No! 70 Crore Indians Are Not As Poor As An Average Madagascan 

The 2024 election season is upon us. It is therefore only natural that we should expect a spate of commentary from the opposition and their liberal allies about how everything in this country is going wrong. 

Statistical jugglery, as always, is a favoured tool when it comes to the topic of economics, as a venerable ex-governor of Reserve Bank of India (RBI) recently demonstrated, in trying to feverishly establish that the production linked incentive (PLI) scheme was a failure. 

But a member of the cabal has now raised the bar — nay, simply changed the game — by deciding that he would not be limited by the constraints of statistics.

After all, what difference does it make whether it is mean or median, when one has decided to go on the attack mode.

A former managing editor of a leading business channel, Aunindyo Chakravarty, has decided that India is not just poor, it's desperately poor.

In fact, he has a specific number in mind — 70 crore — the number of Indians who live in utter economic distress. And he is not going to let the rules of maths stop him from declaring so to the world.

Arithmetic? That’s for school children. The confidence for such daredevilry perhaps comes from the name — Aunindyo, he who shall not be criticised.

And therefore, he declares — 70 crore Indians are as poor as the 'average' person in Madagascar, one of the poorest countries in the world. 

It does not stop there. It needs to rhyme. So he further declares — 70 lakh Indians are as rich as the richest people in the US. 

That is majestic statistical rhetoric — 70 crore, poorest of the poor, 70 lakh richest of the rich, in the same country.

The Flaw Of Averages

The declaration has thus been made. But then as an afterthought, he feels, not as an obligation, that he needs to offer some kind of argument to substantiate it.

He therefore whips out data from World Inequality Database (WID), the 'Bible' for povertarian economists and enthusiasts the world over:

"The average income in Madagascar in the same year was about $3,065 (PPP). The bottom 52 per cent of adults in India earned less than that — about $3,060 (PPP)."

Is this statement true? 

Well, seen outside the narrow confines of maths and statistics, it most definitely is. But for lesser mortals like us, it might be a fruitful exercise to evaluate it from those narrow confines themselves.

So let us see what WID has to say about these 52 per cent of the poorest Indians. 

As per the database, the average income of the bottom 52 per cent Indian adults is, indeed $3,060. 

That brings us to a tiny stumbling block — the only way the entire 52 per cent of poorest Indian adults are earning less than $3,065 is if the entire group earns the same wages of $3,060 (give or take a dollar or two).

So, we go back to the WID. 

Shockingly enough, the income of the lowest 52 per cent is spread over a very wide range. 

It turns out, the 52nd percentile of the Indian adult actually earned $5,300, or approximately Rs 102,800 (all numbers rounded off to nearest hundred) in 2021 — and again, we rely on the math that Aunindyo has discarded, and find that it is 73 per cent above the average income of Madagascar. 

What about the 42nd percentile — well, no luck there as well. The average income is $4,500 (around Rs 87,000), still 46 per cent above the Madagascar per capita income (PCI). 

Ok, maybe we get lucky at the 30th percentile? Nope. $3,700 (around Rs 71,200). 20 per cent above Madagascar PCI. 

We need to go all the way down to the 20th percentile to find Indians whose income is lower than Madagascar's PCI. 

So from a limited statistical perspective, 20 per cent of Indians, or 28 crore people, are poorer than an average Madagascar person (earning Rs 57,761 per year). 

Oh wait, that is wrong too. 

As the povertarian economists never tire of telling us, the per capita income is a misleading figure — given the fat right tail, an average citizen generally earns well below per capita income. 

So, back we go again to WID. It turns out, the average income at the 50th percentile in Madagascar is $1,500, just about half of the country's per capita income. 

In other words, 50 per cent of adults in Madagascar earn less than $1,500. 

How many Indians earn less than $1,500 or Rs 29,100 per annum? 

WID tells us that 13 per cent of Indians earn below that figure. 

