For India, however, the estimate was revised downwards. This is because it is not just about the boundary of poverty – other factors are also played. Also 5.3% of Indians are poor in one measure and 23.9% of others. Let’s unpack it all.
First, what is the poverty line?
The poverty line is the minimum level of expenditures needed to satisfy the basic needs of nutrition, clothing and shelter. The number of people who cannot afford are classified as poor.
One can adopt several standards to determine the boundaries of poverty and the country can freely decide on themselves. But it is difficult at the global level. Simple adjustments to the Indian poverty line in rupees per month would not mean comparable to US expenditures in dollars or Kenyan expenditures in shillings, given the extremely different levels of prices in these countries.
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In order to enable international comparisons, scientists created in 1990 the International Poverty Border, which was modified for the “parity of purchasing power” (PPP) across economics. PPP is an economic concept that compares the cost of a fixed basket of goods and services in different countries to determine the relative value and purchasing power of their currencies. This gave the World Bank the first global standard for the poverty line – $ 1 daily (in 1985 PPP).
However, PPP factors do not remain the same, because inflation is different everywhere, so the International Bank’s International Bank (ICP) is constantly updating PPP factors. This also requires updating the International Poverty Border. That happened now.
Due to these updates, it is possible that without remarkable living level changes, a global line can be exceeded or slipped under it only through the methodology update.
So what did the World Bank say?
Last week, the World Bank used the PPP 2021 update (which ICP released last year) to determine the new poverty line. It also took into account the improved data collection methods by several poor countries, which led to them to the new boundaries of poverty.
He previously said that anyone who spent less than $ 2.15 per day on basic needs (on 2017 PPP). In 2021 it would be adapted to inflation, it would be around $ 2.60 a day, but a new benchmark (which is not only because of PPP changes, but also for improved consumption surveys) is $ 3 per day at 2021 ppp.
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When the World Bank issued its last estimate in September 2024, in 2022, on the basis of Prague, $ 2.15 was counted daily by 9% of people in the world as poor. Now it calculates that the number was 10.5% (again in 2022) a new measure. This means that in 2022 the poor were 125 million more people (the last reference year of which the data is reliably known about) than what last year’s estimate said.
But there are two objections. One, this increase does not necessarily mean that more people are now poor; This means that more people will now be classified as poor. Secondly, this figure would be much higher if the World Bank did not use a new method that would come up with Indian data (which was remote, noticing a decrease in the poverty rate).
How did the Indian data help in revision of estimates?
Many factors, not only the application of 2021 PPP factors, gathered to affect the level of poverty in space for several months. The main thing is that the World Bank has now taken into account the first official survey of household consumption (CES) in India in 11 years, which took place in 2022-23 (and since then also took place in 2023-24).
When the data was still long awaited, the World Bank was forced to use alternative sources to issue the best possible estimate of 12.9% per year 2021 based on the poverty boundary $ 2.15.
But now the estimate is set at 5.3%. This change is based on the new poverty line and on the new official data that are now available. If we used an old benchmark ($ 2.15 daily), approximately 2.4% of the Indians were poor in 2022, according to the World Bank calculations on this year CES.
CES data for exploration 2023-24 is also available, but this is not yet reflected in the World Bank data.
Let’s use a similar comparison to summarize this: at the poverty line of $ 2.15 per day, the poverty rate for 2022 was revised from 12.9% to 2.4%, thanks to new official data. Meanwhile, the poverty rate in 2022 increased from 2.4% to 5.3% due to the changed poverty line.
How has India’s poverty levels changed over time?
Any comparison with old data is poorly recommended. Both poverty lines retrospectively applied to CES 2011–12 report somewhat comparable data to 16.2% ($ 2.15 daily) and 27.1% ($ 3 daily). This means that in both cases poverty has been drastically decreased; According to the new threshold, estimated by a net 269 million Indians, in these 11 years, left poverty.
But this comparison is not that simple. CES 2011–12 is almost comparable to new surveys held in 2022-23 and 2023-24. The new ones tend to record higher Indians’ consumption due to fundamentally improved data collection procedures, and also because they ask them to break up their expenses over 405 items instead of 347.
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New surveys also assign the values of consumption to subsidized goods and services obtained from state programs. This also increases the value of household consumption expenses.
In short, the methodology now records Indians as spending more in general, so it is harder to fall below the specific level of poverty.
But even though a direct comparison is not appropriate, it is clear that the level of poverty has actually dropped in the last decade. How hard it is to say.
What more should one know about it?
One, this is not the only boundary of poverty used by the World Bank around the world. This is in fact a median of the national boundaries of poverty only by low -income countries. It is used for all countries under the name “extreme poverty”, which means that one who is “poor”, even according to standards of low -income countries, can be said to live in “extreme poverty”.
There are two more poverty boundaries: one for lower middle income countries that have been revised from $ 3.65 to $ 4.20 per day and for countries with medium income that were revised from 6.85 to $ 8.30.
India is a country of lower middle income, so the poverty boundary of $ 4.20 daily would be more relevant. This benchmark in 2022 was poor 23.9% of Indians compared to 28.1% estimated old boundaries of poverty. The retrospective value for 2011-12 (not strictly comparable) is almost 58%.
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Secondly, the World Bank report also stated that “growing concerns” about the inability of CES to capture the household at the top of the pyramid of consumption, and also observed its own need to exclude certain data captured in CES – as stated that the factors would underestimate inequality in India.
This means that the new CES methodology is more robust than the earlier and can provide more frequent poverty estimates in this case. Comparison with past data is impossible and should not ideally be used to quantify progress over time.
(tagstotranslate) World Bank Poverty Line (T) India Extreme Poverta (T) Purchasing Power Parity India (T) International Poverta Line
