The Poverty Game. World Bank, Asian Development Bank and India's Planning Commission comes out with three magical figures.

Does it really matter if these children earn an equivalent of $ 1.51 or $ 1.25 or less than that per day? 

Picture Ankesh Kothari (from web)

The magicians are out on the stage. The challenge before them is to compute poverty. performing the vanishing trick, and that too without any compassion, they perform the statistical jugglery. Leading the pack is the World Bank. In its latest poverty vanishing trick the World Bank revisits its Purchasing Power Parity (PPP) index, and in one stroke it reduces India’s poverty from over 402 million in 2005 to a very impressive 98 million in 2010.

On the other hand, the Asian Development Bank has revised its poverty line to $ 1.51 per person (from the existing $1.25), and India's poverty in 2010 rises to 584 million or 47.7 per cent of the population. The gap between 584 million and 98 million is so huge that one is forced to dismiss both the estimates as unreal.

Here comes the third magician. An expert committee under Prof C Rangarajan, a former economic advisor to the Prime Minister, submitted its report to India's Planning Commission in July this year. By revising the poverty line to Rs 32 in rural areas and Rs 47 in urban areas, Rangarajan committee actually added another 93.7 million thereby raising the number of total poor to 363 million or 29.5 per cent of the population. 

So now we have three estimates: 98 million, 363 million and 584 million.

Isn’t this shocking? While not many Indians will believe that Rangarajan committee’s estimates are anywhere near the reality, and in fact is a gross underestimation of the extent of poverty in India, the World Bank’s latest estimates only shows that poverty does not require Millennium Development Goals (MDGs) targets to be achieved or any real effort to combat poverty and squalor. All it needs is a few economists who can play around with statistics. These economists can perform the vanishing trick much better than the Indian rope trick.

According to the World Bank’s latest estimates, global poverty has come down overnight from 1.2 billion to 571 million.

The earlier poverty line figure in India was Rs 27 for rural areas and Rs 33 for urban areas as computed by the Tendulkar committee a year back. This had raised a storm over the faulty and impractical estimates necessitating the setting up of yet another committee under C Rangarajan. And if the recommendations of the Rangarajan committee are to be believed, it tells us that there is something dubiously wrong with the way India is trying to deliberately keep poverty low. In all fairness, the new poverty line is nothing but a starvation line. It only tells us how many people need emergency food aid.

World Bank’s projections are still worse. In order to justify economic liberalization, it has been trying to fiddle around with social indicators as well as the poverty line to establish that the market mantrais working. World Bank’s chief economist Kaushik Basu defends the exercise by saying: “In case a dollar in Ghana can buy three times what it can but in the United States, then a person who earns 1,000 dollar each month in Ghana is said to earn 3,000 in terms of PPP-adjusted dollars”. But the reality is that even in the United States, despite being a privatized economy, hunger has shattered 25 years record. A record 49 million people, one in seven, depend upon food coupons to meet their daily food needs. One in four lives in poverty in America.

The World Bank is wrong. In case of India, with or without the new PPP index of the World Bank, I would like to know what can a poor with a daily income of Rs 47 in urban areas buy three times more than what he can buy in America with the same money. It therefore tells us that economists are no different from the famed Indian magicians. They too can perform the vanishing magic trick with alacrity. 

Global empirical evidence is now emerging challenging the World Bank's deliberate underestimation of poverty. Recent studies (ECLAC 2002, 2011) have conclusively shown that in Latin America for instance actual poverty rates are twice than what the World Bank had projected. More recently, on April 11, 2014, a study by the University of Bristol published in the Journal of Sociology concludes that the World Bank is painting a 'rosy' picture by keeping poverty too low due to its narrow definition. Dr Christopher Deeming of the Bristol University's School of Geographical Sciences is quoted as saying: "Our findings suggest that the current international poverty line of a dollar a day seriously underestimates global poverty."

