Tuesday, June 16, 2009

Poverty definition

World bank defines poverty as consumption less than $1.25 per day. But is that the best measure of poverty? How about the Indian definition - consumption under Rs.15 a day? Based on estimates and CPI/WPI of the 1990s, this definition is totally irrelevant when we look at the current inflation rates. The question is not just adjusting for inflation but also whether we are looking at the correct variables. Is income or consumption the only measure of poverty? Should we look at more qualitative variables like health? Also, in recession times I think poverty needs to be drastically redefined. Now even IT professionals who are suddenly out of a job have become poor. It is quite difficult to arrive at an exact definition of poverty but for the time being I will stick to what the world bank says.

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