Ahead of the G-20 Summit in London next week, the International Monetary Fund, on Friday urged the participating world leaders to make cleaning up the financial sector as their top priority and ensure that the stimulus money is available next year too.
Observing that the world is at a crossroads now as it faces the greatest economic crisis in 60 years, the IMF managing director Dominique Strauss-Kahn said at a news conference that the G-20 leaders have the opportunity to spur a recovery next year if they take the right action.
Asserting that cleaning up the balance sheets of banks and getting the financial sector working again was critical to reviving world growth, Strauss-Kahn said: "Countries can do it in different ways, but they have to do it and do it now."
Responding to questions from reporters in London, Paris and Washington through video conferencing, he said the governments around the world had done very well in announcing stimulus plans to counter the current downturn and create jobs.
But they now needed to ensure that efforts were sustained in 2010, he said.
Strauss-Kahn said though the crisis did not start with emerging markets, the collapse of trade finance and drying up of capital flows is hurting many emerging markets.
The IMF needs enough resources to assist emerging markets; otherwise a collapse in emerging economies would have a devastating impact on developed economies, reinforcing the crisis. He also called for aiding low-income countries.
Terming it a crucial meeting for resolving the world economic crisis, Strauss-Kahn said it is vitally important that the G-20 leaders reach agreement at the April 2 meeting in London. "If there's a big clash it will not be good for confidence," he declared.
Hoping that the meeting would show unity and leadership, the IMF chief said the changes agreed in London could amount to the same strategic shift that took place with the creation of the IMF and the World Bank at Bretton Woods, New Hampshire toward the end of World War II.
In addition to endorsing his five-point IMF agenda, he wanted to see steps agreed to start reforming the international financial system, including regulation of tax havens, rating agencies, and hedge funds. "I'm not expecting something very new. What I expect is the commitment of world leaders to take a step forward and to make it rapidly."
Global activity is now projected to contract by 0.5-1 per cent in 2009 on an annual average basis -- the first such fall in 60 years, the IMF has said.
Source
Showing posts with label World Bank. Show all posts
Showing posts with label World Bank. Show all posts
Sunday, March 29, 2009
Saturday, September 13, 2008
Counting the poor: a poverty of statistics
China, which started at a higher poverty of 60% in 1990 compared with 51% for India in 1990, saw poverty decline to 16% in 2005 compared with 41.6% in 2005 for India.
Last month saw the release of two sets of poverty estimates. The World Bank released poverty estimates based on its recent calculation using updated purchasing power parity, or PPP, estimates. The second estimate released a day later by the Asian Development Bank, or ADB, used the same set of data but different poverty line and PPP deflators than the ones used by the World Bank.
Both studies used National Sample Survey Organisation, or NSSO, consumption expenditure surveys but arrived at different estimates of poverty for India. By the World Bank poverty line of $1.25 (Rs56.13) per day, the estimated number of poor in India in 2004-05 was 456 million, 41.6% of the population. Using the $1.35 per day Asian poverty line of ADB, the number of poor in India is 622 million, which is 54.8% of the population. The third estimate is our own official poverty estimate by the Planning Commission for 2004-05, which is 27.5% of the population, or 301 million.
Needless to say, these large differences in poverty estimates for the same country in the same year are a reflection of the poverty of statistics rather than the statistics of poverty. The poverty of official statistics is not only inherent in the way PPP estimates are calculated that yield different deflators, but also in the way international poverty lines are calculated.
The real difference in these numbers that vary from 27.5% to 54.8% lies in the way we characterize the poor. This essentially requires setting a poverty line which demarcates the poor from the non-poor. It is here that the three methods differ.
For the international poverty lines, matters are further complicated by the choice of PPP deflators used to convert national currencies to internationally agreed currencies such as the US dollar. Compared with the previous set of poverty estimates from the World Bank which were based on the $1 a day poverty line, the new estimates differ on two counts. The first is the incorporation of recently updated PPP deflators based on new price data from the international comparison programme that monitors prices of commodity bundles across countries. The second is the choice of poverty line, which is now anchored on the basis of 15 poorest countries in the world, most of which are in Africa.
The change in methodology as far as ADB poverty estimates are concerned is again two fold. The first is the choice of PPP deflators that are taken for commodity bundles weighted by consumption patterns of the class of people who are closer to poverty line, rather than the entire population. Secondly, the Asian poverty line is derived from national poverty lines of Asian countries.
