New World Bank criteria can reduce India’s poor by 300 million

The number of people living below the poverty line in India is going to decrease by around 75%. At least, on paper.

The World Bank is set to revise the Purchasing Power Parity (PPP) index and draw a new global poverty line. This new statistical formula will reduce the number of poor people in India to 100 million, by some estimates; over 300 million less than when counted using the existing calculations.

Currently, the World Bank has set the global poverty line at $1.25 per person per day. This was calculated on the basis of the 2005 PPP index. The revision of the index would suggest that India’s economy has grown and people have a higher purchasing power than previously estimated. Higher purchasing power of the economy means lower number of people below the poverty line; drastically pushing down the number of poor people in India, say experts.

The total number of people living below the poverty line fluctuates according to method used for its calculation. For example, according to the current calculation of the World Bank there are 400 million people living below the poverty line in India. While the C. Rangrajan committee puts the number at about 363 million, in 2011-12, the Planning Commission, based on the Suresh Tendulkar methodology, fixed the number of poor at 270 million in the same period.

However, World Bank chief economist Kaushik Basu has cautioned, “We should simply recognise that PPP has inherent shortcomings and treat statements of country size and power with, let us say, a fistful of salt.”

While these number may not be connected to ground realities, it does effect a number of important calculation that determine the allocation of resources between developed and developing economies, and degree of responsibility on the developed world to fund their poorer counterparts.

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