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A new measure of poverty

By Darryl D'Monte

On the 20th anniversary of the Human Development Report, Oxford University and UNDP are bringing out a Multidimensional Poverty Index that will replace and refine the Human Poverty Index. The new measure, which uses 10 different indices, threw up a startling fact: just eight Indian states have more poor people than the 26 poorest African countries combined!

Economists and other experts have been grappling with methods of measuring poverty, not least in this country. There is now widespread consensus that per capita income is by no means a sufficient index of how poor -- or rich -- a country is, although the World Bank and other institutions still use ‘dollar-a-day’ widely. At best, it serves as a quick tool to measure poverty, since there is generally a link between income and a person’s wellbeing. However, it papers over many other factors that worsen or mitigate poverty.

Globally, the United Nations Development Programme (UNDP) has developed its Human Development Index and has been coming out with a Human Development Report for two decades. This includes many other indices like life expectancy at birth, adult literacy rate, and enrolment in education, as well as gender empowerment. All these are clubbed under a Human Poverty Index. Some years ago, one country was so incensed at its poor ranking -- probably it compared itself with a neighbour -- that it shut down the UN office there! The report owes much to the pioneering work of the late Pakistani economist Dr Mahbub ul Haq.

UNDP chooses a focus for each report. For instance, in 1998 it highlighted consumption and how the expenditure on cosmetics or ice-cream of a few million people in rich countries was the equivalent of that spent on food and other necessities by the majority of the world.

Many poor countries dread publication of the report, rather like errant schoolchildren awaiting their report cards. India, which ranked 134 out of 182 countries last year, can hardly derive much satisfaction that it did better than our troublesome neighbour Pakistan which ranked 141. Even Bhutan and Laos did better than India.

On the 20th anniversary of the Human Development Report, Oxford University and UNDP are bringing out a Multidimensional Poverty Index, or MPI, which will replace the Human Poverty Index and further refine the measurement of this human condition. In advance of the report’s publication this October, the two agencies have just released details of the new measure, which uses 10 indices. These are: schooling, child enrolment, child mortality, nutrition, electricity, sanitation, drinking water, floor (housing), cooking fuel, and assets. This allows policymakers various permutations and combinations to measure different facets of poverty. It can actually narrow the focus of enquiry to what people lack, right down to the household level.

The Oxford Poverty and Human Development Initiative (OPHI), which took the lead in developing this index, analysed data from 104 countries with a combined population of 5.2 billion, constituting 78% of the world’s total. It found that about 1.7 billion people in these countries live in multidimensional poverty. If income alone is taken into account, and people are considered poor if they earn less than $ 1.25 a day, which is the standard measure throughout the world, this amounts to 1.3 billion only. The MPI measures both the incidence of poverty, or proportion of population that is poor in these ways, as well as the “intensity” of their deprivation, which is the average proportion of indicators in which they are deprived.

The startling fact that emerges from this analysis, which made headlines throughout the world, is that using the MPI, just eight Indian states have more poor people than the 26 poorest African countries combined. These sub-Saharan countries, like Ethiopia, are considered the worst off in the world, with pictures of starving children there becoming symptomatic of a deep malaise. India, on the other hand, today enjoys the status of an emerging economic power, with a booming IT industry, vast industrial potential and a huge internal market. The overall averages have camouflaged these indices of deprivation within the country, “the internal colony”.

The eight Indian states in question are Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan, Uttar Pradesh and West Bengal, with 421 million people; the 26 African countries together number only 410 million, so numerically they are comparable. In the old days, before the fragmentation of Bihar, the veteran demographer Ashish Bose coined the term “BIMARU” states -- Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh -- to connote states that were the most backward. This latest global analysis demonstrates that the picture hasn’t changed much, despite India recording near-double-digit economic growth.

