Daily Current Affairs

Controversy surrounding the Global Hunger Index (GS Paper 2, Issues Relating to Poverty & Hunger

Why in news?

• For the second time in two years, the Ministry of Women and Child Development rejected the Global Hunger Index (GHI) that ranked India 107 among 121 countries.
• India was accorded a score of 29.1 out of 100 (with 0 representing no hunger), placing it behind Sri Lanka (66), Myanmar (71), Nepal (81) and Bangladesh (84).
• It referred to the index as “an erroneous measure of hunger”. It also wrongly claimed that the Index relied on an opinion poll.

 

What is the Global Hunger Index?

• The GHI, is a peer-reviewed annual report that endeavours to “comprehensively measure and track hunger at the global, regional, and country levels”.
• It is jointly-produced by the Germany-based not-for-profit organisationWelthungerhilfe and Ireland-based Concern Worldwide.
• Authors of the report primarily refer to the United Nations’ Sustainable Development Goal 2 (SDG 2) that endeavours to achieve ‘Zero Hunger’ by 2030. According to them, the report attempts to “raise awareness and understanding of the struggle against hunger”.
• The inaugural report was first published in 2006. The 2022 report is its 17th edition.

 

Indicators:

The GHI score is computed using four broad indicators:

1. undernourishment (measure of the proportion of the population facing chronic deficiency of dietary energy intake),
2. child stunting (low height for age),
3. child wasting (low weight for height) and
4. child mortality (death of a child under the age of five).

 

Basic terminologies:

• Hunger refers to the undesirable sensation caused by insufficient consumption of calories on a daily basis to lead a normal and healthy life, taking into account her/his age, sex, stature and physical activity.
• Undernutrition is the result of inadequate intake of food, which could be in terms of either quantity or quality, poor utilisation of nutrients due to infections or other illnesses. It could emanate from varied social or economic factors.
• The U.S. Food and Agriculture Organisation (FAO) defines ‘malnutrition’ is defined as the abnormal physical condition caused by unbalanced or excessive intake of macronutrients and/or micronutrients. Imperative to understand here is chronic undernourishment is synonymous with hunger and undernutrition is a type of malnutrition.

 

Why these four metrics?

• Undernourishment, as per the authors, provides a basis to measure inadequate access to food and is among the lead indicators for international hunger targets, including the UN SDG 2.
• Child stunting and mortality, offers perspective about the child’s vulnerability to nutritional deficiencies, access to food and quality of nutrition.
• Since children (especially below five) are at a developmental age there is a greater and urgent requirement for nutrition with results particularly visible. This forms the basis of assessing nutritional requirement among children. Adults are at a sustainable age,  they are not growing but rather subsisting on nutrition for healthy survival.
• And lastly, on the same rationale, child mortality indicates the serious consequences of hunger. Children are most vulnerable to hunger and thus any potential deficiency (of vitamins and minerals) is better captured.

 

What allegations are we looking at?

• As per the Ministry for Women and Child Development, the report lowers India’s rank based on the estimates of the Proportion of Undernourished (PoU) population.
• It elaborates that the U.S. Food and Agriculture Organisation (FAO) estimate is based on the ‘Food Insecurity Experience Scale (FIES)’ survey module conducted using the Gallup World Poll that bears a sample size of 3,000 respondents being asked eight questions.
• It stated that the data represented a miniscule proportion for a country of India’s size. It countered the assertions in the report pointing to India’s per capita dietary energy supply increasing year-on-year due to enhanced production of major agricultural commodities in the country over the years.
• While FAO uses a suite of indicators on food security, including two important indicators, the GHI only uses the PoU obtained through food balance sheets based on data reported by member countries, including India.
• A food balance sheet provides a comprehensive picture of the pattern of a country’s food supply during a specified reference period. It lists down the source of the supply and its utilisation specific to each food category.

 

Why the GHI uses three child-specific indicators out of the four to calculate hunger for a country’s population?

• By combining the proportion of undernourished in the population (1/3 of the GHI score) with the indicators relating to children under age five (2/3 of the GHI score), the GHI ensures that both the food supply situation of the population as a whole and the effects of inadequate nutrition within a particularly vulnerable subset of the population are captured.
• All four indicators used in the calculation of the global hunger are recognised by the international community, including India, and used for measuring progress towards the UN SDGs.

 

Why the controversy?

