A New Way to Measure Poverty in India – India Real Time – WSJ

How should you measure poverty?

It is a question that has generated enormous controversy in India. The country’s government says that since the mid-1990s, the number of people living below the official poverty line has dropped by more than half, hitting 270 million, or 22% of the population, in 2012.

Still, India continues to rank extremely low in United Nations’ measures of well-being. India ranked 136 out of 186 countries in the 2012 U.N. Human Development Index and 94 out 119 in the U.N. World Food Programme’s Global Hunger Index.

The Indian government sets its official poverty line at 816 rupees per person per month in rural areas and 1,000 rupees per person per month for city dwellers. That works out to about 40 cents a day in the countryside and 50 cents a day in the city.

A new study by the McKinsey Global Institute – the research arm of consulting company McKinsey – says that such a gauge of extreme poverty has its place. But it argues India should focus instead on a more comprehensive measure of what it would take to satisfy a person’s basic needs for food, energy, housing, drinking water, sanitation, healthcare, schooling and social security.

McKinsey calls its new measure an “empowerment line.” It is the level where the report’s authors conclude that India’s citizens can get out of poverty and have the resources to build better lives for themselves, rather than scrape along at subsistence levels. McKinsey set its empowerment line at 1,336 rupees a month – roughly 50% above the government poverty line.

“It’s an expanded definition of poverty and aims to calculate the escape velocity needed to get people sustainably out of poverty,” said Anu Madgavkar, a senior fellow at the institute in Mumbai.

According to McKinsey’s calculations, about 680 million people, or 56% of Indians, now live below the empowerment line. Insufficient and ineffective public programs, poor agricultural productivity and a lack of better jobs all conspire to keep people poor.

via A New Way to Measure Poverty in India – India Real Time – WSJ.

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