The World Bank has revised the base year for the International Comparison of Prices, from 2005 to 2011, according to informed sources in the Planning Commission.
The ICP figures are used along with other economic variables from countries’ national accounts to calculate Purchasing Power Parities (PPPs), a form of exchange rate that takes into account the cost and affordability of common items in different countries, usually expressed in the form of U.S. dollars, the World Bank website says. PPP is used worldwide to compare the income levels in different countries, monitor the incidence of poverty, and track progress towards the Millennium Development Goals and target programmes effectively.
“It is likely that the poverty line of the World Bank currently at $1.25 a day would be revised in keeping with the revised PPPs,” a senior government official said. “However, it is too early to say that there would be a drastic fall in poverty owing to the revision of figures,” the official added.
To a question on whether the official poverty line of the World Bank after revision is likely to bring down poverty figures, an official spokesperson said: “While the PPPs can be taken readily to amend Gross Domestic Product, the same is not true for poverty incidences. This is the reason why the World Bank’s official poverty statistics arrive with a lag after new purchasing power parities become available. That is what is happening now; there is an active research programme to determine how the PPPs affect the poverty statistics.”
‘Not a numbers game’Economist Venkatesh Athreya cautioned against turning poverty estimation into a numbers game. “For a long time the poverty line has been nothing but a death line as it is too low. Also, just by attributing a higher value to the rupee against the dollar cannot technically determine whether poverty has increased or decreased. And the market rate of exchange is not an accurate reflection of purchasing power parity,” he said.
