Poverty’s Great Fall

  • According to the World Bank report on global poverty released over the weekend, the proportion of people living below the global poverty line in 2015 will fall to single digits — 9.6 per cent — down from 12.8 per cent in 2012.
  • This is a first, ever since such data was calculated in 1990. Apart from this, three aspects stand out. One, the famous dollar-a-day poverty line (actually $1.25), prevalent since 2005, stands updated to nearly two dollars a day ($1.90 — based on 2011 price levels) to better reflect current realities.
  • Two, the decline has happened despite the near-global slowdown of growth since the 2008 crisis. Three, notwithstanding the overall fall, poverty is getting increasingly concentrated in South Asia and sub-Saharan Africa.
  • For instance, despite the rapid alleviation of poverty over the past three decades, South Asia continues to be home to one-third of the world’s poor. In fact, as of 2012, India had the largest number of the world’s poor.
  • While detailed India-specific data is still pending, there are two clear takeaways. One, there is unequal progress across states when it comes to non-income dimensions of development. Data shows that it is easier to reduce income or monetary poverty, but multidimensional poverty is far more persistent.
  • This underlines the increasingly important role of state governments when it comes to implementing poverty alleviation programmes. This is crucial because public provisioning of health and education, both in terms of the budget allocated as well as ground-level implementation, varies significantly across states.
  • With states expected to fund more such activities from the increased devolution of tax funds, this aspect will assume importance.
  • Two, the fall in poverty globally as well as in India is due to methodological reasons that will further fuel the ongoing debate on India’s domestic poverty-line calculations. One is the way India measures poverty.
  • The WB report has chosen a new method, wherein consumption expenditure is based on “modified mixed reference period” (or MMRP) against the Indian norm of “uniform reference period (URP)”.
  • Consumption data according to the MMRP for 2011-12, for instance, shows that Indians spent more than what the data according to the URP suggests. This results in a lower poverty figure. The additional problem is that India started collecting MMRP-based data only since 2009-10 and so, there is no comparative data. It would be best to regard the latest numbers with some caution.