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The new World Bank estimates are sobering not just for India but for the developing world as a whole. They show that poverty has been more widespread across the developing world over the past 25 years than previously estimated. But there has also been strong progress towards reducing overall poverty
The hype about India’s post-liberalisation success has been busted by none other than the World Bank (WB). According to the Bank’s new estimates not only is India home to roughly one-third of all the poor in the world, it has a higher proportion of its population living on less than $ 2 a day than even sub-Saharan Africa. Compared with India’s 828 million people, or 75.6% of the population living below US$ 2 a day, sub-Saharan Africa, considered the world’s poorest region, ranks better with 72.2% of its population -- about 551 million people -- below the US$ 2 a day level. India has 456 million people, or around 42% of its population living below the new international poverty line of $ 1.25 a day. The number of Indian poor constitutes 33% of the global poor -- pegged at 1.4 billion people. The new estimates are based on recently re-calculated purchasing power parity (PPP) exchange rates that make comparisons across countries possible. The new PPP has been arrived at as “the average poverty line found in the poorest 10-20 countries,” according to the Bank’s briefing note. In other words, nearly five out of 10 Indians live below what the world’s poorest countries consider the poverty line. These sobering figures have emerged from the World Bank’s latest estimates on global poverty, and clearly hint at the fruits of economic benefits having failed to trickle down to India’s poor
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The data available shows that the rate of poverty decline in India was faster between 1981 and 1990 than between 1990 and 2005. The poverty rate -- those below $ 1.25 per day -- for India declined from 59.8% in 1981 to 51.3% by 1990, or 8.5 percentage points over nine years. Between 1990 and 2005 it declined to 41.6% -- a drop of 9.7 percentage points over 15 years, clearly a much slower rate of decline. These new figures should give India’s leaders, policymakers and economic think-tanks sleepless nights and compel them to take a fresh look at strategies to reduce poverty. Martin Ravallion, director of the World Bank’s Development Research Group, said: “Our latest revision of poverty numbers is the largest revision yet because of important new data revealing that the cost of living in the developing world is higher than we thought.” Ravallion’s paper on the new numbers, co-authored with Shaohua Chen, senior statistician in the Development Research Group, is titled ‘The developing world is poorer than we thought, but no less successful in the fight against poverty’. The authors find that though estimates of the number of poor have increased, the rate of poverty reduction in the developing world is still as strong as when poverty was viewed through the lens of the 1993 price data. The World Bank has not yet released the full report; the estimates are based on a briefing note issued in Washington. FAQs provided by the Bank on the new estimates say: ‘India has maintained even progress against poverty since the 1980s, with the poverty rate declining at a little under one percentage point per year.’ In February this year, the Bank’s World Development Report revealed that greater investment in agriculture in transforming economies like India was vital to the welfare of the rural poor. Titled ‘Agriculture for Development’, the report warns that the international goal of halving extreme poverty and hunger by 2015 will not be reached unless neglect and underinvestment in the agricultural and rural sectors over the past 20 years is reversed. It should be noted here that the current World Bank commitments in India’s agriculture, irrigation and rural livelihoods amount to US$ 2.6 billion. Over the years, agriculture in India has seen a steady decline in investment -- a matter of great concern. The new estimates are sobering not just for India but for the developing world as a whole. They show that poverty has been more widespread across the developing world over the past 25 years than previously estimated. But there has also been strong -- if regionally uneven -- progress towards reducing overall poverty. The World Bank makes the point that while raising people above the poverty line is a relatively achievable task -- it believes poverty levels in 1990 can be halved by 2015 -- it is proving extremely difficult to raise them above the $ 2 per day mark. The number of people in the developing world below this level has in fact gone up marginally from 2.5 billion to 2.6 billion since 1981. The new data shows that marked regional differences in progress against poverty persist. Poverty in East Asia has fallen from nearly 80% of the population living below US$ 1.25 a day in 1981, to 18% in 2005. However, the poverty rate in sub-Saharan Africa remained 50% in 2005 -- no lower than in 1981, although with encouraging signs of progress. More facts and analysis - This is the first major effort to update poverty data based on 2005 measures of purchasing power parity. The new poverty estimates are based on data from 675 household surveys across 116 developing countries. Over 1.2 million randomly sampled households were interviewed for the 2005 estimate, representing 96% of the developing world. However, lapses in survey data availability mean that the new estimates do not yet reflect the potentially large adverse effects on poor people of rising food and fuel prices since 2005.
- The number of poor has fallen by 500 million since 1981 (from 52% of the developing world’s population in 1981, to 26% in 2005) and the world is still on track to halving the 1990 poverty rate by 2015. But at this rate of progress, about a billion people will still live below $ 1.25 a day in 2015. Also, most people who escaped $ 1.25 a day poverty over 1981-2005 would still be poor by middle-income-country standards.
- East Asia’s progress has been dramatic since 1981, when it was the poorest region in the world. In China, the number of people living on less than $ 1.25 a day in 2005 has dropped from 835 million in 1981 to 207 million in 2005. The Bank’s earlier 2004 estimate had 130 million people living in China below $ 1 a day, based on 1993 PPP. Thus, the new calculations reveal more poor people than assumed earlier, but China’s remarkable success in reducing poverty still stands.
- In the developing world outside China, the $ 1.25 poverty rate has fallen from 40% to 29% over 1981-2005. However, given population growth, this progress was not enough to bring down the total number of poor outside China, which has stayed at around 1.2 billion.
- In South Asia, the $ 1.25 poverty rate has fallen from 60% to 40% over 1981-2005, but, again, not enough to bring down the total number of poor people in the region, which stood at about 600 million in 2005. In India, poverty at $ 1.25 a day in 2005 increased from 420 million people in 1981 to 455 million in 2005, while the poverty rate as a share of the total population went from 60% in 1981 to 42% in 2005.
- In sub-Saharan Africa, the $ 1.25 a day rate was 50% in 2005 -- the same as it was in 1981, after rising, then falling during the period. The number of poor has almost doubled, from 200 million in 1981 to about 380 million in 2005. If the trend persists, a third of the world’s poor will live in Africa by 2015. Average consumption among poor people in sub-Saharan Africa stood at a meagre 70 cents a day in 2005. Given that poverty is so deep in Africa, much more growth will be needed than for other regions to have the same impact on poverty.
- For middle-income countries the median poverty line for all developing countries -- $ 2 a day -- is more suitable. 2.6 billion people lived on less than $ 2 a day in 2005 -- a number largely unchanged since 1981. This suggests less progress in crossing the $ 2 a day hurdle. By this measure, the poverty rate has fallen over 1981-2005 in Latin America and the Middle East and North Africa, but not enough to bring down the total number of poor. The $ 2 a day poverty rate has risen in Eastern Europe and Central Asia, though with signs of progress since the late-1990s.
Source: http://web.worldbank.org, August 2008
http://www.newstrackindia.com, August 2008
Reuters, August 27, 2008
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