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Inflation in India
In 2019, the Global Multidimensional Poverty Index indicated that the Indian government’s poverty reduction efforts led to 271 million people rising out of poverty between 2006 and 2016. This would place India as the country with the “highest rate of poverty reduction.” However, like most other countries, global inflation arising from the COVID-19 pandemic and the Russia-Ukraine war have made Indian citizens more vulnerable to poverty through increased inflation in India.

The Impacts of Inflation

Even before Russia’s invasion of Ukraine caused global inflation to rise, inflation in India was already mounting. The Russia-Ukraine crisis did not cause inflation in India but merely accelerated it. According to the wholesale price index (WPI), “as measured by the WPI, it averaged 11[%] during March-June 2021, 12.2[%] July to October 2021 and 14.1[%] between November 2021 and February 2022,” Frontline magazine reports.

Even before the onset of the COVID-19 pandemic, India noted high unemployment rates. By April 2019, unemployment in India stood at 7.6%, which is almost double the rate from 2017 (about 4%). Petrol and fuel had already more than doubled since 2020. Prices continued to increase after the invasion of Ukraine.

Food Inflation

In India, the costs of essential food products have soared by 50% between 2015 and 2022. This staggering inflation has an especially significant impact on India’s lower middle class and lower class, especially in rural areas. Because, while the prices of many common items have nearly doubled, the “real wage rate” has increased by just 22% since 2015.

In April 2022, the World Bank highlighted that “for each one percentage point increase in food prices, 10 million people are thrown into extreme poverty. If food prices stay this high for a year, global poverty could go up by more than 100 million.”

Poverty Rates in India

India is a country that has long been lauded for its fight against poverty. According to the United Nations, India managed to lift 415 million citizens out of conditions of multidimensional poverty over a 15-year period “between 2005-06 and 2019-21.”

However, like many other countries, the COVID-19 pandemic and the Ukraine-Russia war significantly impacted poverty and inflation in India. According to the Pew Research Center, “the number of people who are poor in India (with incomes of $2 or less a day) is estimated to have increased by 75 million because of the COVID-19 recession.” The World Bank estimated that, globally, the pandemic pushed 71 million additional people into extreme poverty in 2020 and at least one-third came from India, ThePrint says.

However, poverty estimations are not definitive since India has failed to release official poverty estimates since 2011/12. While some researchers estimate that poverty levels in India have increased, others suggest extreme poverty rates did not rise during the pandemic.

Political Response

Despite the general concern over rising rates of poverty and inflation in India, some Indian politicians assert no such concerns. India’s Minister of Finance Nirmala Sitharaman has taken a firm stance that India’s inflation is not a major source of concern for the country. Citing a United Nations Development Programme report, she said in July 2022 that the effect of inflation on India’s impoverished is “negligible.”

She has also stated that India’s welfare program had eased the impact of rising food costs during the pandemic and through the Russia-Ukraine crisis. The Indian government began a program to distribute grain to people most in need under the National Food Security Act, running from April 2020 to September 2022.

In total, it benefited almost 800 million people over the course of 2.5 years. The government also worked to support people financially, paying low-income women ₹500 ($6.08) a month for the first three months of the pandemic, which benefited 2 million women. A recent assessment showed that these programs and other targeted transfer initiatives shielded low-income families from price hikes.

India is putting up a strong fight against inflation and poverty. Although inflation and poverty levels are still high in the country, a strong governmental welfare system remains the solution to reducing impacts on the most vulnerable citizens.

– Padma Balaji
Photo: Flickr

Rupee’s Resilience
Turbulence in South Asian economies, political upheaval and international events such as the Russia-Ukraine war have caused inflation and a drop in the value of the Indian rupee. The Indian rupee has still performed better in these times of turmoil and global inflation issues in comparison to other Asian and European currencies. The government and the Reserve Bank of India have taken precautions and put controls on imports of goods and overseas investments. The rupee’s resilience has proven to be impressive in many ways and efforts to preserve its value are continuing to impact the cost of living in developing countries in South Asia. Without measures to protect the value of the rupee, inflation could have disastrous effects on the working class and impoverished people whose wages can no longer meet the cost of living.

