Based on preliminary calculations, it is being reported that 77-220 million have fallen into poverty in India on account of Covid-19, with the poor now accounting for 60% of urban, and 70% of rural residents. Based on a 2021 follow-up to a 2002 survey conducted in rural Rajasthan, this article shows that while households lost between one-third and two-thirds of their cash incomes during March 2020-August 2021, they experienced little to no change in long-term poverty.
Millions in India lost their livelihoods during the pandemic. Preliminary estimates suggest that between 77 and 220 million could have fallen into poverty in the country, including 69 to 136 million in rural areas (Azim Premji University, 2021, Kochhar 2021). Others estimate that income poverty in urban areas spiked from 40% before the pandemic to 60% while rural poverty may have gone up to 70% (Gupta et al. 2021).
To get a clearer picture of the situation, additional questions need to be examined: How much of the increase in poverty is of a transient nature, and likely to be reversed when economic conditions return to normal? And how much has a structural or long-term character, marked by deeper and less easily reversed descents into poverty?
We use the terms structural (or chronic or long-term) and transient (or stochastic or short-term) following Carter and May (2001) and Carter and Barrett (2006). The structural poor are those whose income and consumption levels are usually below the poverty line because they lack assets and capabilities. The transient poor, on the other hand, have sufficient asset endowments and are, therefore, able to earn incomes above the poverty line, on average. At points, however – such as during the months of the lockdown – their incomes may dip sharply, falling below the poverty line or all the way to zero, likely describing the experiences of many among the 220 million, but unless assets and capabilities have eroded simultaneously, the increment in structural poverty will be much smaller.
The distinction between structural poverty and transient poverty is critical for comprehending the post-pandemic poverty situation. Temporarily lowered incomes give an indication of transient poverty, but assets and capabilities must also be examined. Different methodologies are helpful for this purpose.
Our study
In a recent study (Krishna and Agrawal 2021), we assess changes in structural poverty in a group of seven villages of three districts in the southern part of the state of Rajasthan. The availability of fine-grained data dating back to 2002, first examined in Krishna (2004), enables before-and-after comparisons, perhaps for the first time in relation to the Covid-19 period.
The seven villages we study in July-August 2021 are part of the larger group of 35 villages in Rajasthan where we examined household poverty dynamics in 2002 (Krishna 2004). We use “Stages of Progress”, a participatory and community-based method that focusses on assets and capabilities, and helps measure structural poverty1. When implementing the study in 2002, we assembled a focus group in each of the 35 villages we studied, composed of between 20 and 40 villagers representing different castes, genders, and age groups. After discussing our objectives, we asked this group: What does a household usually do, when it climbs upward gradually from acute poverty? Which assets or capabilities are acquired first? As things keep improving, which other assets and capabilities are acquired at later stages? Each village group separately recorded its sequence of Stages of Progress.
What is remarkable is that the initial few stages were reported in the same sequence in each of the 35 villages. These initial Stages of Progress are, in order: food on a regular basis (or more accurately, the capability to keep the household regularly fed); sending children to school; possessing clothes to wear outside the house; and repaying debt in regular instalments.
The fifth stage – making essential house repairs, especially, patching leaky roofs – was also commonly reported. This is the stage people reach right after moving beyond poverty. Anyone at stage 4 or lower is regarded as structurally poor. Table 1 gives the full list of the Stages of Progress in a sample village. Structural poverty is thus defined collectively and normatively, in relation to easily verifiable markers. Villagers in this region deem themselves, and others, poor when they do not have enough to eat, do not have proper clothes to wear, cannot afford to send their children to school, and accumulate more debt without being able to repay instalments.
Table 1. Stages of Progress: Illustration from one study village in Rajasthan
Stages | Activity of progress |
1 | Arrangement of food |
2 | Arrangement of clothes |
3 | Sending children to school |
4 | Repaying debt in instalments |
5 | Essential house repair (fixing leaky roofs) |
6 | Improvement in farming |
7 | Purchasing cattle |
8 | Buying a motorcycle |
9 | Constructing a concrete house |
10 | Purchasing jewellery |
11 | Purchase a tractor, car. Etc. |
Note: A household below stage 5 is considered poor.