In India too, the entire effort of policy planners as well as the numerous expert committees constituted over time to estimate poverty have simply tried to brush the realities under the carpet. While Rangarajan Committee tabulates a new poverty line, way back in 2007, Arjun Sengupta committee report had estimated that 77 per cent of the population or 834 million people were unable to spend more than Rs 20 a day. But more recently, the consumer expenditure data presented by the National Sample Survey Organisation (NSSO) 2011-12 paints before us the grim realities.

Accordingly, if you are spending more than Rs 2,886 per month in the rural areas and Rs 6,383 in the urban areas you are part of the top 5 per cent of the country’s population. In other words, those spending more than Rs 6383 in urban areas are in the same category as Mukesh Ambani, Ratan Tata, Nandan Nilekani et al. For the rest 95 per cent, roughly 118-crore people, life in any case remains tough. With or without the growth trajectory, their life hasn’t changed. In fact, with the aggressive pitching by the corporate-controlled media, the growing social divide is getting completely ignored. Poor have simply disappeared from the economic radar screen.  

Another estimate exposes the glaring inequalities. The economic wealth of 56 people is equal to the economic wealth of 600 million people. No wonder when we take averages like the rising average income, it hides the rapidly growing inequalities. The mainline economic thinking is that the 600 million would benefit from a trickle-down impact. Now with the number of absolute poor being reduced with a magic stroke, the World Bank will succeed in painting a rosy picture by brushing the poor under the carpet in one single sweep hides the truth. With the passage of time, these unchallenged statistics will be repeatedly used and get accepted over time.

Unless the World Bank makes an immediate correction, all projections of removing 'extreme poverty' by 2030 would be as farcical as the new poverty estimates are. But I doubt if there would be an international uproar forcing the World Bank to redraw the poverty line. At this rate, in the next five years when the World Bank will revise its PPP index, poverty in India on paper will disappear. The poor in India will one day suddenly wake up to find themselves bracketed with those living in opulence. That’s the power of statistical jugglery. #

Painting a rosy picture, Deccan Herald, Sept 9, 2014.
http://www.deccanherald.com/content/429821/painting-rosy-picture.html

गरीबी पर आंकड़ों का खेल Dainik Jagran, Sept 6, 2014
http://www.jagran.com/editorial/apnibaat-figures-on-poverty-11609424.html

World Bank deliberately underestimates poverty

 

Dhravi slum in Mumbai -- National Geographic 

The business of poverty actually extends to sweeping the poor under the carpet. Over the years I find that while most governments across the world have failed to stem poverty (except in countries like China), the international financial institutions are bending backwards to demonstrate that economic liberalisation helps in reducing poverty, and often drastically. This is being achieved by tampering with statistics, and often providing social indicators that don't actually measure up. One such classic example is the dollar a day measure adopted by the World Bank to define the percentage of the population living in extreme poverty.

Global empirical evidence is now emerging challenging the World Bank's deliberate underestimation of poverty. Recent studies (ECLAC 2002, 2011) have conclusively shown that in Latin America for instance actual poverty rates are twice than what the World Bank had projected. More recently, on April 11, 2014, a study by the University of Bristol published in the Journal of Sociology concludes that the World Bank is painting a 'rosy' picture by keeping poverty too low due to its narrow definition. Dr Christopher Deeming of the Bristol University's School of Geographical Sciences is quoted as saying: "Our findings suggest that the current international poverty line of a dallar a day seriously underestimates global poverty."

He further states: "If the World Bank had in fact used a poverty line grounded in basic needs, rather in its present artificial one which only looks at one monetary measure, the total number of poor people in the world would increase substantially, perhaps by as much as 30 per cent." (The report can be read here: http://jos.sagepub.com/content/early/2014/04/09/1440783314523867.full.pdf+html).  This is exactly what I have been saying over the years. Take the case of poverty line in India. The stringent poverty measures that the Planning Commission has been adopting for decades actually only estimate the extent of starvation (India's poverty line is actually a starvation line. http://devinder-sharma.blogspot.in/2009/12/indias-poverty-line-is-actually.html).

