Has Poverty in India Really Dropped?

In POLI 1100 yesterday, we analyzed the topic of development and underdevelopment and noted that, according to some estimates, the world has become less unequal (more equal) over the last 10 years or so, primarily (we noted) as the result of the economic rise of China and India. Given that these two countries contain more than 1/3 of the world’s total population, what happens to them (and their citizens) has dramatic global impact. So, if incomes (and wealth) in India and China are rising, then it’s not surprising that the world is becoming a wealthier (and more equal) place. Take a look at the chart below. You’ll notice differences in the two trend lines, which can be accounted for by the rise in income in China and India.

While there have been rumours for many years that official Chinese economic statistics may not be the most reliable, a recent story in the New York Times asks the somewhat surprising question “Has Poverty Really Dropped in India?” It turns out that the answer is most likely yes, though it appears, on the surface, that some of sleight was at work. However, in the end the drop in poverty seems legitimate:

Remember when the public was outraged at the idea that the poverty line should be 32 rupees, or 63 cents, a day in urban areas?

We’ve now learned it should really be 29 rupees. And believe it or not, this is no sleight of hand to show a drop in poverty.

The Planning Commission’s latest poverty estimates, [click on this link for the statistics, which are grouped by caste, religion, and other demographic indicators] released Monday evening, show a 7 percentage-point drop in India’s poor, the largest fall since the figure was first calculated in 1962.

Some critics say the Planning Commission has reduced an already controversially low poverty line even further, using the new thresholds to create the appearance of a large drop in absolute numbers.

By the way, how much is 29 rupees–the poverty threshold in urban areas? About 57 Canadian cents, at today’s exchange rates! So according, to the Indian government, an Indian living in an urban area can earn only 58% of the one dollar/day threshold and still not be considered as officially living in poverty!! Yikes!