Each household’s current and prior status were elicited in relation to these Stages of Progress. Where does this household stand presently? What was its status earlier? Next, a random sample of 30% of households in each village was interviewed about the events associated with each upturn or downturn. The result was a trove of data for 6,500 households, with detailed event histories for the sample of 2,000 households.
We select seven villages for the follow-up study in 20212. We implement the Stages-of-Progress anew. This time, too, the same initial four Stages of Progress were reported by village groups, and the poverty cutoff was placed by them at the same point (between stages 4 and 5) as in 2002. Therefore, comparisons over time are supported. We ascertain each household’s Stage of Progress at the time of the inquiry (July-August 2021), comparing these stages with those recorded in 2002 for the same household, and conducting repeat interviews with the same household heads or their successor(s)3. We had conducted interviews with 258 household heads in 2002. We were able to re-contact and re-interview 185 household heads as well as the successors of another 49 heads4. In-migration or out-migration by entire households is rare. While not statistically representative, the seven villages show diverse living conditions (Table 2).
Table 2. Village information in 2021
Village (District) | No. of households (HHs) | Distance to nearest market | Distance to nearest high school | Distance to nearest PHC/ | % SC HHs | % ST HHs | Average HH size | Average landholding (bighas) |
Phainiyonkagudha (Udaipur) | 231 | 10 | 2 | 2 | 4.33 | 25.11 | 5.96 | 2.03 |
Phiyawari (Rajsamand) | 179 | 3 | 0 | 0 | 13.41 | 41.9 | 5.07 | 4.32 |
Vishanpura (Udaipur) | 182 | 4 | 4 | 1 | 17.58 | 19.78 | 4.5 | 5.3 |
Daulji Ka (Bhilwara) | 163 | 6 | 4 | 6 | 0 | 63.8 | 5 | 4.06 |
Khatikhera (Bhilwara) | 123 | 3 | 3 | 3 | 33.33 | 0 | 4.86 | 2.79 |
Mehtaji Ka (Bhilwara) | 240 | 7 | 0 | 4 | 15 | 10.83 | 4.59 | 6.16 |
Sarana (Bhilwara) | 348 | 8 | 8 | 8 | 26.44 | 3.74 | 6.06 | 4.57 |
Total | 1,466 | - | - | - | 15.96 | 21.28 | 5.19 | 4.26 |
Notes: (i) In the table HH indicates household, SC indicates Scheduled Caste, ST indicates Scheduled Tribe, and PHC indicates primary health centre. (ii) Distance is measured in kilometres. (iii) Bigha, a local unit of land, is equal to one-sixth of a hectare.
Structural poverty fell sharply pre-pandemic (2002-2020)
The share in structural poverty fell from nearly one-half in 2002 to less than 20% just before the pandemic (Table 3). Every caste group made progress, though much larger proportions of SCs (Scheduled Castes) and STs (Scheduled Tribes) remain poor (Table 4).
Table 3. Percentage of structurally poor households
Village | 2002 | 2020 |
Phairniyonkagudha | 35.06 | 25.22 |
Phiyawari | 68.72 | 31.28 |
Vishanpura | 41.01 | 15.38 |
Daulji Ka Khera | 67.48 | 19.63 |
Khatikhera | 30.08 | 13.01 |
Mehataji Ka Khera | 36.55 | 15.48 |
Sarana | 60.34 | 12.93 |
Total | 49.38 | 18.58 |
Table 4. Percentage of structurally poor households, by caste groups
Caste group | 2002 | 2020 |
General | 30.77 | 6.25 |
Other Backward Classes (OBC) | 33.12 | 5.93 |
SC | 63.09 | 28.21 |
ST | 88.10 | 48.71 |
Falling into poverty was a rare occurrence during the 2002-2020 period (Table 5). Overall, only 0.5% of all village households fell into poverty during this period. In contrast, a much larger share, 31.5%, moved up and out of poverty.
