The World Bank on India’s poverty
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The World Bank’s Global Monitoring Report for 2014-15 on the Millennium Development Goals says India has been the biggest contributor to poverty reduction between 2008 and 2011, with around 140 million or so lifted out of absolute poverty. Unfortunately, even this remarkable feat is not enough—the report says that in 2011, India accounted for 30% of those living in extreme poverty in the world.
The received wisdom has been that India is a very poor country, so it’s obvious that poverty levels here have to be high. But how poor is it? The accompanying chart, from the World Bank’s development indicators, shows that India’s gross domestic product per capita, in purchasing power parity (PPP) terms and in 2011 constant international dollars, was $5,238 in 2013. As the World Bank explains, PPP GDP is gross domestic product converted to international dollars using purchasing power parity rates. And an international dollar has the same purchasing power over GDP as the US dollar has in the US. There are all kinds of issues with PPP conversion, but let’s not go down that difficult path.
Assuming the World Bank’s calculations are right, the chart shows that several countries much poorer than India have much lower levels of poverty. In other words, being poor hasn’t prevented these nations from caring for the poorest in their midst. Notice also that such countries are all across the world, including in our own neighbourhood. Both Pakistan and Nepal are much poorer than India, yet Pakistan has a much lower poverty headcount, while Nepal is just a bit higher than India’s, despite its per capita income being less than half ours. Sri Lanka, of course, has long been the gold standard for poverty reduction in the region. In 1991, when its per capita GDP was $3,442, the percentage of people living below $1.25 per day was 15%.
For instance, “For a typical Indian household among the top 10%, the net worth could support consumption for more than 23 years. For a typical Indian household in the bottom 10%, however, the net worth was sufficient to support consumption for less than three months.”
Or, “The share of children under five who are stunted among the poorest quintile is above 50% in Bangladesh and Nepal and reaches 60% in India.” And finally, “Of 1,000 children born in India’s poorest population quintile, 82 will die within 12 months and 117 within five years.” That is quite a massacre.
But things are changing. The level of education of the mother is important in determining access to health for children and inequality in access to education is less among the young. Migration and non-farm work have been big factors in mobility and the report says upward mobility among the poor is as high as in the US or Vietnam. Unfortunately, downward mobility is much higher in India. One problem is that while social spending for safety nets for the poor is meagre, a lot of subsidies, such as on cooking gas (or on fertilisers) benefit the rich the most. We also have a preference for billionaires—the report says India is an outlier in the ratio of billionaire wealth to GDP among economies at a similar level of development.
A combination of high growth and social security programmes by both central and state governments led to poverty coming down from 41.6% of the population in 2005 to 23.6% in 2012. But the World Bank report says that, as the poverty headcount becomes lower, the impact of economic growth on poverty comes down. This is simply because the number of people clustered around the poverty line reduces. In other words, lowering poverty further would call for greater effort. But then, as pointed out earlier, many countries with lower per capita income have done much better in removing poverty. All we have to do is follow them.
Manas Chakravarty looks at trends and issues in the financial markets. Your comments and feedback are welcome at email@example.com