For most of its formative period, the field of development economics was concerned with one overriding, and one related, objective. The former was growth, the latter poverty reduction. Since about the mid-nineties, the focus has shifted to the second, derived goal of poverty reduction. While it is recognized that growth is essential, it nevertheless is felt that growth can have differential effects on poverty; in particular, differences can result because of the important mediation on poverty reduction of both the levels, and changes, in inequality.
The development community has changed its language from talking about growth to talking about “pro-poor” growth. There are no meetings, no pronouncements, and hardly any publications which emerge from the international aid community which do not have the “politically correct” adjective attached to growth; the pro-poor aspects presumably give growth a human face. The topic of growth and its impact on poverty reduction is not new; what is “new” is the emphasis on different growth strategies in order that the reduction in poverty be maximized. Towards this end, aid organizations like the World Bank and the Asian Development Bank have set up “filters” to weed out projects that do not conform to a pro-poor strategy.
After summarizing the controversy over the magnitude of Indian poverty, this paper discusses the trends in the survey capture ratio and the possible sources and magnitude of errors contained in both the households surveys and national accounts. The paper proceeds then to estimate poverty in India in 1999-2000 according to different methods, emphasizing in particular a method which uses information about increases in NSS household survey-measured real wages between 1983 and 1999. The paper concludes that, in particular in the light of data from the national sample surveys, it is almost incontrovertible that poverty in India was less than 15 per cent in 1999-2000 – which is some conceptual distance away from the corresponding 35 to 40 per cent world Bank estimate for the same year and is nearly half the official government of India estimate of 26 per cent.
One of the most important development goals is the reduction in absolute poverty to 15 percent by 2015. This, and related, development goals have been agreed upon by governments and the UN system, and have been labeled the Millennium Development Goals. In my recently published book, Imagine there’s no country: Poverty, Inequality and Growth in the Era of Globalization, I had documented how the poverty reduction goal had already been reached by 2000, the very year of formulation of the goals for 2015. In a critique of my study, World Bank as well as its main poverty analyst, Martin Ravallion, question the authenticity of the data, assumptions and methods used by Imagine. In fact, data and definitions account for an insignificant amount of the difference in the poverty estimates of World Bank and Imagine. The major explanation for the higher World Bank poverty rates is found to be due to a lower growth estimate of per capita expenditures, and especially lower compared to the growth estimate obtained from national accounts data (Imagine). This lower growth, 10.4 percent over 11 years, 1987-1998, is based on household survey means (World Bank data). An associated, and surprising, finding is that while poverty estimates are accurately reproduced, there is a big divergence between the published growth rate of 10.4 percent and the “reproduced” survey growth of 5.6 percent. Notwithstanding this major uncertainty about the World Bank data or its growth and poverty results, all the major findings of Imagine are faithfully reproduced exclusively using only World Bank data. Further, an extension of the World Bank poverty measurement method also yields the result that the MDG poverty reduction goal has been reached. Finally, using the recently released 1996 PPP data, poverty in 2000 was below 15 percent for all methods, including the flawed World Bank poverty measurement method.
This book is about a miracle; the findings are even more poignant given that this miracle is not even recognized as having occurred. To be sure, there have been several documents in recognition of the East Asian miracle – but even this documentation has been questioned by many after the occurrence of the East Asian financial crisis. The miracle being talked about here is the transformation of a poor Asia into a thriving middle class Asia. This transformation started in some Asian countries in the early sixties; by the early eighties, fast growth had enveloped almost the entire continent. The pace of development observed in the eighties and nineties has been the fastest on record for any large region of the world – ever.
