Richer India makes the world poorer: Economist

Discussion in 'Defence & Strategic Issues' started by Dark_Prince, Feb 8, 2010.

  1. Dark_Prince

    Dark_Prince Regular Member

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    Richer India makes the world poorer: Economist


    NEW DELHI: Angus Deaton, the Princeton economist regarded as world's foremost authority on cross-country income data, has cast serious doubts on the World Bank's last upward revision of global poverty figures and India's statistics are at the centre of the storm.

    The world became poorer as a result of a combination of India's economic growth and its low poverty line, Deaton, who is president of the American Economic Association, said in his presidential address to the AEA in Atlanta, in the US last month. India's extremely low poverty line was so strongly depressing the average poverty line for poor countries that India's exit from this group because of its economic growth resulted in the average rising.

    The international poverty line is calculated by taking the national poverty lines of a group of the poorest countries in the world, converting them to US dollars by using a Purchasing Power Parity (PPP) index, and taking a simple average. For its latest 2008 revision, the bank for the first time changed the set of poor countries used, since new data was available through its International Comparison Program (ICP), and
    India was dropped on account of its growth. The new poverty line was updated from $1.08 per day at 1993 prices to $1.25 per day at 2005 prices. This raised the number of poor by 400 million to 1.4 billion.

    Since India's poverty line is low compared to its living standards, as Indian average incomes rose and it moved out of the group of selected countries, the global poverty line rose and consequently so did the number of persons defined as poor, Deaton showed.

    "In effect, India and the world have become poorer because India has become richer!" said Deaton in his address. If Guinea-Bissau, which has a much smaller population but a high poverty line relative to its living standards were to get richer and go past the cut-off line, the global poverty line would decrease as would the number of poor. If poverty falls in any country included in the counts, and increases nowhere else, global poverty should fall. The current procedure does not satisfy that basic requirement. Nor does it satisfy the property that global poverty should fall by no more than the fall in poverty in individual countries, Deaton observed.

    An alternative procedure is to calculate the global poverty line by averaging the poverty lines of all countries, but after weighting them for the number of poor in each country. By this method, the Indian poverty line would receive about a third of the total weight, instead of being completely absent from the current $1.25 per day poverty line. Another alternative Deaton suggests is that the Indian poverty line be converted to dollars and used as the global poverty line, provided that the line does not shift if India gets richer.

    Nobody ever said that India had to be in the reference group of countries forever, countered Martin Ravallion, the director of the development research group of the bank and one of three authors on whose research the 2008 revision was based, in an email to TOI.

    The new sample of countries implies a higher international line, but is more representative of the developing world, Ravallion added. "As long as we agree on the principle that this line should be representative of the lines found in low-income countries, we must accept that poverty is higher than we thought by those standards," Ravallion reiterated in his email.

    None of this necessarily means that poverty is improving in India. Since Deaton and the bank are discussing global poverty estimates, they do not get into the veracity of the Indian poverty line. In fact, both admit that global comparisons are mainly of significance to international NGOs, while national policy is based on country-level estimates prepared by national agencies.

    At home, following a tortuous history of arguments over the Indian poverty line, the Suresh Tendulkar committee in its report to the Planning Commission two months ago suggested a significant upward revision of India's low poverty line from Rs 356.30 (rural) and Rs 538.60 (urban) per capita per month to Rs 446.68 (rural) and Rs 578.80 (urban) per capita per month for 2004-5. This is about $1.17 at 2005 PPP, closer to the World Bank's $1.25 figure. This implies that had India updated its poverty line earlier, the global poverty line might have been reset at $1.25 much earlier instead of being recently revised.


    http://timesofindia.indiatimes.com/india/Richer-India-makes-the-world-poorer-Economist/articleshow/5546726.cms
     
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  3. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    This is the biggest load of crap i have read India going from 1.17 to 1.25 8 cents more made the world poorer-yeah right.Well the Chinese should take note that an 8 cent increase has more of an impact on the world than any of their economic gains.
     
  4. Dark_Prince

    Dark_Prince Regular Member

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    If you read carefully, they create a poverty live on similar basis of WPI and CPI....?? assign weights?? How do u assume that??:confused: This is a funny article and had shown how intellectually bankrupt and un-progressive the economists have become!

    or Look at the positive aspect of this squabbling, they are blaming India for misery (as if we robbed them)....In return acknowledging the Fact that India is an Economic force to reckon with and they cant do anything about it!! :D :D
     
  5. debasree

    debasree Regular Member

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    i want to say only one word (RIDICULOUS)
     
  6. JAISWAL

    JAISWAL Senior Member Senior Member

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    quit good artical but this bound to happen, as any poor country incom increase automaticlly reasult in decrese in value in line of poor index.
    [​IMG]
     
    Last edited: May 27, 2011
  7. p2prada

    p2prada Stars and Ambassadors Stars and Ambassadors

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    Nice article. It highlights that India is moving out of poverty, slowly but surely. This is obviously good news and perhaps this will increase investments in India.
     
  8. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    Another crappy old economist article. What did a richer UK do for the world??It created the third world nations of Asia and Africa.
     
  9. S.A.T.A

    S.A.T.A Senior Member Senior Member

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    If the average world poverty has to decrease in tandem with its fall in individual poor countries,then the average economic growth in all the poor countries needed to pull the population above the national average should also be equal,more or less.If the above findings are true enough then it illustrates the fact that there is wide disparity in the average economic growth between and among the various poorer countries.

    International financial institutions like IMF and world bank and richer countries must address this problem of unequal economic growth rate,at the moment all their focus and energy is devoted towards the star economies of Asia and the BRIC.
     
    Last edited: May 27, 2011
    LETHALFORCE and A.V. like this.
  10. bhramos

    bhramos Elite Member Elite Member

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    it full of crap,
    and it want India to remain under poverty line and be a Third world nation...
     
  11. Godless-Kafir

    Godless-Kafir DFI Buddha Senior Member

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    I would not dismiss this article, i for long have doubted the viability of all countries being rich simultaneously. All the resources would be over priced and the dollar value will decrease leaving the average american to buy only enough goods as an average Indian or African. I am not sure of this but i have some suspicions on this.
     
  12. Blackwater

    Blackwater Veteran Member Veteran Member

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    Pak-chin dosti zindabad:pakistan::pakistan::frusty:
     

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