The net change is that the Asian poverty line of $1.35 per day is higher than the World Bank poverty line of $1.25 per day. Moreover, because the PPP deflator used is suitably weighted for consumption of people around the poverty line, ADB estimates are almost 13% higher than the World Bank poverty estimates.
Both these international set of poverty lines suggest a much larger magnitude of poor people in the country than the official estimate of poverty suggested by the Planning Commission. But why do these poverty estimates show higher estimates of poor than the official estimates?
The PPP deflator part may not be the real culprit in this case. The real culprit in this case is our own poverty line which is pegged at a lower level than the poverty line of poorest 15 countries.
The discrepancies in the present set of poverty lines in the official poverty estimation methodology have been highlighted by a number of academic papers in the recent past. Apart from being too low, these also suffer from various other problems such as inter-state price differentials and rural-urban price differentials. Acknowledging these, the government has also set up a new expert group under the chairmanship of S.D. Tendulkar to suggest a suitable poverty line.
However, quarrelling on the actual estimate of poor in the country may be secondary to the important message coming from these poverty comparisons. This is particularly relevant for the two largest countries that are also the fastest growing, India and China.
China, which started at a higher poverty of 60% in 1990 compared with 51% for India in 1990, saw poverty decline to 16% in 2005 compared with 41.6% in 2005 for India. That is, in the last 15 years while China managed to reduce the number of poor by 475 million, the number of poor in India actually increased by 20 million. This is despite the fact that growth rate of Chinese economy is only marginally higher than the growth rate of Indian economy.
This is also the message from ADB poverty estimates. Despite the high growth rate of Indian economy in the recent past, India has the second highest poverty—after Nepal—among all Asian countries.
Clearly, growth alone may not be the best antidote for poverty reduction, at least not in the Indian context.
Needless to say, these large differences in poverty estimates for the same country in the same year are a reflection of the poverty of statistics rather than the statistics of poverty. The poverty of official statistics is not only inherent in the way PPP estimates are calculated that yield different deflators, but also in the way international poverty lines are calculated.
The real difference in these numbers that vary from 27.5% to 54.8% lies in the way we characterize the poor. This essentially requires setting a poverty line which demarcates the poor from the non-poor. It is here that the three methods differ.
For the international poverty lines, matters are further complicated by the choice of PPP deflators used to convert national currencies to internationally agreed currencies such as the US dollar. Compared with the previous set of poverty estimates from the World Bank which were based on the $1 a day poverty line, the new estimates differ on two counts. The first is the incorporation of recently updated PPP deflators based on new price data from the international comparison programme that monitors prices of commodity bundles across countries. The second is the choice of poverty line, which is now anchored on the basis of 15 poorest countries in the world, most of which are in Africa.
The change in methodology as far as ADB poverty estimates are concerned is again two fold. The first is the choice of PPP deflators that are taken for commodity bundles weighted by consumption patterns of the class of people who are closer to poverty line, rather than the entire population. Secondly, the Asian poverty line is derived from national poverty lines of Asian countries.
The net change is that the Asian poverty line of $1.35 per day is higher than the World Bank poverty line of $1.25 per day. Moreover, because the PPP deflator used is suitably weighted for consumption of people around the poverty line, ADB estimates are almost 13% higher than the World Bank poverty estimates.
Both these international set of poverty lines suggest a much larger magnitude of poor people in the country than the official estimate of poverty suggested by the Planning Commission. But why do these poverty estimates show higher estimates of poor than the official estimates?
The PPP deflator part may not be the real culprit in this case. The real culprit in this case is our own poverty line which is pegged at a lower level than the poverty line of poorest 15 countries.
The discrepancies in the present set of poverty lines in the official poverty estimation methodology have been highlighted by a number of academic papers in the recent past. Apart from being too low, these also suffer from various other problems such as inter-state price differentials and rural-urban price differentials. Acknowledging these, the government has also set up a new expert group under the chairmanship of S.D. Tendulkar to suggest a suitable poverty line.
However, quarrelling on the actual estimate of poor in the country may be secondary to the important message coming from these poverty comparisons. This is particularly relevant for the two largest countries that are also the fastest growing, India and China.
