The extent of poverty in India remains much debated. Ditto questions about whether policy reforms have contributed to a more rapid reduction in poverty over the past few years. These issues have now been ignited by the shocking news that India continues to account for roughly one-third of the poor globally. The World Bank's own estimate of poverty in 2007 has been drastically revised by new cost-of-living data. If we go by the new poverty line of $1.25 at 2005 purchasing power parity (PPP), poverty afflicts 41.6 per cent of India's population. This means the number of poor is as high as 456 million.

These estimates raise deep questions about the measurement of poverty and assessment of the impact of policy reforms and the growth acceleration of recent years. There are also serious implications for the effectiveness of targeted anti-poverty interventions and various subsidies, like those on food and fuel.

One response to these alarmist findings by the World Bank would be to reject them because of doubts about the reliability of the cost of living data. This is not to be taken lightly, as even the much-improved data is vitiated by lack of adequate coverage of rural areas, particularly important in the Indian context because the vast majority of the poor are still concentrated in the villages.

Be that as it may, these are the most up-to-date and comprehensive estimates. So it would be unfair to blame the World Bank researchers for exaggerating the extent of poverty in the developing world as well as India. An issue, however, that has not been highlighted is the large variability of poverty estimates. An illustrative example is that if the poverty line is raised from $1 a day to $1.25, as done by the World Bank, the global estimate of poverty rises from 16 per cent to about 26 per cent and the number of poor shoots up from 879 million to about 1,400 million. As stated earlier, for India it makes a huge difference as the percentage of poor jumps from 24.3 per cent to 42 per cent—the absolute number is just short of being twice as high.

There is another related and contentious issue of the decline in poverty following liberalisation of the Indian economy during the 1990s. There is a sharp division among economists and policymakers, with some taking the view that poverty reduction accelerated during this period and others vehemently questioning it. The World Bank report clearly shows that there was a marked slowing down of poverty reduction in the period 1993-2005. This has little to do with the fact that the base-year poverty in 1993 was lower than in 1981. Since the range of poverty in the two base years was 60 per cent (in 1981) to nearly 50 per cent (in 1993), the base year does not really matter, as the numbers are indeed very high.

India's official estimate of poverty for 2004-05 ranges from 28-31 per cent depending on the cost of living index. Using the old yardstick, in fact, the World Bank estimates are lower. Indeed, India appears to be considerably poorer only if the poverty line used is slightly higher (that is, $1.25 against $1). What is a matter of concern is that this higher poverty line is in fact the average of the 15 poorest countries in the world.

One immediate question raised by this comparison is whether the official poverty line is at all relevant or appropriate for an emerging economy like India. In any case, the alarmist reaction to these higher estimates of poverty is somewhat misplaced as there are large sections of disadvantaged groups such as the ST/SCs who remain mired in acute poverty. Around 44 per cent of STs and 32 per cent of SCs are still acutely poor despite decades of affirmative action.

That the fruits of accelerated growth have not trickled down to a large segment of the Indian population is confirmed by the World Bank report. Nor is there much support for anti-poverty measures mitigating poverty in a significant way. It is time the policymakers reviewed the design and implementation of such interventions, especially because the fiscal burden is unsustainable. However, whether the pervasiveness of income poverty is to some extent alleviated by easier access to public health and education facilities is plausible but calls for a careful assessment.

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(Raghav Gaiha is professor of public policy at the University of Delhi.)