Covid-19 To Double Poverty In India

A transfer of at least ₹750 per person a month for six months will help them recover from economic damage wrought by the pandemic

- Shweta Saini And Pulkit Khatri

In the second week of April, UN’s International Labour Organization (ILO) said that about 400 million workers from informal sector in India are likely to be pushed deeper into poverty due to COVID-19. There is no dispute that poverty will worsen in the country, but the question is by how much? We try and answer this in the article using data with the National Sample Survey Office (NSSO) and the erstwhile Planning Commission.

Through quinquennial surveys, NSSO offers estimates of monthly per capita consumption expenditure ( MPCE) of households. This data, which is taken as proxy for income, was the basis of estimating poverty levels by the Planning Commission. Latest data in this regard is available for 2011-12 (2017-18 NSSO report is pending for release) and that year 21.9 per cent of the country's population, or about 270 million people, were estimated to be living below the poverty line. Using NSSO’s MPCE data and Planning Commission’s state-level poverty data as our base, we simulate the impact of income shock due to COVID-19 on the country's poverty level.

We simulate an income shock scenario, where individuals suffer a loss for three months, implying a loss of about 25 per cent in average MPCE for the year. We assume a uniform shock across the fractiles (based on MPCE, NSSO distributes population into 12 fractiles or cut-off points) and that incomes would return to pre- COVID-19 levels after the disruption from March to May.