Cents and poverty sensibilities

Written by P Raghavan | New Delhi, Aug 26 | Updated: Aug 27 2008, 06:09am hrs
The World Bank has junked the dollar-a-day definition of poverty as outdated. New calculations made by the bank shows it takes $1.25 a day, adjusted for purchasing power parity, to keep a person above the poverty line. Using this yardstick, the bank on Tuesday reassessed the number of global poor at 1.4 billion, an almost 40% jump over previous estimates.

But the bank still acknowledged that India has achieved a massive reduction in the number of people below the poverty line, even using the new estimates. The new yardstick would only make the goals for further reduction stiffer. In Indias case, this would mean that the share of population below the $1.25-a-day poverty line climbs to 41.6%, against 24.3% under the $1-a-day criterion.

In China, the increase in the share of poor under the new poverty line is more dramatic: almost doubling from just 8.1% under the old poverty-line estimate to 15.9% under the revised poverty line. The figures are sure to spark a major debate in political and academic circles.

In absolute figures, the number of poor in India goes up to 455.8 million, compared with the 266.5 million derived using the $1 definition. The new estimates are the first major update by the bank, incorporating the findings of a 2005 international comparison programme.

The bank says the new global yardstick is a more accurate measure of how much a person needed to stay above absolute poverty in developing countries in the year 2005. The purchasing power parity index used to derive these figures was last revised in 1993. With changes in the cost of living, that index had become outdated.

In relative terms, the share of global poor, as defined by the new poverty line, would go up to 25.7% of world population, compared with 16.1% based on the old poverty line.