The fine print of the estimates also shows that the rate of decline of poverty in India was faster between 1981 and 1990 than it has been between 1990 and 2005. This finding is likely to give fresh ammunition to those who maintain that economic reforms, which started in 1991, have failed to reduce poverty at a faster rate.
India, according to the new estimates, had 456 million people or about 42% of the population living below the new international poverty line of $1.25 per day. The number of Indian poor also constitute 33% of the global poor, which is pegged at 1.4 billion people.
India also had 828 million people, or 75.6% of the population living below $2 a day. Sub-Saharan Africa, considered the world’s poorest region, is better — it has 72.2% of its population or 551 million people below the $2 a day level.
The estimates are based on recently recalculated purchasing power parity (PPP) exchange rates, which makes comparisons across countries possible. The dollar exchange rates being referred to here, therefore, are not the ones used in normal exchange rates.
While the full report has not yet been released, a briefing note sent by the Bank had some of the data and what that showed was that the poverty rate — those below $1.25 per day — for India had come down 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.
An FAQ on the new estimates, also provided by the Bank, makes no mention of this and states that, “India has maintained even progress against poverty since the 1980s, with the poverty rate declining at a little under one percentage point per year.”
The note does point out that while India had 421 million below the $1.25-a-day mark in 1981, that number had gone up not down to 456 million by 2005. Thus, while there has been a decline in the poverty ratio, the ranks of the poor are still swelling.
The new international poverty line of $1.25 PPP per day has been arrived at as “the average poverty line found in the poorest 10-20 countries”, according to the briefing note. In other words, more than four out of 10 Indians lives below what the world’s poorest countries consider the poverty line.
The new estimates are sobering not just for India but for the developing world as a whole, as they reveal higher levels of poverty than earlier estimated.
For instance, even in China’s case, they suggest that 208 million people or 16% of the population is below the new international poverty line rather than the 130 million estimated earlier. However, that is still a sharp decline from the 730 million (84%) that were poor in that country in 1981.
East Asia, in fact, is the region that has recorded the sharpest reductions in poverty from about 79% of the population in 1981 to 18% in 2005. In contrast, Eastern Europe and Central Asia — broadly the former Soviet bloc — has seen poverty rates go up from 1.6% to 5%. What is noticeable in this region is the decline in poverty till 1987, when it was down to just 1% of the population, and the sharp rise subsequently.
For Sub-Saharan Africa, the worrying sign is that poverty rates are virtually unchanged from 1981, which is why the Bank estimates that by 2015, this region could be home to one-third of the world’s poor.
The Bank also 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 very difficult to raise them above the $2 per day mark. The number of those in the developing world below this level has in fact gone up marginally from 2.5 billion to 2.6 billion since 1981
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