I recently wrote about the international debate over how to define “middle class.” In particular, there’s been increasing questioning of the rosy forecasts by organizations like the African and Asian Development Banks, which use $2 a day—an absurdly low number, even in very poor counties—as the “middle class” cutoff.
The New York Times India bureau has been having its own debate about poverty statistics. A new proposal by Chakravarthi Rangarajan, former chairman of the prime minister’s Economic Advisory Council, would raise the country’s poverty line, classifying an additional 94 million Indians as poor.
The new proposal would consider anyone living on less than 32 rupees (53 cents) a day for rural areas or 47 rupees (78 cents) in urban areas to be poor, up from 27 and 33, respectively, under the currently used model. The old numbers proved controversial when Congress Party leaders patted themselves on the back for reducing the country’ poverty level last year and then proved startlingly ignorant about what exactly 33 rupees can by you in an Indian city. (Not much. Enough for basic food maybe but not rent, clothes, medical expenses, or education.) The new numbers, which have not yet been officially adopted, would raise the poverty rate in India from 21.9 percent to about 29.5 percent.
India has never had such a high definition of poverty, but even Rangarajan’s numbers seem shockingly low. The World Bank usually uses $1.25 per day as its cutoff for extreme poverty.
The debate is particularly timely with new Prime Minister Narendra Modi releasing his first budget this week. Modi’s critics frequently point out that despite the massive economic growth achieved under his term as governor of Gujarat, the state’s poverty level has barely budged.
The overall good news is that while India remains a very poor country—and a much poorer one than its leaders like to admit—poverty is falling no matter which definition you use. Under Rangarajan’s numbers, porverty has dropped from 38.2 percent to 29.5 percent. That’s a massive improvement in not just Indian but human welfare over a very short period. But as Modi seeks to transform the world’s second-largest country, it would be good to be a bit more realistic about the scale of the challenge and the pace of progress.