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World Bank's poverty figures don't add up

comment Updated: Aug 07, 2014 01:35 IST
Hindustan Times
National Food Security Law

The World Bank’s revision of its 2005 method of calculating poverty has only served to make contentious an already hot issue on which much of central government policy depends. The National Food Security Law has a special provision for the antyodaya population, in the calculation of whose numbers the poverty line will have to be taken into account. In terms of the purchasing power parity (PPP) index of 2005, India had 400 million poor people in 2010, which is more than what has been estimated by the C Rangarajan panel. However, the Bank has revised the formula and, along with a new global poverty line, has arrived at the conclusion that India’s population below the poverty line is lower than 100 million. Considering that there are targets regarding poverty reduction in the Millennium Development Goals, one could even suspect a piece of statistical manipulation involved in this.

It was only in early July that the Rangarajan panel had put out its figures, according to which 29.5%, or 363 million, of India’s population were poor in 2011-12. In calculating this, the panel had used Rs 47 in urban areas and Rs 32 in rural areas as the threshold income levels. Before this, the Suresh Tendulkar panel report, going by the Planning Commission methodology, had ventured to suggest 21.9% of India’s population were poor in 2011-12. However, this method was received with a wide degree of scepticism.

A lot of things have not been said in the World Bank report. Was the Bank looking at just access to food, or had taken into account education and healthcare as well? Was it using consumption baskets or some similar criterion? Secondly, using global benchmarks in calculating poverty can be misleading. PPP is based on the assumption that the proportion of the price levels in two countries is equal to their exchange rates. Given that, if one were to find out whether a person with one dollar in hand is richest in India, Sierra Leone or Uzbekistan, one has to look at the real effective exchange rate. This just ends up being a game of numbers. Hence, everything considered, it is advisable not to give much credence to the World Bank report.