Table 5. Percentage of structural poverty dynamics, 2002-2020
Villages surveyed in 2021 | In 2020 | |||
Poor | Non-poor | Total | ||
In 2002 | Poor | 18.1 | 31.3 | 49.4 |
Non-poor | 0.5 | 50.2 | 50.7 | |
Total | 18.6 | 81.4 | 100 | |
Signs of improvement are widely visible. The number of college graduates has risen sharply. While, in 2002, it was rare to see even a television set, and motorcycles were few and far between in these villages, 91% of households owned a mobile phone in 2021, and nearly 70% owned motorcycles.
Exploring household-level reasons for escape and descent reveals the underlying dynamics. Two reasons are principally responsible for the progress observed. First, the number of households who earn cash incomes has gone up sharply. Fewer than a quarter of households earned cash incomes in 2002, but by 2020, nearly two-thirds of households have one or more members, mostly younger men, who work in cities for some part of the year, in informal positions, such as factory workers, drivers, loaders, carpenters, plumbers, electricians, miners, etc., usually earning between Rs. 8,000 and Rs. 15,000, monthly. Acquiring such a job was a primary reason for escaping structural poverty. People have accumulated cash reserves, mostly in bank accounts, and no longer need to sell assets to tide over difficult situations.
A much-reduced incidence of descents was the second important reason. While 23% of households fell into poverty in the two decades before 2002, mostly on account of illnesses and high health expenses (Krishna 2004), these reasons for descent became much less pressing in the 18-year period after. Clinics and sub-centres have come closer to villages, and ambulances with emergency services are more widely available. People are more educated, and instead of waiting until their patients are seriously unwell, they take them to a doctor much earlier. Health insurance coverage has grown, though in these villages it still falls short of 20%.
The Covid-19 period: March 2020-August 2021
The village groups we assembled informed us that as many as 60% of all households had lost between one-third and two-thirds of their cash incomes for as long as six months during Phase 1 (March-August 2020) and another two months during Phase 2 of the pandemic (April-June 2021). Households’ estimates corroborate this depiction of financial disruption.
And yet, in terms of the markers of structural poverty, village households experienced little to no change over this 18-month period. Hardly any household’s stage of progress was affected. There was little erosion of assets and capabilities.
In Table 6, each household’s stage of progress at the beginning of a period is subtracted from its stage at the end of that period. Thus, a household that was at stage 4 in 2002 but at stage 10 in 2020 gets a stage-change score of +6. The column for each period shows the numbers of households with the specified stage-change score.
Table 6. Changes in structural poverty over two time periods
Stage-change scores of households | 18-year period (2002-2020) | 18-month Covid-19 period (March 2020-August 2021) |
+5 or more | 91 (6.21) | 1 (0.07) |
+4 | 123 (8.39) | 2 (0.14) |
+3 | 219 (14.94) | 9 (0.61) |
+2 | 325 (22.17) | 38 (2.59) |
+1 | 445 (30.35) | 132 (9.00) |
0 (No change) | 230 (15.69) | 1,270 (86.63) |
-1 | 15 (1.02) | 11 (0.75) |
-2 or worse | 11 (0.75) | 1 (0.07) |
Total | 1,466 | 1,466 |
Note: Numbers in parentheses are the percentage of all households.
More than 95% of households experience no change or a small positive change in structural conditions during the Covid-19 period. Twelve households – less than 1% in all – experience structural descents, but in 11 of 12 cases descents are of a marginal nature.
The thesis that the pandemic has led to widespread and deep-rooted increases in poverty does not find support in these data that consider assets and structural poverty instead of looking at fluctuations in incomes, many or most of which could be short-term. In this rural belt, there has been, so far, no notable increase in long-term poverty. Of the 221 households we interviewed, no more than 17 had sold any assets in this period. Responding to a survey question, more than two-thirds reported being upbeat about future expectations.
One key respondent recounts, “People could not go into towns. They lost their jobs and incomes. But no one had to sell off land or jewellery, or abandon cattle. Paisey ki kami aayi leykin garibi ki maar nahin” (we faced cash shortages but not the spectre of poverty).