Increasing inflation and poverty rates are inextricably linked. As the prices of basic commodities increase and the value of a currency decreases, vulnerable populations are unable to keep up with the expenses. The rupee’s resilience will be beneficial in keeping the poverty level relatively stable.

Recent Depreciation

The ongoing war in Ukraine and the subsequent market volatility, combined with U.S. Federal Reserve’s actions to tighten monetary policy have drastically impacted the global market in terms of access to imported goods and depreciation of foreign currencies.

During the month of July, the Indian rupee reached an all-time low. Its value has fallen below 80 rupees per $1 USD as of July 19, 2022, equating to a total value fall of 7.1% since January 19, 2022. Other South Asian countries have followed a similar, worsening trend. For example, Sri Lanka’s currency has fallen almost 80% to 362 Sri Lankan rupees per $1 USD in the same time period. This is due to multiple other factors, including political upheaval and bankruptcy, as the country is facing its “worst economic crisis since independence in 1948.” Less drastically, the value of the Pakistani rupee has fallen about 22% to 216 Pakistani rupees per $1 USD.

Considering the large drops in rupee values and increasing U.S. interest rates, the Indian rupee’s resilience has proven impressive. Falling exchange rates have not caused irreversible damage to the domestic currency as Indian investments are still attractive to foreign investors since the U.S. dollar is simultaneously getting stronger and allowing investors to buy more valuable shares. The Indian central bank has made one of its main goals to maintain a sense of stability and prevent market volatility from impacting its emerging economy. With a stable market and prices, vulnerable populations will be able to access food and basic resources with steady wages.

Effects on Cost of Living

Poverty remains a widespread problem in India, with about 176 million Indians living in extreme poverty as of 2015. The country has made progress in lifting itself from these high rates of poverty with action from the government and Reserve Bank of India, especially amid the COVID-19 pandemic. These measures include “monetary and fiscal policy measures,” increased spending on health and social protection and economic decisions relating to imports and trading with foreign countries.

India relies on imports to provide consumers and its market with services and goods and the depreciating rupee and inflation will undoubtedly prove difficult for the working population of India. Worsening depreciation leads to inflation and higher costs for foreign commodities, including imports such as fuel and oil, imported foods and foreign education. This, in turn, decreases the purchasing power of people’s salaries, which is the most hard-hitting for India’s vulnerable working populations.

However, the depreciation of the rupee “can also support India’s exports as our goods and services become cheaper for foreign importers,” India’s CRISIL analytical company said.

Preserving Value

The rupee has been holding its ground against the dollar due to a fall in oil prices as well as efforts by India’s central bank. The Reserve Bank of India (RBI) increased its intervention in the market over the past decade. Currently, it buys an average of $7 billion from the market every month. RBI also announced in July 2022 that it will “allow trade settlements between India and other countries in rupees.”

The Government of India, also known as the Centre, has also taken measures to safeguard the rupee’s resilience to prevent the rupee from further depreciating and impacting consumer markets to an even greater extent. Investments are one of the main focuses in maintaining the value of the rupee against global market uncertainty. The government is considering lowering limits on overseas investments by Indian residents to counteract depreciation and is making efforts to speed up USD remittances that exporters owe. The Centre could also attempt entering a bond index for more securities and inflow to sell back to investors.

Looking Ahead

Minister of Finance and Corporate Affairs Nirmala Sitharaman has shared that inflation is not expected to severely worsen poverty in India as no one will be pushed “below the lower poverty line of $1.9/day, while only 0.02% & 0.04% of the population will go below higher poverty lines of $3.3/day and $5.5/day, respectively.”

The efforts of the government to protect the purchasing power of the rupee are necessary for consumers to continue supporting themselves, especially those that poverty already impacted. In September 2022, Reuters reported that a minimum of 10 Indian states announced [support of more than] 1 trillion rupees ($12.6 billion), mainly in cash transfers and electricity subsidies, for households to combat inflation.”