• According to the Ministry, the report is not only disconnected from ground reality but also chooses to deliberately ignore the food security efforts of the Central government especially during the pandemic.
• The Union Cabinet through the Pradhan MantriGaribKalyan Ann Yojna (PM-GKAY), provisioned an additional five kg ration per person each month in addition to their normal quota of foodgrains as per the National Food Security Act. It was recently extended to December 2022.

 

Concerns:

• The schemes definitely helped ease the situation but fell short of being adequate.
• However, given the unemployment, prices of food increasing and stagnant wage-levels, people are not eating what they should eat.
• The pandemic-induced distress only added to an existing dimension and made it worse.

 

The bigger picture of intermediation, financial crises

(GS Paper 3, Economy)

 

Context:

• The Nobel Memorial Prize in Economic Sciences has been awarded to three American economists Ben S. Bernanke, the former Federal Reserve Chair; Douglas W. Diamond at the University of Chicago; and Philip H. Dybvig at Washington University in St. Louis for offering a deeper understanding of the genesis, the propagation, and the management of financial crises.

Role of banks in financial sector:

• The financial sector plays a major role in modern economies and banks are the cornerstone of the financial system.
• They mobilise savings for investments, create opportunities to pool risks, improve allocative efficiencies, and lower transaction costs when funds exchange hands between borrowers and lenders.
• The very mechanisms that enable banks to offer these valuable services are also those which, at times, make banks vulnerable to small shocks and market sentiments, triggering a financial crisis and/or bank run with severe consequences.

How an ideal situation in financial sector can be risky?

• Consider an ideal situation where banks and firms are honest, banks are healthy with a small volume of non-performing loans, and that the economy is not facing any significant adverse events such as wars, floods, etc.
• According to Diamond and Dybvig, even in this ideal environment banks may fail to meet obligations to depositors due to a different kind of risk, the risk associated with maturity transformation which banks have to undertake to be viable.

 

Case of an ideal situation:

• Consider a bank that takes deposits from many small savers, who may face a sudden need for cash due to unforeseen circumstances. Therefore, they prefer to put their savings in liquid deposit accounts from which they can withdraw at minimum notice.
• On the other hand, the firms that borrow from the bank prefer loans with longer maturity since they want to invest the money in business activities. To make its operation viable, a bank has to pay attention to the needs of both sets of customers. Thus, a bank has to turn short-term deposits into long-term lending.
• Under ordinary circumstances, a bank’s day-to-day operation remains unaffected by this mismatch of its assets (loans) and liabilities (deposits) because withdrawals by depositors largely uncorrelated.
• On a given day, only a fraction of depositors faces an unforeseen need for cash and the need to withdraw money from their accounts.

 

A framework used as an explainer:

• Repeated observations of borrower behaviourallows banks to set aside a fraction of deposits needed to meet the daily demand for withdrawal and safely give out the rest as loans with longer maturities. This process works well as long as each depositor expects other depositors to withdraw only when they have real expenditure needs.
• But suppose something changes for the depositors (economic or political events for example). This could trigger a belief among the depositors that their deposits are at risk. Such expectations could be wholly unfounded or based on a minor event.
• Now depositors know that a bank has locked a significant fraction of its deposits in loans that cannot be quickly called in, and also anticipating that other depositors will want to withdraw their funds.
• Consequently, the best strategy for a depositor under these circumstances would be to withdraw his/her own money before it runs out. Incidentally, a way to prevent such crises and runs is to offer deposit insurance, which many governments have implemented.

 

Credit market’s role:

• The other winner Ben Bernanke, made significant contributions to the understanding of the credit market’s role in propagating and accentuating the effects of shocks.
• During the great depression of the 1930s, nearly 7,000 banks in the United States failed taking with them $7 billion in depositors’ assets. One can view bank failures at this scale as a consequence of a deep economic downturn and stop there.
• However, Bernanke in a 1983 paper argued that the disruptions of 1930-33 reduced the effectiveness of the financial sector as a whole by increasing the real costs of intermediating in the market and making credit more expensive and difficult to obtain.
• Consequently, bank runs played an important role in converting the severe but not unprecedented downturn of 1929-30 into a protracted depression.
• Bernanke’s research on the banking sector upholds the belief that favourable credit market conditions are essential for moderating shocks.
• He did put this belief to work as the Federal Chair during the 2008 recession.

 

Conclusion:

• Overall, the three winners cover different but complementary aspects of financial intermediation and banking.

Number of poor people in India fell by about 415 million between 2005-06 and 2019-21: UN

(GS Paper 3, Poverty)

Why in news?