Summing up
A combination of factors helps understand why structural poverty remained nearly unchanged during the first 18 months of the pandemic. First, households’ resilience increased markedly in the two decades prior. Where people used to have little or no cash reserves and had to sell or mortgage assets in times of financial stress, the infusion of regular cash incomes has raised households’ resilience. Second, government assistance consisting of food rations of five kilograms of wheat per individual was available for 5-6 months during Phase 1 and another two months of Phase 2, and MNREGA5 (Mahatma Gandhi National Rural Employment Guarantee Act) was expanded, providing minimum-wage employment to many more people. Third, rising education levels have improved the quality of people’s responses to threats and opportunities. Falling into poverty has become less of a danger.
It is difficult to predict what might happen if the period of income losses is stretched further. People’s cash reserves could be depleted. Their newly acquired resilience may be eroded.
The same factors could have played out differently in other places. Studies in urban slums indicate growing long-term poverty (see, for example, Auerbach and Thachil (2021), and Downs-Tepper et al. (2021a, 2021b)). National and state averages paper over key differences in local conditions. Because of the role played by local economies, grassroots studies are necessary to get a clearer picture. It is also important to get a separate measure of structural poverty, in the absence of which it becomes hard to avoid conflating fluctuations in incomes with longer term poverty.
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Notes:
- For more details on the methodology, see Krishna (2010).
- We would have liked to undertake a more extensive study but we did not have the window of time nor the wherewithal for a more extensive study.
- These protocols were examined and approved by the Institutional Review Board of Indian Institute of Management (IIM)-Udaipur. Every member of the team was fully vaccinated. They remained masked and were supplied with masks to offer to village interlocutors.
- We lost a total of 37 households, an acceptable attrition rate for a study of this nature.
- MNREGA offers a guarantee of 100 days of wage-employment in a year to a rural household whose adult members are willing to do unskilled manual work at the prescribed minimum wage.
Further Reading
- Auerbach, Adam and Tariq Thachil (2021), “How does Covid-19 affect urban slums? Evidence from settlement leaders in India”, World Development, 140. https://doi.org/10.1016/j.worlddev.2020.105304
- Azim Premji University (2021), ‘State of Working India 2021: One year of Covid-19’, Centre for Sustainable Employment Report.
- Carter, Michael and Julian May (2001), “One Kind of Freedom: Poverty Dynamics in Post-apartheid South Africa”, World Development, 29(12): 1987-2006. Available here.
- Carter, Michael and Christopher Barrett. (2006), “The Economics of Poverty Traps and Persistent Poverty: An Asset-Based Approach”, Journal of Development Studies, 42(2): 178-99. Available here.
- Downs-Tepper, H, A Krishna and E Rains (2021a), ‘Covid-19: Health and economic impacts in Indian slums’, Ideas for India, 31 May.
- Downs-Tepper, Harlan, Anirudh Krishna and Emily Rains (2021b), “A threat to life and livelihoods: examining the effects of the first wave of COVID-19 on health and wellbeing in Bengaluru and Patna slums”, Environment and Urbanization, OnlineFirst. Available here.
- Gupta, A, A Malani, and B Woda (2021), ‘Inequality in India Declined During COVID’, NBER Working Paper No. 29597.
- Kochhar, R (2021), ‘In the pandemic, India’s middle class shrinks and poverty spreads while China sees smaller changes’, Pew Research Centre, March 18.
- Krishna, A and A Agrawal (2021), 'Extensive income losses but little change in long-term poverty: A longitudinal study of 7 Rajasthan villages before, during and after Covid-19', Working paper.
- Krishna, Anirudh (2004), “Escaping Poverty and Becoming Poor: Who Gains, Who Loses, and Why? People’s Assessments of Stability and Change in 35 North Indian Villages”, World Development, 32(1): 121-36. Available here.
- Krishna, A (2010), One Illness Away: Why People Become Poor and How they Escape Poverty, Oxford University Press, Oxford, United Kingdom.
- National Commission for Enterprises in the Unorganized Sector (2007), ‘Report on Conditions of Work and Promotion of Livelihoods in the Unorganized Sector’, Report.
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