– Nethya Samarakkodige
Photo: Flickr

Scheduled Tribes in India
The term “Scheduled Tribes” refers to multiple tribes in India who the Indian government and the country’s constitution recognizes. Currently, 705 Scheduled Tribes exist in India. Among these 705 recognized tribes, 75 of them have the Particularly Vulnerable Tribal Groups (PVTGs) designation. These groups have a pre-agriculture level of technology, stagnant or declining populations, extremely low literacy and subsistence-level economies.

Scheduled Tribes

Scheduled Tribes of India are usually called Adivasi after the original inhabitants of India. Many of these Scheduled Tribes have their own languages, religious customs, forms of self-governance and traditions of their own.

During India’s industrialization era, from 1750 to 1947, many Scheduled Tribes experienced displacement from their homes and homelands. Mining activities, commercial farming, timber industries and war were the main causes of Adivasi displacement during this time period. Due to their displacement, Adivasis had to migrate to different parts of India. The majority of these Adivasi had problems integrating into the mainstream Indian society since many of them were illiterate and malnourished. This contributed to the Indian perception that the Adivasi were poor, ignorant and backward.

According to the 2011 census of India’s population, Scheduled Tribes made up approximately 8 percent of India’s population. Scheduled Tribes also accounted for 25 percent of the poorest populations in India. In 2018, India’s National Data found that Scheduled Tribes in India were the poorest populace. According to The National Family Health Survey 2015-2016, 45.9 percent of Scheduled Tribe members lived in the lowest wealth bracket. This finding was even more shocking since more people of Scheduled Tribes lived in the lowest wealth bracket than the people of Scheduled Castes, who people previously knew as the untouchable castes.

Statistics

A 2018 study in the Journal of Social Inclusion Studies delves deeper into the above statistics. The study points to the lack of access to productive income-earning assets, non-utilization of available resources, lack of education and equal opportunities, all serving as the main causes of poverty among Scheduled Tribes in India. What further complicates the matter is that traditional methods of addressing tribal poverty are not viable.

While economic development usually associates with poverty alleviation, economic development and industrialization are the cause of Scheduled Tribes’ poverty in India. The recent economic development has eliminated many of the traditional occupations that tribal inhabitants of India had. The same study presented a table of data about the incidence of poverty between tribals and non-tribals in India. The researchers noted that India’s economic development did not occur equally for the many Scheduled Tribes. The data from 1993 to 2012 shows that tribal poverty is always higher than non-tribal poverty. The study found that tribal poverty was still more than two times higher than non-tribal poverty, even though India’s overall incidence of poverty has been in decline since 1993.

The Indian Government

The Indian government is working to reduce poverty among Scheduled Tribes. In 2019, for example, India’s finance minister Nirmala Sitharaman announced that India is allocating 85,000 crore ($74,710.96) of its 2020 budget to furthering the development and welfare of scheduled tribes. The Indian Ministry of Tribal Affairs is also responsible for promoting and implementing the programs that will benefit Scheduled Tribes in India.

On February 14, 2020, the Minister of Tribal Affairs conducted a workshop with the Tribal Cooperation Marketing Federation of India (TRIFED). During the workshop, the minister recognized and congratulated TRIFED in its mission of expanding and promoting products that tribal craftsmen and craftswomen made. In the same workshop, multiple shareholders, mainly leading national institutions, social sector and industry leaders, met up to discuss their further cooperation with the TRIFED’s mission.

Scheduled Tribes in India still find themselves in a difficult economic reality. The historic and economic marginalization which displaced the Scheduled Tribes still seems to still loom over India. More shockingly, the cause of Scheduled Tribe poverty seems to have its roots in India’s improving economic conditions since 1750. The Indian government does, however, recognize the importance of economically supporting and developing its Scheduled Tribes. With the help of the Indian government, many hope that a better financial future waits for the Scheduled Tribes in India.

YongJin Yi
Photo: Flickr