China, which started at a higher poverty of 60% in 1990 compared with 51% for India in 1990, saw poverty decline to 16% in 2005 compared with 41.6% in 2005 for India. That is, in the last 15 years while China managed to reduce the number of poor by 475 million, the number of poor in India actually increased by 20 million. This is despite the fact that growth rate of Chinese economy is only marginally higher than the growth rate of Indian economy.
This is also the message from ADB poverty estimates. Despite the high growth rate of Indian economy in the recent past, India has the second highest poverty—after Nepal—among all Asian countries.
Clearly, growth alone may not be the best antidote for poverty reduction, at least not in the Indian context.
Saturday, September 6, 2008
42%, 28% or 6%...How many Indians are really poor?
The good news first—if you earned $1.01 a day back in 1981, you are now counted among the world’s “elite” poor, thanks to the raising of the minimum subsistence level by the World Bank to $1.25 from the earlier $1 a day. The bad news: news doesn’t cook food. Based on the World Bank’s revised estimates, the number of poor in the developing world in 1981 is—or rather was—a little over 1.9 billion as against the earlier estimates of 1.53 billion. This number has now come down to 1.4 billion in 2005, though it has risen against the earlier estimate—based on the $1 a day threshold level—of 879 million.
The Indian news is not too happy either—in absolute numbers, India, in 2005, had 455.8 million people living on less than $1.25 a day vis-à-vis 420.5 million in 1981, which makes us worse-off than even Sub-Saharan Africa, whose figures for 2005 are 384.2 million. However, according to the $1 a day mark, the numbers have actually reduced— from 296.1 million in 1981 to 266.5 million in 2005.
So, are we getting poorer by the day, even after 17 years of economic reforms? Hogwash, is what Surjit S. Bhalla, Chairman, Oxus Investments, dubs the latest World Bank report. “Real incomes in India have gone up by 71 per cent since 1993—the mid-point year in the period under review (1981-2005)—and yet according to the World Bank, it has decreased by 36 per cent. Its survey is missing out on a lot of consumption,” points out Bhalla. India’s official definition of the poverty line has hinged on the minimum caloric consumption of an individual— an average of 2,200 calories per day on the premise that an intake less than this figure would severely compromise an individual’s physical survival. But these figures date back to the 1970s and since then, interestingly, per capita incomes have risen by over 40 times while the caloric intake has in fact reduced even below the minimum urban requirement of 2,100 calories.
So, are we getting poorer by the day, even after 17 years of economic reforms? Hogwash, is what Surjit S. Bhalla, Chairman, Oxus Investments, dubs the latest World Bank report. “Real incomes in India have gone up by 71 per cent since 1993—the mid-point year in the period under review (1981-2005)—and yet according to the World Bank, it has decreased by 36 per cent. Its survey is missing out on a lot of consumption,” points out Bhalla. India’s official definition of the poverty line has hinged on the minimum caloric consumption of an individual— an average of 2,200 calories per day on the premise that an intake less than this figure would severely compromise an individual’s physical survival. But these figures date back to the 1970s and since then, interestingly, per capita incomes have risen by over 40 times while the caloric intake has in fact reduced even below the minimum urban requirement of 2,100 calories.
Bhalla’s take on India’s poverty figures: six per cent for 2005, down from 13 per cent in 2002. That’s almost 700 per cent less than the World Bank figure of 41.6 per cent as the percentage of Indians living below $1.25 a day in 2005. Despite the gloomy scenario, the report points out that efforts to reduce poverty are bearing fruit—with the percentage of people globally living below the new poverty line halved from 52 per cent to 26 per cent over 1981-2005, a reduction of 1 percentage point every year. However, most of them have just moved into the band between $1.25 and $2 a day—with their numbers over the same period doubling from 600 million to 1.2 billion. That means that the total number of poor in developing countries living on less than $2 a day is 2.6 billion.
Interestingly, a day after the World Bank’s new definition of the poverty line, the Asian Development Bank came out with its own set of figures for the Asian region—less than $1.35 a day. So how poor are you? Well, that depends on which set of figures you want to believe.
Interestingly, a day after the World Bank’s new definition of the poverty line, the Asian Development Bank came out with its own set of figures for the Asian region—less than $1.35 a day. So how poor are you? Well, that depends on which set of figures you want to believe.
Subscribe to:
Posts (Atom)