• The number of poor people in India fell by about 415 million between 2005-06 and 2019-21, a historic change according to the UN.

Details:

• The new Multidimensional Poverty Index (MPI) released by the United Nations Development Programme (UNDP) and the Oxford Poverty and Human Development Initiative (OPHI) at the University of Oxford said that in India, 415 million people exited poverty between 2005/06 and 2019/21.
• It demonstrates that the ‘Sustainable Development Goal’ target 1.2 of reducing at least by half the proportion of men, women and children of all ages living in poverty in all its dimensions according to national definitions by 2030 is possible to achieve and at scale. 

Key Highlights:

• The report said based on 2020 population data for India, it has by far the largest number of poor people worldwide (228.9 million), followed by Nigeria (96.7 million projected in 2020).
• Despite progress, India's population remains vulnerable to the mounting effects of the COVID-19 pandemic and to rising food and energy prices. Integrated policies tackling the ongoing nutritional and energy crises should be a priority.
• Despite tremendous gains, the ongoing task of ending poverty for the 228.9 million poor people in 2019/2021 is daunting especially as the number has nearly certainly risen since the data were collected.
• While poverty among children fell faster in absolute terms, India still has the highest number of poor children in the world (97 million, or 21.8 per cent of children ages 017 in India).

 

Global scenario:

• The report said across 111 countries, 1.2 billion people 19.1 per cent live in acute multidimensional poverty. Half of these people, 593 million are children under age 18. The analysis looks at the most common deprivation profiles across 111 developing countries.
• The most common profile, affecting 3.9 per cent of poor people, includes deprivations in exactly four indicators: nutrition, cooking fuel, sanitation and housing.More than 45.5 million poor people are deprived in only these four indicators.
• Of those people, 34.4 million live in India, 2.1 million in Bangladesh and 1.9 million in Pakistan making this a predominantly South Asian profile.

 

Reduction in Multidimensional Poverty Index (MPI) value in India:

• In some countries, subnational regions that were initially among the poorest in their country reduced poverty faster in absolute terms than the national average, narrowing the poverty gap. These include Bihar, Jharkhand and Uttar Pradesh in India (2015/2016 2019/2021).
• The reduction in Multidimensional Poverty Index (MPI) value in India was swift across the two most recent periods. Of the nearly 415 million people who exited poverty in India in the 15 years prior to the COVID-19 pandemic, roughly 275 million did so between 2005/2006 and 2015/2016 and 140 million did so between 2015/2016 and 2019/2021.
• The 2019-2021 data show that about 16.4 per cent of India's population live in poverty, with an average intensity of 42 per cent. About 4.2 per cent of the population live in severe poverty.
• About 18.7 per cent of people, roughly the same proportion as in 2015-2016, are vulnerable to poverty because their deprivation score ranges from 20 per cent to 33 per cent. Two-thirds of these people live in a household in which at least one person is deprived in nutrition a worrying statistic,.
• The percentage of people who are poor is 21.2 per cent in rural areas compared with 5.5 per cent in urban areas. Rural areas account for nearly 90 per cent of poor people: 205 million of the nearly 229 million poor people live in rural areas making them a clear priority.

 

Poverty infemale-headed households:

• India is the only country in South Asia in which poverty is significantly more prevalent among female-headed households than among male-headed households.
• About 19.7 per cent of people living in female-headed households live in poverty compared with 15.9 per cent in male-headed households.
• One in seven households is a female-headed household, so around 39 million poor people live in a household headed by a woman.

 

State wise trend:

• Across states and union territories in India, the fastest reduction in relative terms was in Goa, followed by Jammu and Kashmir, Andhra Pradesh, Chhattisgarh and Rajasthan.
• In relative terms the poorest states have not caught up. Of the 10 poorest states in 2015/2016, only one (West Bengal) was not among the 10 poorest in 2019/2021. The rest Bihar, Jharkhand, Meghalaya, Madhya Pradesh, Uttar Pradesh, Assam, Odisha, Chhattisgarh and Rajasthan remain among the 10 poorest.
• The pace and patterns of MPI reduction in India vary across states and union territories. While additional analysis is needed to clarify the drivers of change in each context, it is clear that multiple policy actions and schemes underpin these results.

Way Forward:

• There have been visible investments in boosting access to sanitation, cooking fuel and electricity indicators that have seen large improvements.
• A policy emphasis on universal coverage for example, in education, nutrition, water, sanitation, employment and housing likely contributed to these results.