The World Bank recently updated its global poverty line, which
is now re-estimated at $1.90 a day, up from $1.25 a day earlier. Accordingly,
poverty estimates for all countries have been revised, mostly downward.
Nepal’s absolute poverty at $1.90 a day stood at 14.9% in
2010, a sharp decrease from 47.1% in 2003 and 61.7% in 1995. Compare this with
the estimate based on $1.25 a day (2005 PPP): in 2010 absolute poverty stood at
23.7%, also sharply down from 53.1% in 2003 and 68.0% in 1995. The new poverty
benchmark shows a marginal acceleration in absolute poverty reduction, but
overall not much difference in rate of decrease over the last two decades.
The estimates based on national poverty line, which is
fixed at NRs 19,261 (NRs 11,929 for food items and NRs 7,332 for non-food items
in 2011 prices) are the same. The estimates based on NLSS III data show that
about 25.2% of the people lived below the national poverty line in 2010/11. Consumption basket was changed in this round of estimate, so it cannot be strictly
compared to the previous estimates. See this
for more and this
for poverty by district. The major contributing factors for poverty reduction
are remittance income (see here
and here),
higher agricultural wages, urbanization (mostly propelled by rural-urban
migration) and investment in public services (education and healthcare,
financed mostly by donors) (see here).
It has hardly anything to do with economic growth.
Poverty in South Asia
Now, lets look at how the other South Asian economies fare
with the re-estimated global poverty estimate. India has the highest poverty
rate (21.3%) in South Asia, followed by Nepal and Pakistan. Overall, all
countries have managed to lower poverty save the Maldives.
Inequality in South Asia
Nepal lowered inequality (as measured by Gini index based
on consumption) from 43.3 in 2003 to 32.8 in 2010. Similarly, Bangladesh, the
Maldives and Pakistan have marginally also lowered inequality. The most
progress is achieved by Nepal. Inequality seems to have increased in Bhutan,
India and Sri Lanka.
Consumption share
The share in consumption of the lowest 40% of the population
stood at 20.5% and the highest 40%’s share was 63.3% in Nepal in 2010. The
share of consumption attributed to the lowest 40% has increased and the share
of the highest 40% decreased during the last two living standard survey
periods. India and Sri Lanka saw a marginal decline in the consumption share of
the lowest 40% population.
Briefly about the re-estimated international poverty line
While the new poverty line is based on 2011
purchasing-power-parity (PPP), the earlier poverty line was based on 2005 PPP
prices. The other methods of computing the poverty line remains the same
(basically, the earlier global extreme poverty line was expressed in 2011 PPP
values computed under the International Comparison Program in 2014).
The new global poverty line is computed
by taking the average of national poverty lines of the 15 poorest countries
(Chad, Ethiopia, The Gambia, Ghana, Guinea-Bissau, Malawi, Mali, Mozambique,
Nepal, Niger, Rwanda, Sierra Leone, Tajikistan, Tanzania and Uganda) in 2011
and then converted into US dollars using 2011 PPP. So, starting October 2015
the new global extreme poverty line is $1.90 a day. About 987 million people
globally (14.2% of global population) lived under this line in 2012 and it is
projected to drop to around 700 million in 2015. More here and
here.
A bit of timeline of the global poverty estimates:
- $1 a day created in 1991 used 1985 PPP
- Re-estimated to $1.08 a day using 1993 PPP
- Re-estimated to $1.25 a day using 2005 PPP
- Re-estimated to $1.90 a day (precisely $1.88 a day) using 2011 PPP
