Poor are getting richer, extreme poverty in world falls below 10%

Fall in poverty is attributed to strong economic growth rates in emerging markets, particularly India

GN Bureau | October 5, 2015


#world bank   #poverty   #india   #education   #health   #us  

Due to sustained policy interventions the world may see end of poverty in next 15 years as the number of people in extreme poverty is now less than 10% and this has happened for the first time. The bank attributed the continued fall in poverty to strong economic growth rates in emerging markets, particularly India, and investments in education, health, and social safety nets.

According to a World Bank report, the number of people living in extreme poverty is likely to fall for the first time below 10 percent of the world’s population in 2015, the World Bank said Sunday as it revised its benchmark for measuring the problem. Extreme poverty has long been defined as living on or below $1.25 a day, but the World Bank’s adjustment now sets the poverty line at $1.90 a day. The organization released the information on the eve of its annual meetings in Lima, Peru.

The bank said the change reflects new data on differences in the cost of living across countries, while preserving the real purchasing power of the previous yardstick.

Using the new benchmark, the World Bank says that 702 million people or 9.6 percent of the world’s population will be living in extreme poverty in 2015. This is down from 902 million people or 12.8 percent of the global population in 2012.

“These projections show us that we are the first generation in human history that can end extreme poverty,” World Bank Group President Jim Yong Kim said in a statement. “This is the best story in the world today — these projections show us that we are the first generation in human history that can end extreme poverty,’’ Kim said. “This new forecast of poverty falling into the single digits should give us new momentum and help us focus even more clearly on the most effective strategies to end extreme poverty.”

However, he warned that slower global growth, volatile financial markets, conflicts, high youth unemployment and the impact of climate change were obstacles to meeting a UN target to end poverty by 2030, part of a new set of development goals adopted by 193 countries at the United Nations last month.

Experts said the prospect of emerging economies losing steam could challenge promises to eradicate extreme poverty.

The World Bank first introduced a global poverty line in 1990, setting it at $1 a day. It was adjusted last in 2008, when the group raised it to $1.25 a day.

Across the planet, the number of people living in extreme poverty has dropped by more than half since 1990, when 1.9 billion people lived under $1.25 a day, compared to 836 million in 2015, according to the United Nations.

This follows the adoption in 2000 of the Millennium Development Goals, which included the eradication of extreme poverty.

Replacing the MDGs are the Sustainable Development Goals, a set of 17 goals to combat poverty, inequality and climate change by 2030 — with ending extreme poverty for all people everywhere, a key target.

Global poverty remains high and concentrated Poverty levels remain unacceptably high and are particularly concentrated in Sub-Saharan Africa and South Asia.

India was home to the largest number of poor in 2012, but its poverty rate is one of the lowest among those countries with the largest number of poor. A new methodology applied to household surveys in India suggests that its poverty rate could be even lower.

Box: Why poverty in India could be even lower

Poverty measures for India are based on the household expenditure surveys done as part of the National Sample Surveys (NSS).

Since NSS began in the 1950s, it has used 30-day recall for consumption of both food and nonfood items to measure expenditures. These so-called “uniform reference period” (URP) consumption aggregates collected in every consumption survey (except 1999/2000) provide the

longest consistent series for measuring poverty in India. Historically, these have been the basis of the World Bank’s poverty estimates for India at the international poverty line.

Since 2015 is the target year for the Millennium Development Goals, the assessment of changes in poverty over time is best based on the URP method, which was used to set the baseline poverty rates for India in 1990.

For 2011/12, India’s poverty rate using URP-based consumption was 21.2 percent.

The National Sample Survey Organization introduced a new consumption series based on a “modified mixed reference period” (MMRP) in the 2009/10 survey. The MMRP series (which modified the 30-day recall to a 7-day recall for some food items and to a 1-year recall for low-frequency nonfood consumption items) was recommended as a more accurate reflection of consumption expenditures, following experimental rounds to examine non-sampling errors.

As a result of the shorter recall period for food items, MMRP-based consumption expenditures in both rural and urban areas are 10–12 percent larger than URP-based aggregates. These higher expenditures, combined with a high population density around

the poverty line, translates to a significantly lower poverty rate of 12.4 percent for 2011/12.

The MMRP, which is available from 2009/10 onward, is expected to be the consumption aggregate of choice for monitoring poverty in the future. This year’s MMRP-based estimate of 12.4 percent will set the baseline for future India and global poverty estimates, one consequence of which will be a break in the global series.
 
MMRP is a modified version of the Mixed Reference Period (MRP), which has used two recall periods, 30 days for some items and 365 for others; the NSS consumption surveys have used these two recall periods since the early 1990s.

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