OF late, there have been several academic papers and media write-ups on the World Bank’s 2025 claim of steeply declining extreme poverty in the world, especially in Asia. It would be wonderful if this was true, but it is not true. This claim is spurious, arising from a statistical legerdemain that the Bank and governments have practised for many decades, ignoring all criticism. For half a century they have repeatedly underestimated poverty line expenditure until by now their poverty lines are so incredibly low that they do not permit human survival. The Bank has declared 5.25 per cent of the Indian population to be in extreme poverty using a poverty line of Rs.62 per day. The Niti Aayog had arrived at its overall 5 per cent poverty ratio for 2022-23 by applying poverty lines of Rs.57/69 per day for rural/urban India. These sums would have bought daily a little less than 2.9/3.5 litres of the cheapest bottled drinking water, while the poverty line is supposed to meet all daily food as well as non-food (medical, utilities, manufactures, rent, transport) expenses. All except homeless beggars are dead before reaching these spending levels. We can expect by next year the claim that India has achieved zero extreme poverty, when there are no survivors at all at the poverty line.  The real poverty line at which a bare minimum level of nutrition can be reached, is at least three times the official poverty line and at least 65 percent of the population falls below it.

The World Bank has been sending advisors to developing countries to train their economists on poverty estimation procedure under its ‘capacity building programme’. China’s poverty line was set on Bank advice by taking the 1978 poverty line of 100 yuan a year updated to 1997, and adding non-food spending. China’s 2019 claim of ‘zero poverty’ used an official poverty line of 8.8 yuan per day which would have bought 2.1 litres of bottled drinking water there, and nothing else. No survivors remained at this artificial, never actually observed spending level, and this zero number of persons observed was interpreted perversely as the achievement of ‘zero extreme poverty’. Immediately after this the poverty line was raised to 11 yuan a day for 2020. Informed analysts in China say that at least one fifth of the population is unable to spend a bare subsistence minimum which they put at about 1,000 yuan per month, three times the official poverty line. There is thus no actual achievement of 5 percent poverty in India and no zero poverty in China.

However, more recently, China has launched a massive project of sending many thousands of trained persons, to rural areas in particular, to physically identify, with the help of local communities, the most deprived families and has been giving large transfers to genuinely reduce and eventually eliminate poverty. On a smaller scale Kerala in India has followed a similar policy and with its strong community networks and volunteers, has had success in identifying and rehabilitating destitute families.    

The World Bank uses the national local currency poverty lines of several poor countries and merely adjusts them upwards for purchasing power to US dollar, averaging to obtain its present global poverty line of $3 per day. When applying this line to an individual country, say India, it does the reverse adjustment and deflates the nominal rupee-dollar exchange rate by about 0.28 to arrive at the rupee equivalent of $3, which is always very close to the official Indian poverty line.

Why are all official poverty lines in fact artificially constructed, give spurious result of decline, and end up below survival level? Because for many decades under Bank advice, official poverty lines have been de-linked, without any explanation, from satisfying any nutrition standard whatsoever. Only the very first estimate of poverty in each country was based correctly on obtaining a ‘poverty line’ that enabled the population to reach a specified nutrition standard; every later estimate was incorrect because it simply applied a Laspeyres price index to the initial figure to bring it forward to later years, without ever asking the question whether the nutrition norm continued to be satisfied. The Laspeyres index is base-weighted with respect to quantities namely, the particular consumption basket of items and quantities of good and services purchased at the poverty line in the base year is held constant and its value merely updated by the change in prices.

The base year in India and China was 1973 and 1978 respectively, by now 52 years and 47 years in the past. Suppose that when making its very first poverty estimates in 1973 and 1978, the governments of India and China had announced that they were taking the updated cost of a consumption basket that prevailed in the year 1921 and 1931 respectively, they would have been laughed at. But today governments and the Bank talk glibly of current poverty on the basis of a half century old basket without arousing any criticism, because the educated public has no idea of the absurdity of the estimation procedure they use.

In 1973, in rural India Rs.49 per month per head was needed to reach a nutrition norm of 2200 calories per day, and 56.4 per cent of persons spending less than this was the official, correct poverty ratio.  By 2011-12 satisfying the same nutrition norm required Rs.1320 per month spending and 66.8 per cent of persons fell below this, a marked rise over the initial 56.4 per cent. But official estimators had silently abandoned the nutrition norm after 1973, and merely price indexed the base year figure giving Rs.816 as the official poverty line with 25.7 percent of persons falling below it, compared to the correct Rs.1320 and 66.8 percent. Calorie intake obviously was much lower at the official poverty line, rendering the claim of poverty decline spurious, since the poor were being counted below a declining and not a constant nutrition standard. Similarly, the correct 1973 urban poverty line of Rs.56.6 per month satisfying the 2100 calories norm, gave a poverty ratio of 49 per cent which by 2011-12 rose substantially to 62 per cent, with the same 2100 calories standard requiring Rs.2,130 to be spent. The official poverty line for 2011-12 was only Rs.1,000 yielding a mere 13.7 percent poverty ratio, and allowing only 1775 calories daily, a fact never mentioned.      

Every new official poverty line over time gave lower and lower nutritional intake, until the ultimate absurdity has been reached by now (as I predicted in a 2013 paper) of a poverty line below physical survival level. And the absence of observations because no one survives, is celebrated as zero extreme poverty! Note that many African countries started poverty estimation late, their base years are not more than a decade earlier, and so they register high, close to realistic levels of poverty.

Assuming a fixed consumption basket from half a century ago as in India is equivalent to assuming away poverty, for it is precisely the changes in the availability of essential goods and services producing change in the available basket, that are important for the question of whether poverty rises or falls. From being considered essential services that should be provided out of public funds, healthcare, utilities and education have been shifted rapidly into the sphere of private provisioning and have seen steeply higher pricing under the market-oriented reforms of the last three decades. A rising proportion of all households is unable to both meet these higher costs and maintain their nutritional standard, since their incomes have not risen adequately. The rise in household debt in India is a telling indicator. Households that were not poor to begin with, have slipped into poverty while those already poor have suffered further nutritional decline.  The NSS consumption data in India show a decline over time in average energy and protein intake per head in both rural and urban areas.

If an Olympic high jump athlete claimed improved performance by continually lowering the bar, he would be banned for life for cheating; if a school principal claimed that the percentage of failures had fallen sharply to zero from 40 percent, and this was found to arise from lowering the pass mark from 50 out of 100 to 2 out of 100, the principal would be sacked. But it seems that there is no international body which can discipline the Bank into following a logical and ethical estimation procedure, and abandon the illogical and dishonest one it actually uses, that has reduced the poverty line in Asia to below survival level. The Bank has already rejected the Report (2020) by Philip Alston, designated as the United Nations Special Rapporteur on Extreme Poverty and Human Rights, which expressed concern at the unrealistic poverty lines used by the Bank.  No doubt the Bank will continue to mock the poor, telling them that millions of them have been ‘lifted out of extreme poverty’ whereas in reality ever more households facing soaring medical and other costs, are sinking into indebtedness and lowered nutrition.