Cost of living higher in developing world than is perceived: WB

Written by Economy Bureau | New Delhi, Aug 26 | Updated: Aug 28 2008, 05:18am hrs
Even as emerging Asian economies like India and China continue to define poverty based on $1 per day at 2005 prices, the World Bank, in its recent survey of the poor in 116 developing countries, has decided to redefine the poverty line at $1.25 per day at 2005 prices.

Releasing its first major data on the status of poverty in the developing world on Tuesday, the World Bank said that the upward revision of the poverty line is not arbitrary one, it is the average poverty line found in the poorest 10-20 countries. We are assessing poverty as a whole by the standards of the poorest countries , it said, pointing to the fact that some national poverty lines are based on less than the figure of $1.25, as is the case with India and China.

It pointed that while developing countries like China and Indias poverty lines were based on a meager $1 per day, better-off countries like middle income countries and regions like Latin America and Eastern Europe have a higher poverty line of $2 per day which would be the median poverty line for all developing countries.

This definition for poverty must essentially be a reflection of the inflation in the US. There will be a conversion element to the $1.25 per day figure. It would be converted to the purchasing power parity in every other country, Chief statistician Pranob Sen said, adding that this cannot be considered as a statement on the status of the poor in India. The latest estimates draw on 675 household surveys for 116 developing countries, representing 96% of the population of the developing world.

Based on improved price data collection and processing, the World Bank found that the cost of living is higher in the developing world than is perceived. Past estimates of the level of poverty in the developing world have to be revised in the light of this new data, it said.

Even as several countries including India have embarked on several poverty alleviation programmes, the new data has revealed a higher count of the poor. India still has 266.5 million people living on around $1 per day (Rs 40 approximately) against Chinas 106.1 million in 2005.

According to the old data, the poverty count had fallen below one billion. But with the upward adjustment to the cost-of-living in developing countries which have been hit by inflation, the World Bank estimated that 1.4 billion people in the world are still poor by the standards of the poorest countries and 2.6 billion people consume less than $2 a day, in 2005 prices.

While the number of poor has declined in Asia, it went up in other parts of the South Asian region. The poverty rate has fallen in South Asia, including India, from 60% to 40% between 1981 and 2005. Significant progress was noticed in East Asia where the percentage of people living below $1.25 a day has fallen from 80% in 1981 to 18% in 2005. The poverty rate has fallen from 1981-2005 in Latin America and the Caribbean, and in the Middle East and North Africa, though not enough to bring down the number of poor.

Sub-Saharan Africa is the only region that has not shown any signs of decline in the percentage of poor spending $1.25 a day during the entire period of 1981 to 2005, which stood at 50%. The number of poor has almost doubled in Africa over 1981-2005, from 200 million to 380 million.