So, 18 crore Indians earn less than what an average Madagascan earns. Still, 18 crore too many, but as maths tells us, slightly lower than the 70 crore figure that Aunindyo claimed.   

The PPP US Dollar facade

One fact easy to miss for an average reader in the article was that not once was a mention made about income in rupee terms. It was always in purchasing power parity (PPP) US dollar. Sample this:

"The average income in Burundi in 2022 was about $1,750 (PPP). The bottom 42 per cent of adults in India earned less than that — about $1,720 (PPP)."

Now this is a fair way for comparing across countries, but imagine if the writer had also converted that figure of $1,720 into rupees, it would have been Rs 34,000 annually (WID dollar/Rs PPP conversion rate is 19.4). 

Now, that would have made many readers sit up and ask — "what? 42 per cent of Indians earn less than Rs 3,000 per month... which is Rs 100 per day". Even the staunchest Marxist would have found that impossible to believe.

It is fine for normal people to not make that conversion mentally but what was really alarming was that a reputed professor from Jawaharlal Nehru University (JNU), a development economist at that, tweeted this fact appreciatively.  

Imagine a person in a position to shape and influence policy and educate students, thinking that 4/10 of this country earns Rs 100 or less per day.

To clarify, as per WID, an Indian adult in the 15th percentile has an annual income of Rs 37,800 ($1,900). 

(As an aside, we apply the same narrow rules of statistics to the above statement on Burundi and we find, from the WID that 50 per cent of adults in Burundi earn less than $900. 10 per cent of Indians, or 14 crore people have average earnings below that figure, which is way too high, but it is not the 58 crore figure that the author had claimed).

Too Many Rich Indians?

Now, we move on to the other part of the author's claim — 0.5 per cent of Indians have an average income comparable to the top 10 per cent of US adults. 

WID data tells us that the actual figure is around 60 lakh (0.44 per cent of richest Indians) — the author has taken some creative liberties to enable him to come with that rhetoric flourish of '70 lakh-70 crore', but that seems like a trifle issue compared to the complete freedom from facts that he took with respect to the poverty claim.

The serious point though is that the above figure is supposed to shock us and it indeed does shock many. 

Equally powerful, on the face of it, is the information that India has the same number of super-rich ($30,000/month which is Rs 6 lakh per month) as Germany and UK combined. 

Not many pause to think why the figure is supposed to be shocking. India has almost 10x the population of Germany and UK combined. So on a per capita basis, India has one-tenth the number of super-rich as Germany+UK. 

Why is this seen as unreasonably high when India's per capita income is over one-sixth of the combined PCI of the two countries? 

What should be a reasonable figure for the super-rich in India? 35 lakhs? 10 Lakhs? zero? 

It seems a fairly common sensical proposition that an economy of the size of India, despite its relative poverty, will provide opportunities for ambitious businessmen to create wealth by focusing on scale. 

So to the statement that India has 70 lakh (60 lakh actually) super-rich, I ask, with some trepidation — "so what?".  

Needed — A Balanced Narrative On Poverty

Poverty is a topic of grave national and human importance. And that is why we need to rescue it from those for whom poverty discourse is only a ruse to push their ideology. 

Of course, it would be too much to ask of these people to even acknowledge that over the last nine years, tremendous strides have been made in poverty alleviation as the current government has built a formidable JAM (Jan Dhan-Aadhaar-Mobile) architecture to deliver strongly on welfare programmes with minimum leakage. 

The UNDP’s Global Multidimensional Poverty Index of 2020 estimated that more than 14 crore people have been lifted out of poverty in India since 2015-16. 

According to a World Bank policy research paper, people suffering from extreme poverty in India fell significantly from 22.5 per cent in 2011 to 10.2 per cent in 2019. 

Do we still have a good distance to go? Absolutely yes. But a balanced and fair discourse of the progress made so far and where we stand currently are crucial in order to make the right policy choices (and more importantly avoid the destructive ones).