A slower decline in poverty rate, but a rise in inequality

The latest household survey comes with good news that the poverty rate in Bangladesh dropped to 18.7% in the last six years – half of the period being devastated by twin global shocks. 

But there is a note of warning too – the improvement comes with widening income inequality.

The latest Household Income and Expenditure Survey (HIES),  conducted by the Bangladesh Bureau of Statistics (BBS) and released on Wednesday, also shows higher poverty incidence in villages than in towns with people spending more on goods and services other than food. 

The HIES 2022 shows that the poverty rate has declined by 5.6 percentage points in six years from 24.3% in 2016, marking a less than 1% fall per year. While this is still a positive trend, the reduction rate has been decreasing continuously from over 1% average decline per year since 2000.

Extreme poverty fell to 5.6%. Six years ago, 12.9% of the population were extremely poor, according to the survey. 

Bangladesh has made significant progress in economic growth and poverty reduction in the last two decades, which has been recognised globally. 

Infograph: TBS

Inequality increases

However, the latest BBS survey finds that the poverty reduction rate has slowed down, while inequality has increased-- a development that underlies the need to implement policies and programmes that promote inclusive growth and shared prosperity. 

While the planning minister said the poverty rate has decreased amid the Covid-19 pandemic and the Russia-Ukraine war and it is a great achievement for the country, economists said weak policies and corruption are promoting inequality. 

"Many countries around the world have experienced negative economic growth due to Covid-19 and war. But we have seen both positive economic growth and a decrease in poverty," said MA Mannan, planning minister at the launch of the report at the BBS headquarters in Agargaon.

The decline reflects the continuous socioeconomic progress which could have been higher if the Covid-19 pandemic and the Russia-Ukraine war did not hit the economy hard, the planning minister said.

Pandemic-induced lockdown, enforced several times since March 2020, badly hit the livelihoods of informal workers, pushing many into income poverty until they started recovering with normalcy returning with the mass vaccination drive, according to studies of various think tanks.

Though average monthly household income more than doubled in six years to Tk32,422, the latest HIES data show income inequality has widened further as the Gini co-efficient index rose to 0.499 last year from 0.482 six years back.

Although there are no internationally defined standard cut-off values, the Unicef says Gini index<0.2 is commonly recognised as  representing perfect income equality, 0.4–0.5 corresponds with high income disparity and Bangladesh is in this range. 

However, the gap widened at a slower rate this time-- from 0.024 between 2010 and 2016 on Gini index to 0.017 in the next six years. 

The Gini index is a measure of income across a population. A higher index indicates greater inequality with high income individuals receiving much larger percentages of the population's total income.

'Faulty distribution causes inequality' 

Dr Salehuddin Ahmed, former governor of the Bangladesh Bank, said poverty rates have come down, though at a slower rate, because of an improvement in transport and communications. "Inequality is rising because of a faulty distribution system," he told The Business Standard. 

BIDS Director General Dr Binayak Sen has said that the decline in extreme poverty rate is a positive development. He also mentioned an NGO finding that they cannot find anyone in extreme poverty for their poverty alleviation programme.

Regarding inequality, he said that the BIDS conducted research on this issue a long time ago, which showed that those engaged in self-employment, receiving higher wages, and having education have increased their income. This has resulted in an increase in inequality with others. He suggested that another study needs to be conducted from 2010 to 2022 to identify the causes of inequality.

Though average monthly household income more than doubled in six years to Tk32,422, the latest HIES data show income inequality has widened further as the Gini co-efficient index rose to 0.499 last year from 0.482 six years back.

However, the gap widened at a slower rate this time-- from 0.024 between 2010 and 2016 on Gini index to 0.017 in the next six years. 

The rapid growth in people's real income might have contributed to the slower pace of inequality growth, though overall inequality deepened further due to governance, institutional and distributional issues, says Dr Monzur Hossain, research director at the Bangladesh Institute of Development Studies (BIDS). 

The existing system is far from building an equitable society, he thinks.   

The BBS has also acknowledged that the concentration of income has slightly increased as per HIES 2022, which implies that there is a need to address income inequality to ensure the benefits of economic growth are distributed more evenly among all segments of society.

Household expenditures doubled

Household expenditures also doubled during the period to Tk31,500, mainly driven by the rising trend in non-food spending. Households now spend 54.2% of their incomes on goods and services other than foods, which was 52.3% in 2016, according to the HIES-22.

Food expenditures accounted for 47.7% of family income in 2016, which dropped to 45.8% in 2022, which indicates that families have more money to spend on things other than food and this could be due to various factors, such as increased household income, improved access to affordable food, or changes in consumption patterns. 

According to BBS, the decrease in the percentage of income spent on food could have positive implications for overall household well-being, such as improved nutrition, better health outcomes, and increased ability to save or invest in other areas.

An analysis of monthly inflation trends also shows how non-food inflation continues to push the overall consumer price index higher.

Though Bangladesh has one of the world's lowest food inflation, unbridled non-food price hikes keep the country's general inflation high, pushing the monthly consumer price index to 9.33% in March-- highest in seven months. Though indices of both food and non-food groups rose, the hike in non-food prices was bigger than food items.

Incorporating the changes in consumption patterns, the BBS in the latest HIES added 225 items to the non-food group, raising the number of goods and services other than foods to 441. Food basket now contains 263 as per the 'upgraded classification of individual consumption by purpose,' up from 149 items taken into account in 2016.

Splitting the poverty data, the BBS says poverty incidence remains much higher in rural areas – at 20.5% – than the 14.7% in towns.

It also notes a growing inclusion of households into the formal financial system as at least one in 14.1% families opened a bank account – almost double compared to six years before.

Better living

The household survey gives a glimpse of positive changes in socioeconomic conditions of people with over 99% households having access to electricity, more than 92% having improved toilets and over 96% getting safe water.

In 2016, nearly 76% of households had electricity access. Literacy rate (age 7 years and above) is 74% now, up from 65.6% in 2016.

Food consumption pattern changes

In the HIES 2010, per day rice consumption was 441.6gm per person in rural and 344.2gm in urban areas. The latest HIES finds that rice consumption went down to 349.1gm in rural areas and 284.7gm in urban areas.

Also, vegetable consumption rose to 202.2gm and 201.gm per person in rural and urban areas in the latest survey, up from 170gm and 155gm respectively in the HIES 2010.

The HIES 2022 also finds that per person meat intake shot up to 35.4gm in rural and 50.3gm in urban, significantly higher from 14.7gm and 33.3gm in 2010.

Egg and fruit consumption also increased as per the HIES 2022. Fruit consumption has more than doubled to 90.9gm in rural areas and 105.3gm in urban areas.

Calorie intake grows

The overall calorie intake per person per day is 2,393 Kcal in HIES 2022, up from 2210.4 Kcal and 2318.3 Kcal in HIES 2016 and HIES2010 respectively.

And, the calorie intake was higher in rural a reas – 2424.2 Kcal, up from 2240.2 Kcal in 2016.