Using 2005 data, OPHI found that India’s MPI was 0.296, with 0.0 representing the absence of any deprivation. The nation’s incidence of poverty was as high as 55%, as against 29% according to the official poverty line, 42% using the $ 1.25 a day yardstick, and as high as 76% using $ 2 a day. South Asia has the largest number of poor in the world, measured by the MPI, with 51% or 844 million people, as against only a quarter of the world’s total in Africa, comprising 458 million. India actually figured second lowest in the whole of Asia, with only Nepal having a worse MPI of 0.36. Even Bangladesh and Pakistan fared better, although marginally so. China has an MPI of 0.06.

The advantage of this new yardstick is that it can assess which indicator contributed most to a country’s poverty. In India’s case, lack of nutrition (which includes food intake itself) played the biggest role, followed by child mortality and child enrolment in roughly equal measure. This can be further broken up into rural versus urban, where the role of each indicator obviously differs. What is more, the data can be disaggregated to show how the composition of poverty differs between different regions or groups. The MPI also reveals great variations within countries: Nairobi has the same level of MPI poverty as the Dominican Republic, whereas Kenya’s rural northeast is poorer in MPI terms than Niger, which figured last -- ranked 182 -- in the 2009 UNDP Human Development Index.

OPHI has conducted a telling comparison not between countries but between a region and another country. “Usually we compare countries, but because of India’s size it can be informative to compare a country with a state,” it says. It has measured Madhya Pradesh against the Democratic Republic of Congo (DRC), which ranked 176 in last year’s Human Development Report. Their populations are roughly equivalent: 70 and 63 million respectively. What’s more, their MPIs are also roughly the same: 0.39. While the proportion of people suffering from poverty is higher in DRC -- 73% as against 69% in MP -- in the latter, “poor people experience a higher average intensity of poverty -- they are poorer in more dimensions in the same time”.

In Madhya Pradesh, like in India as a whole, malnutrition is the biggest culprit, while in the Democratic Republic of Congo it is child enrolment in school. Lack of electricity and drinking water are more acute in DRC than in MP. This shows how averages can be broken up in this manner between countries or regions within countries, to provide a more significant picture of what constitutes poverty and, by inference, what can be done to alleviate it. Although their MPIs are the same, the composition varies. Furthermore, it is important to remember that DRC continues to face a high level of violence, being a war-ravaged country. No so Madhya Pradesh.

Within Madhya Pradesh, it is possible to disaggregate the proportion of different communities suffering from poverty. Thus, 81% of scheduled tribes are poor, 66% of scheduled castes and 58% of backward classes. But if one takes Madhya Pradesh as a whole, only a third of the population is poor. Scheduled castes also suffer a high average intensity of poverty, measured against weighted indicators.

OPHI provides a ranking of 21 Indian states, lumping the seven northeastern states as a single category. Overall, Kerala figures the best, with an MPI of 0.065, followed by Goa, Punjab, Himachal Pradesh and Tamil Nadu. Only 16% of Kerala is poor. Bihar is the worst off, with an MPI of almost 0.5, with Jharkhand, Madhya Pradesh, Chhattisgarh and Uttar Pradesh above it, at the bottom of the ladder. An overwhelming 81% of people in Bihar are poor; in MPI terms, they number 77 million, which itself is bigger than the population of most countries.

Dr Sabina Alkire, OPHI’s director, likens the MPI to “a high-resolution lens which reveals a vivid spectrum of challenges facing the poorest households”. She developed the MPI with Professor James Foster of George Washington University in the US. The UN recently released a progress report on the Millennium Development Goals, which are a mere five years away. These include halving those who are poor in the world, who lack access to drinking water and sanitation, by 2015. OPHI researchers believe that success on this front will only be possible “by addressing the needs of those most disadvantaged by geography, age, gender or ethnicity”. The MPI can assist in this endeavour.

This multidimensional approach to poverty has already been adapted for use in Mexico, while it is under consideration in Chile and Colombia. And researchers are already at work on the missing dimensions in these measurements, including aspects such as social exclusion.

Infochange News & Features, July 2010