Poverty and inequality

Poverty and inequality

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As per the World Bank report entitled Ending Extreme Poverty, Sharing Prosperity: Progress and Policies (released in October 2015), authored by Marcio Cruz, James Foster, Bryce Quillin, and Phillip Schellekkens, please click here to access: 

Indian scenario

•  India was home to the largest number of poor in 2012, but its poverty rate is one of the lowest among those countries with the largest number of poor. A new methodology applied to household surveys in India shows that its poverty rate could be even lower.

• Suggesting that India, which is home to the largest number of poor during 2012, may have been overestimating the number of its poor, the World Bank report has detailed how a shift in the way consumption expenditure is recorded alters the country’s poverty rate from 21.2 per cent to 12.4 per cent for 2011-12.

• In its report, the World Bank, highlighting ‘Why poverty in India could be even lower’, says the poverty rate of India can change if data recording is based on the modified mixed reference period (MMRP) instead of the uniform reference period (URP).

• Under the URP, used in the National Sample Surveys (NSS) since the 1950s, data is collected on the “30-day recall for consumption of both food and non-food items to measure expenditures”. But under the MMRP, which was done in NSS (alongside URP) in 2009-10, the 30-day recall was modified to a 7-day recall for some food items and to a 1-year recall for low-frequency non-food consumption items.

• The report states  that the MMRP was recommended as a more accurate reflection of consumption expenditures. As a result of the shorter recall period for food items, MMRP-based consumption expenditures in both rural and urban areas are 10-12 per cent larger than URP-based aggregates. These higher expenditures, combined with a high population density around the poverty line, translates to a significantly lower poverty rate of 12.4 percent for 2011/12.

• Uniform Reference Period monthly per capita consumption expenditure (MPCE) is the measure of MPCE obtained by the NSS consumer expenditure survey (CES) when household consumer expenditure on each item is recorded for a reference period of “last 30 days” (preceding the date of survey).

• Modified Mixed Reference Period MPCE is the measure of MPCE obtained by the CES when household consumer expenditure on edible oil, egg, fish and meat, vegetables, fruits, spices, beverages, refreshments, processed food, pan, tobacco and intoxicants is recorded for a reference period of “last 7 days”, and  for all other items, the reference periods used are the same as in case  of Mixed Reference Period MPCE (MPCEMRP).

• In its regional forecast for 2015, the World Bank report says that poverty in East Asia and the Pacific would fall to 4.1 percent of its population, down from 7.2 percent in 2012; Latin America and the Caribbean would fall to 5.6 percent from 6.2 percent in 2012. In South Asia, the poverty would fall to 13.5 percent in 2015 compared to 18.8 percent in 2012; Sub-Saharan Africa poverty would decline to 35.2 percent in 2015 compared to 42.6 percent in 2012.

Global scenario

• The World Bank report has set a new global poverty line at $1.90 using 2011 prices. Based on the new global poverty line, there were just 902 million people  globally who lived under the poverty line of $1.90 in 2012 (based on the latest available data).

• Using the new global poverty line (as well as new country-level data on living standards), the World Bank projects that global poverty will have fallen from 902 million people or 12.8 percent of the global population in 2012 to 702 million people, or 9.6 percent of the global population, this year.

• As differences in the cost of living across the world evolve, the global poverty line has to be periodically updated to reflect these changes. Since 2008, the last update, the World Bank used $1.25 as the global line.

• The new global poverty line uses updated price data to paint a more accurate picture of the costs of basic food, clothing, and shelter needs around the world. In other words, the real value of $1.90 in today’s prices is the same as $1.25 was in 2005.

• The proportion of global population living on less than $ 1.90 a day in 2012  was about a third of what it was in 1990. As per the World Bank report, this confirms that the first Millennium Development Goal (MDG) target—cutting the extreme poverty  rate to half  of  its  1990  level—was  met well  before  its  2015  target  date. From a broader historical perspective, the global poverty rate has fallen by approximately 1 percentage point a year since 1990, with rapid poverty reduction in China and India playing a central role in this outcome. 

More sources:

World Bank estimates show fall in India’s poverty rate -Vidya Venkat, The Hindu, 6 October, 2015, please click here to access
Poverty rate in India lowest among nations with poor population -Lalit K Jha, Livemint.com/ PTI, 5 October, 2015, please click here to access

Count of poor people in India may be lower, says World Bank -Udit Misra, The Indian Express, 6 October, 2015, please click here to access

FAQs: Global Poverty Line Update, World Bank, please click here to access


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