Poverty: Good and bad news  

Abdul Bayes   | Published: June 18, 2018 22:08:23

The Household Income and Expenditure Survey (HIES) 2016 has brought to the fore a number of interesting trends in poverty and inequality in Bangladesh. Apparently, the trends question the complacency looming large among the policy makers as far as poverty reduction is concerned. Possibly, the observations would provide some food for thought also. Data show that one-fourth of the population in 2016 is estimated to be poor, at headcount, compared to roughly one-third prevailing in 2010. Obviously, this indicates the good news that the incidence of poverty has reduced in Bangladesh over time. However, along with the improvement in income poverty levels, signs of a decline in non-income poverty are also in evidence. Both improvements are adducible to increase per capita income following higher economic growth that the economy reaped over the years.

Over the same comparable period, however, as shown by the HIES, rural poverty reduced significantly to 26 per cent from 35 per cent while urban poverty went down marginally to about 19 per cent from 21 per cent. It is no wonder that despite improvement in the poverty front, there are ample room for concerns to question complacency, if any. Poverty is relatively more pervasive in the rural areas compared to the urban counterparts although the difference between the rural and urban poverty incidence has more than halved in 2016. Second, despite this being the most exhilarating achievement,  the pace of poverty reduction has shown a slide at all levels. For example, national poverty rate during the 2010-16 declined by 1.2 percentage points per annum in contrast to 1.8 and 1.7 percentage points respectively for the 2000-05 and 2005-10 periods. Again, rural poverty declined by more than  1.5 percentage points per annum while urban poverty reduction has been consistently at slower pace .

If that is the case, it tells us that future poverty reduction in Bangladesh will become progressively challenging. Addressing the uphill tasks will call for a number of steps - improved targeted programmes favouring the more marginalised groups, creating jobs for them and expansion of the social safety net programmes etc.

Seemingly the poverty divide has become more apparent through HIES data. As is well-known, and as far as poverty reduction is concerned, the Eastern Divisions of Bangladesh comprising Chittagong, Dhaka and Sylhet have historically fared well compared to their Western counterparts comprising Barisal, Khulna, Rajshahi. During the 2010-16 period, all the Eastern Divisions experienced significant decline in  poverty rates whereas Western regions - barring Barisal - witnessed marginal poverty reduction. This is in sharp contrast to the 2005-10 period when just the opposite scenario prevailed - the Western Divisions outpacing the Eastern parts in poverty reduction.

The HIES data tend to reveal that standard of living indicators displayed signs of progress, albeit slow though, over the corresponding period. In general, people's access to amenities - better housing, drinking water, sanitation, electricity, mobile and internet facilities - have improved over the 2010-16 period. Particularly, literacy rate has also shown improvement at national, rural and urban levels during 2010-16. Lamentably however, the pace of progress in the urban areas moved slowly.  The improvements in non-income poverty reflected by standard of living could be adduced to an extent to the increased rise in the per capita income growth over time.

While poverty reduction, though at slowed pace, produced a sigh of relief, rise in the inequality of income over the same time period resulted in major concern. Income inequality needs to be reduced to boost economic growth as lower income inequality produces more economic growth, other things remaining the same. The evidence of income concentration at the top is both disquieting and overwhelming. During the 2010-16 period, income inequality in Bangladesh was on the rise at all levels. Over the same period, consumption inequality was fairly constant. Income growth of the poor people lagged behind that of the non-poor people thus triggering an increase in income inequality. The share of income of the lowest 5 per cent of households has dropped while the income share of the top 5 per cent households has gone up.  However, whether  growing high income inequality puts a brake on the rate of poverty reduction via slowing economic growth is a big research question for today and tomorrow. 

The abovementioned disconcerting scenario deepness further if household income distribution is examined at the deciles level. As a researcher has noted, if monthly (nominal) income per household is considered, it appears that the bottom 5 per cent and 10 per cent households, at all levels, have suffered significant decline between 2010 and 2016. Meanwhile, the situation was favourable for households in other deciles - particularly in the top 5 per cent and 10 per cent levels. However, the situation was more equitable between 2005 and 2010. Based on the above analysis, the unambiguous conclusion that can be inferred is that the rich are getting richer while the poor are getting poorer in Bangladesh.

Thus the 'development paradox' should be considered with some grain of salt. All that glitters in Bangladesh now is not gold. Positive outcomes in poverty reduction should be pitted against negative outcomes in growing inequality to arrive at a realistic conclusion.

Abdul Bayes is a former Professor of Economics at Jahangirnagar University. abdul.bayes@brac.net/


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