Thursday, September 1, 2011

Update on poverty in South Asia, 2008-2010

A new ADB Economics Working Paper (by Guanghua Wan and Iva Sebastian) estimates the percentage and number of poor people living on less than $1.25 a day (PPP) in Asia (below I have included discussion on South Asia only). The report argues that despite the financial crisis and food and fuel price hikes, the number of poor people in Asia living below $1.25 a day decreased by 150 million between 2005 and 2008 (from 903.4 million in 2005 to 753.5 million in 2008). However, “the reduction was generally slower compared to the previous period.” In Asia, the HCR fell from 27.1 percent in 2005 to 21.9 percent in 2008.

Overall, three countries (Bhutan, Uzbekistan and Cambodia)in South Asia saw over 10 percentage points decline in head count ratio (HCR) between 2005 and 2008. In 2008, Nepal had the highest proportion (52.04 percent) of people below the poverty line of $1.25 a day. This has not changed much in 2010 (50.51 percent), according to the estimated figure. [Now, this stands in contrast to NLSS III findings, which showed that in six years time (2004-2010) absolute poverty declined from 31.5 percent to 13 percent,  a 18 percentage points decline in absolute poverty. Note that the poverty threshold, measurement and years (income by ADB versus consumption plus access to basic services by Nepali government) considered by ADB and Nepali government are different.]

In total, HCR ($1.25 a day) in South Asia declined by 10.35 percent (from 42.48 percent in 2005 to 38.08 percent in 2008). This translated into a decrease in the number of poor to 513.93 million in 2008 from 550.17 million in 2005.  For $2 a day, HCR in South Asia declined by 3.64 percent (72.82 percent in 2008 from 75.57 percent in 2005). India is home to the largest number of the continent’s poor, followed by China, Bangladesh, Indonesia and Pakistan.

Based on poverty estimates and survey, where appropriate, the authors estimated poverty figures for 2009 and 2010. They estimate that there were 658 million extreme poor in Asia,  18.7 percent of total population in 2010. The impressive growth rate in China and India and in East Asia contributed to poverty reduction. The paper argues that economic growth is a necessary condition to reduce poverty. Still, Nepal’s recent experience shows that you can reduce poverty with stagnating growth rate (a different variable was at play—remittances).

The estimated number of poor people between 2008 and 2010 decreased in all countries except for Nepal and Pakistan. Comparing estimated number of poor between 2009 and 2010, in South Asia, only Nepal saw an increase. As mentioned earlier, this is surprising given the results of NLSS III. If the ADB researchers use the latest data from NLSS III, I think they will get substantially different estimate for poverty in Nepal.

Number of poor (million) under the $1.25 Per Day Poverty Line 
Country 2005 2008 2009 2010
Bangladesh 77.36 70.96 69.3 67.57
Bhutan 0.17 0.05 0.05 0.05
India 455.8 426.5 409 389.49
Nepal 14.82 14.99 15.05 15.07
Pakistan 35.19 29.88 30.68 30.61
Sri Lanka 19.67 1.44 1.41 1.3


  • For 2005, estimates are based on PovcalNet estimates. For 2008–2010, estimates in bold (Pakistan in 2008) are based on household survey data, while those in italics (India in 2010) are based on grouped data, and those underlined are based on PovcalNet adjusted using CPI for the poor. The rest are derived using the poverty elasticity approach.
  • For Bhutan, 2007 poverty rates were estimated from Bhutan Living Standard Survey 2007 and then used to project 2008–2010 values using the poverty elasticity approach.
  • For India, 2010 HCRs are derived from grouped data from Key Indicators of Household Consumer Expenditure in India 2009-2010 NSS 66th Round, and 2008 and 2009 estimates
  • For Pakistan, 2008 estimates are based on Pakistan Integrated Household Survey 2007–08.