Re­draw the poverty line

It must re­flect new re­al­i­ties of food in­fla­tion, cli­mate change im­pacts


There should be re­gion­spe­cific poverty lines that take into ac­count re­al­i­ties of in­fla­tion and cli­mate change

Fpast two years ex­perts have been ques­tion­ing OR­THE the ad­e­quacy and use of In­dia’s poverty line. Most of the crit­i­cism points to the fact that the def­i­ni­tion is out­dated and its ex­pen­di­ture limit in­di­cates a “star­va­tion line”, not poverty. Now, there is a sim­i­lar de­bate over the in­ter­na­tional poverty line of $1.25/day. Like the de­bate in In­dia, the in­ter­na­tional poverty line faces the crit­i­cism of be­ing out­dated. It does not re­flect the new re­al­i­ties of ris­ing food in­fla­tion, change in ba­sic re­quire­ments and cli­mate change that is mak­ing peo­ple vul­ner­a­ble to reg­u­lar nat­u­ral dis­as­ters.

The de­bate started with two con­tra­dict­ing re­ports from two equally com­pe­tent in­sti­tu­tions: the World Bank and the Asian De­vel­op­ment Bank (adb). In Au­gust, the me­dia re­ported that the World Bank had de­cided to re­vise the in­ter­na­tional poverty line to $1.78/day. If the new poverty line is ap­plied, the num­ber of the world’s ex­treme poor will come down by half. This is led by dras­tic re­duc­tion in the num­ber of poor in In­dia and China.

On the other hand, in the first week of Septem­ber, adb re­leased a re­port de­mand­ing re­draw­ing of the poverty line, re­flect­ing the changed liv­ing re­al­i­ties in Asia. It sug­gested a new poverty line, $1.51/day. This def­i­ni­tion in­creases poverty lev­els by 9.8 per cent in Asia.

Not­with­stand­ing the dif­fer­ences be­tween the two poverty lines, what is im­por­tant is the con­tri­bu­tion the two re­ports have made in re­viv­ing the de­bate.Why should one change the poverty line? First, the global poverty line is based on out­dated data, culled from 15 coun­tries, mostly African. Se­condly, there are stark dif­fer­ences be­tween the lev­els of poverty in dif­fer­ent re­gions. A poverty line based on data from Africa may not re­flect the so­cio-eco­nomic con­di­tions in Asia. Thirdly, there have been changes in the ba­sic re­quire­ments of peo­ple. There are ex­penses peo­ple never thought about in the 1980s. For ex­am­ple, us­ing a mod­ern cook­ing medium or a mo­bile phone. Fourthly, cli­mate change and food in­fla­tion make peo­ple vul­ner­a­ble to reg­u­lar fi­nan­cial shocks.

So why is there a dif­fer­ence in the es­ti­mates given by adb and the World Bank? The World Bank only ad­justed the dis­tor­tion in ex­change rates of cur­ren­cies to es­ti­mate the new poverty line. This led to a re­duc­tion in poverty in emerg­ing economies like In­dia and China. But the poverty line pro­posed by adb in­cor­po­rates the im­pacts of food in­fla­tion and vul­ner­a­bil­i­ties to cli­mate ex­tremes. This jus­ti­fi­ably in­creases the num­ber of poor.

This also ex­plains a popular per­cep­tion in coun­tries like In­dia. Of­ten, we get a high gdp growth but the level of poverty does not reg­is­ter a suit­able drop. An av­er­age ru­ral In­dian spends more on food than an ur­ban res­i­dent. But the poverty line does not get up­dated ac­cord­ing to food in­fla­tion. In any case, food is just one of the pa­ram­e­ters that de­cide the poverty line. There are many new fun­da­men­tals in the life of a ru­ral In­dian— pay­ing for trans­port, mo­bile phone and pri­vate health­care. Add to th­ese the in­creas­ing vul­ner­a­bil­ity to nat­u­ral dis­as­ters. In­dia’s poverty line or the global poverty lines do not fac­tor th­ese ex­penses.

It is time the de­bate changed the regime of poverty line. There should be re­gion-spe­cific poverty lines, for ex­am­ple a poverty line for South Asia. This will help in fac­tor­ing a re­gion’s so­cio-eco­nomic con­di­tions and vul­ner­a­bil­i­ties. Once we do this, there will be a near real as­sess­ment of the level of poverty to tar­get erad­i­ca­tion. As the world de­cides on a new set of de­vel­op­ment goals, the poverty line should be junked to be­gin with.


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