Reduction of poverty and hence, how it is measured, has long been a contentious political economy issue in India. There is general discomfort every time the headcount ratio of the number of poor, based upon an accepted methodology recommended by an expert committee, declines; this then triggers a process to revisit known issues by another expert committee. The collective conscience, it seems, expresses a sigh of relief only when the new committee recommends a methodology that raises the headcount ratio as well as the number of absolute poor. Serious policy analysis often becomes a casualty. The government, mostly at the receiving end, is left with the only comfort that the new set of estimates keeps the direction intact, i.e., the headcount ratio declines when compared with similar estimates for the previous round.
For example, estimates for the year 2004-05, based on Tendulkar method, raised the headcount ratio by almost 100 million over that estimates based upon then-existing Lakdawala norms, as the accompanying graphic shows. The former estimates were quite consistent with those of the World Bank, which were based upon a poverty line of $1.25 per day per person. The government, however, appointed a new committee once estimates for 2011-12, based upon Tendulkar norms, indicated a sharp fall in the absolute number of poor to 270 million from 407 million in 2004-05. Expectedly, the new estimates, as per the revised method suggested by the Rangarajan committee, raised the number of poor by nearly 100 million for 2009-10 and 2011-12! The number of poor, according to these new estimates released in June 2016, was 455 million in 2009-10 and 363 million in 2011-12.
And now, the World Bank has just released the summary results and findings of the latest round of International Comparison Program (ICP, 2011)—a global statistical partnership to collect comparative price data, estimate purchasing power parities (PPPs) and compile detailed expenditure values of countries’ gross domestic products. Based on these data, the Bank is expected to release its official estimates of world poverty by end-August. However, preliminary estimates by Chandy & Kharas of Brookings institution, May 2014, show a dramatic reduction of over 50% in the number of global poor—to 571 million in 2010 (at 2011 PPPs) from 1,215 million in 2005 (2005 PPPs) at the Bank’s current poverty line of $1.25 per day per person. Let’s call this the baseline scenario.