Covid pushed 56 mn Indians into extreme poverty: World Bank

The Covid-19 pandemic could have pushed over 70 million people into extreme poverty globally in 2020, with India accounting for 56 million of them, suggests a World Bank study published last week. 

The ‘Poverty and Shared Prosperity 2020’ study’s India estimates are based on the Consumer Pyramids Household Survey (CPHS), conducted by the Centre for Monitoring Indian Economy (CMIE), a private data company. The report states they had to depend upon CPHS data as India has not published official survey data on poverty since 2011.

“The household consumption data used for poverty monitoring is based on an analysis by Sinha Roy and van der Weide in which the CPHS sample is re-weighted to more closely resemble a nationally representative survey and the consumption aggregate is adjusted to more closely match the consumption aggregate used in the official series,” the report explains. 

The report, however, states that a national account–based projection of India’s poverty implies an increase of 23 million in 2020. 

The report says that subsidies meant to reduce extreme poverty are often poorly targeted and should not be preferred over direct cash transfers. Citing the example of spending on energy subsidies in low-and middle-income economies, the report said one-half of it goes to the richest 20% of the population, who consume more energy.

“Programmes like targeted cash transfers are far more likely to reach poor and vulnerable groups. More than 60% of spending on cash transfers goes to the bottom 40%. Cash transfers also tend to have a larger impact on income growth than subsidies,” the report said. 

The World Bank report also wants countries to mobilise revenue without hurting the poor. It recommended property and carbon taxes and more progressive personal and corporate income taxes to mobilise revenue, without hurting vulnerable people. “If indirect taxes need to be raised, cash transfers can be simultaneously used to offset their effects on the most vulnerable households,” it suggests. 

The report estimates the Covid pandemic increased the global extreme poverty rate to an estimated 9.3% in 2020—up from 8.4% in 2019. It indicates that more than 70 million people were pushed into extreme poverty by the end of 2020, increasing the global total to over 700 million.