Following the same prescription, India too has shown that its poverty has come down from 37 per cent to 22 per cent. This shameless demonstration of 'inclusive growth' comes at a time when the Arjun Sengupta committee had in 2007 worked out that 77 per cent of the population or roughly 834 million people were able to spend not more than Rs 20/day (roughly 30 US cents). Even in the United States, poverty is growing with estimates pointing to 1 in 7 living in poverty.  

Unless the World Bank makes an immediate correction, all projections of removing 'extreme poverty' by 2030 would be as farcical as its earlier target set in 1973 to remove 'absolute poverty' in low and middle income countries by the end of the century i.e. the year 2000.  But will the World Bank do this? Your guess is as good as mine. After all, it pays to keep poverty low. Only then you can justify the faulty economic policies.

Further reading: How to keep poverty low
http://www.huffingtonpost.com/devinder-sharma/how-to-keep-poverty-low_b_838329.html

The algebra of poverty. Juggling statistics, India now claims reduction in poverty

There is excitement in the air. I mean in the air waves. For the past two days I have been hearing the TV anchors and the Congress spokespersons repeatedly emphasizing on the latest miracle that they claim has been achieved. Poverty has come down by 15 per cent between 2004-05 and 2011-12.

For a country which loves miracles, this is certainly big.

National Sample Survey Organisation (NSSO) data shows that the percentage of population below the poverty line has come down from 37 per cent in 2004-05 to 22 per cent in 2011-12. Planning Commission has last year (in Mar 2012) announced that poverty percentage has come down by 7.3 per cent, which means from 37.2 per cent in 2004-05 to 29.8 per cent in 2009-2010. And now finally, the data for the eight years the UPA has remained in power shows a magical decline in poverty by 15 per cent.

Interestingly, the reduction in poverty is being flaunted at a time when the Planning Commission is still not sure about the new poverty line. Writing in the Hindustan Times, Chetan Chauhan says: "The politics of poverty is at play with the Planning Commission claiming that the number of poor came down from 29.8i per cent in 2004-05 to 21.9 per cent in 2011-12, but failed to specify the poverty line (No of poor dips, but who is poor remains unclear. Hindustan Times, July 19, 2013. http://bit.ly/15TFG6J)".

Isn't it therefore interesting as well as curious to know how did the Planning Commission arrive at this magical figure when it has junked its earlier methodology of computing poverty at Rs 32 for the urban and Rs 28 for the rural areas. There was a big uproar in the country when the Supreme Court had questioned a very low poverty line. But as the news report said: "The commission’s deputy chairperson Montek Singh on Thursday avoided queries on the new estimates. The poverty number would come down whatever methodology is employed,” he said. If this is the way poverty is calculated I am sure you will agree that we need to revisit the entire methodology and the claims being made on the reduction of poverty.

This reminds me of another interesting fact that I had shared at a number of platforms. Soon after the economic reforms were unleashed in 1991, the then deputy chairman of Planning Commission Pranab Mukherjee (who is now the President of India) had brought down poverty from 37 per cent to 19 per cent in one go. I don't know why the present deputy Chairman of Planning Commission Montek Singh Ahluwalia has not tried to surpass his predecessor. Statistical jugglery could have helped him to reduce poverty not only by 15 per cent, but a more drastic 50 per cent. By doing that, he would have done the UN Millennium Development Goals (MDGs) a big service and at the same time justified the need to continue economic reforms.

In any case, poverty reduction is a miracle considering that inflation as measured through consumer price index (CPI) had remained in the vicinity of 10 per cent for several years now, and at a time when the UPA-II has launched a massive right-based Food Security programme to reach 67 per cent of the population. If only 22 per cent of the population is poor I see no reason why the government should be providing legal food entitlements to 67 per cent of the population.

India's poverty line is amongst the most stringent in the world. Planning Commission can certainly bring down poverty whenever it wishes by simply lowering the poverty line slab. This is what I had said earlier in one of my articles: The Algebra of Poverty (Hindu Business Line, Jan 2, 2002. http://bit.ly/1992e6w). You thought we have learnt something from the past? Well, you can see it for yourself.