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ADB moots new poverty measure

business Updated: Aug 27, 2008 20:30 IST
HT Correspondent

Experts are quibbling, but what is the reality? India may have joined the league of hottest growth economies, but the jury is still out on whether the glass of poverty alleviation is half full, or half empty.

The Asian Development Bank on Wednesday offered a new measure of poverty — earning of $1.35 per day on purchasing power parity — which puts more than half of India’s 1.1-billion population in the category of poor.

According to ADB, about 54.8 per cent of the country's population earned less than $1.35 a day in 2005. The estimates came a day after the World Bank released a study that used earning of $1.25 a day as the poverty line, and showed that the poverty ratio in India fell from 60 per cent to 42 per cent between 1981 and 2005.

By the Indian government’s yardstick, a tad less than a quarter of country's population are poor.

The use of purchasing power partiy as done by ADB, experts say, helps highlight such aspects of deprivation that are linked to consumption.

For example, in 2005 it took on average Rs 44.10 to obtain $1 in currency markets. But this does not mean that $1 had the same purchasing power in the US as Rs 44.10 did in India that year. A global statistical project in 2005 has found that $1 had the same purchasing power as Rs 15.60 for the goods and services that make up household consumption in India.

“It should be obvious that converting $1 either into Rs 15.60 or into Rs 44.10 will have a huge bearing on the resulting estimates of $1-a-day poverty in India,” the ADB report said.

“For the first time a thorough sensitivity analysis of internationally comparable poverty estimates has been carried out. Second, a poverty line that is relevant specifically to the Asia and Pacific region has been adopted,” said Ifzal Ali, ADB Chief Economist.

The report notes that there is a considerable difference in quality and price between packaged rice bought in a supermarket and rice bought by the scoop in a wet market – where the poor traditionally shop.

In a region that has witnessed rapid economic growth it might also be time to evaluate poverty incidence using a benchmark that reflects the region’s dynamism, said Ali.

“Our aim in this study was to shed light on how alternative approaches to compiling purchasing power parities can influence internationally comparable estimates of poverty,” said Ali.

The ADB report estimates that in the 16 countries that participated in the study 1.042 billion people would have been living below its newly defined poverty line in 2005.