in the case of the new poor. In India, the income losses were so staggering that both the chronic and the new poor survived the pandemic by cutting down on their food intake. In fact, the poorest 20 percent households were bereft of any income in the months of April and May 2020. The poor relied on informal borrowings to finance their food, health, and other necessary expenditures. As such, electricity, water, and sanitation became financial liabilities.

In the global context, the proportion of the new poor in agriculture is below that of the chronic poor. However, in India, informal opportunities in agriculture proved to be one of the popular fallback options. Informality increased significantly in the country with those displaced from work moving primarily into self-employment followed by casual work with the least preferred option being informal salaried work. Also, while it is expected that the education levels of the new poor are higher than the chronic poor in the global case, the same is unlikely to be true for India with no perceptible difference in education levels between the two groups.

The poor relied on informal borrowings to finance their food, health, and other necessary expenditures. As such, electricity, water, and sanitation became financial liabilities.

Increased poverty in India following the pandemic was not surprising. The pandemic-induced poverty has hit vulnerable India. A sizeable proportion of those who exit poverty, especially those who are just above the poverty line, remain vulnerable. This vulnerability has many faces: Poor quality of employment, uncertain income, minimal savings, lack of assets, absence of social security, inadequate housing, lack of skills and education, and lack of political voice. The numbers on poverty reduction in India have been glorified at the expense of making the vulnerable invisible to policy action. Greater vulnerability not only entailed greater susceptibility to contract the disease, but also greater disruption. At the same time, vulnerability took away from the ability to withstand such disruption.

Sources of resilience

Gains in poverty reduction cannot be sustained unless their beneficiaries are made resilient and prevented from slipping back into the poverty trap. Some important sources of resilience include adequate financial savings, assets in the form of land or a house, higher levels of education and skill, insurance, and ability to access the digital world, especially digital public goods. It is no coincidence that these sources of resilience would have provided the wherewithal to cope with the shock of the COVID-19 pandemic. Resilience is accompanied by the capacity to grow in normal circumstances and the strength to adapt in the face of crisis.

While increasing expenditure on education as a percentage of GDP, the government must translate such expenditure into an improved, outcome-oriented public education and skilling system, which facilitates occupational mobility enabling upward economic mobility and adaptation to shocks.

Some important sources of resilience include adequate financial savings, assets in the form of land or a house, higher levels of education and skill, insurance, and ability to access the digital world, especially digital public goods.

Universal coverage by medical insurance will ensure that a debilitating health crisis does not push the vulnerable into debt and, in turn, a poverty trap. The deficits in the quality of public health services need to be corrected while providing such services at cost-effective rates to reduce a larger out-of-pocket expenditure on healthcare.

Employment is a fundamental lever of building resilience. Decent work entails certain and adequate incomes, and some form of job and social security.  Reversing the persistent trend of sluggish job creation in the formal sector, the government needs to revamp the existing ecosystem—defined by public investments, governance, access to formal finance and markets, subsidies and incentives, and various compliance protocols—within which the private sector operates. Such revamping requires enabling the scale-up of existing MSMEs and other enterprises, and incentivising the setting up of new enterprises while ensuring geographical equity of employment creation.

The deficits in the quality of public health services need to be corrected while providing such services at cost-effective rates to reduce a larger out-of-pocket expenditure on healthcare.

The generation of decent work needs to be accompanied by efforts that nudge and incentivise savings behaviour. Geographical equity of job creation must be supplemented by enabling access to, at the very least, state-owned affordable rental housing preferably based on the ‘pay as you go’ model, if not home ownership.

Coping with the pandemic relied significantly on digital adaptation. Such adaptation could be the ‘go to’ coping mechanism in the future. As such, owning digital means can improve the quotient of resilience.

In conclusion, the need for policy to move beyond poverty alleviation and improve focus on building resilience of the vulnerable is reiterated.

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Author

Renita D'souza

Renita D'souza

Renita DSouza is a PhD in Economics and was a Fellow at Observer Research Foundation Mumbai under the Inclusive Growth and SDGs programme. Her research ...

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