India's poverty rate at 12.4% in 2011-12

World Bank cites NSSO report to say India's poverty rate lowest among emerging nations

Only 12.4 per cent of India's population lived below the poverty line in 2011-12, the World Bank has said. It arrived at the figure using its new expenditure cut-off of $1.9 a person a day and the National Sample Survey Office (NSSO)'s new methodology of poverty estimation.

If the NSSO's previous methodology is used, the figure stands at 21.2 per cent.

The World Bank, which scaled up its expenditure cut-off from $1.25 a day, said India's poverty rate was one of the lowest among developing countries, even if one used the previous NSSO methodology. The new cut-off is based on purchasing power parity (PPP) during 2011; the previous one was based on PPP for 2005.

On a list of 10 countries, India's poverty rate of 21.2 per cent was higher than only China's and Indonesia's. However, in terms of the absolute number of poor people, India topped the list for 2011-12.

This estimate fell to 12.4 per cent if the NSSO's new methodology of measuring monthly per capita household consumption expenditure (MPCE) was used, said a World Bank report, 'Ending Extreme Poverty and Sharing Prosperity'. As there is no data on income distribution in India, consumption expenditure is considered to calculate poverty.

The new methodology is based on a modified mixed reference period, or the measure of MPCE when household consumer expenditure on most food items is recorded for a reference period of the past seven days. For household consumer expenditure on items of clothing and bedding, footwear, education, institutional medical care, and durable goods, a reference period of the past 365 days is used, while expenditure on all other items is recorded for a reference period of the past 30 days.

In the previous methodology, based on a uniform reference period, the MPCE was based on household consumer expenditure on each item for a reference period of the past 30 days.

The new method is considered accurate, as it converts the 30-day recall to a seven-day recall for food items and to one-year recall for low-frequency non-food consumption items. The World Bank said as a result, expenditure in both rural and urban areas was 10-12 per cent higher than previous estimates.

It added from now, revised estimates of consumption expenditure would be used to gauge poverty in India.

In 2011-12, the United Progressive Alliance was in power at the Centre. At that time, the estimation of poverty had stirred a huge controversy. The poverty rate of 21.9 per cent for 2011-12, using the Suresh Tendulkar methodology, and 29.5 per cent based on the C Rangarajan model were higher than the World Bank's current estimate.

In India, reduction in income-based poverty rates was greater in states with higher initial poverty values, the report said. However, in terms of multi-dimensional poverty, the trend appears to be divergent, with states with less poverty showing greater progress, the World Bank said.

Infrastructure has played a crucial role in boosting the earnings of the poor in India. Rural electrification has increased labour supply and promoted girl schooling by redistributing their time to tasks that encourage attendance, according to the report. Investment in rail transportation has helped reduce the impact of adverse weather on agricultural prices and, consequently, real income.

The report said at the global level, the number of people living in extreme poverty had likely fallen to 9.6 per cent of the entire population this year from 12.8 per cent in 2012, based on an income cut-off of $1.9 a day.

In absolute terms, the number of poor across the world fell from 902 million people in 2012 to 702 million, according to the report.

The global poverty target of three per cent by 2030 seems optimistic, as the swift growth through the past decade is unlikely to be repeated across countries. Further, poverty is likely to remain at 20.1 per cent in Sub-Saharan Africa, which accounts for half the global poor.

Even if incomes were to rise at the average growth through 1994-2013, global poverty would stand at 5.7 per cent in 2030, with poverty in Sub-Saharan Africa at 26.9 per cent.

"The economic growth outlook is less impressive for emerging economies in the near future, which will create new challenges in the fight to end poverty and attend to the needs of the vulnerable, especially those living at the bottom 40 per cent of their societies," said Kaushik Basu, chief economist of World Bank.

Poor structural characteristics of impoverished nations, the need to incorporate natural resources in economic decision-making, and adverse climate change were significant challenges to eradicating poverty, the World Bank report said. It added poverty also extended to aspects such as lack of access to basic infrastructure, health, education and employment. Even if income-based poverty was eradicated, it was likely that multi-dimensional poverty would persist in the short run, it said.