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Asian Giants

Swaran Singh

Edited by Ashok Gulati and Shenggen Fan
Oxford University Press, New Delhi, 2007, pp. 548, Rs. 745.00

VOLUME XXXII NUMBER 12 December 2008

The updated and improvised new estimates on global poverty released by a World Bank study last August have opened up a new debate on the impact of these estimates on the poverty profiles of developing countries. This concerns countries like China and India especially that have projected having made remarkable strides in their rural development and poverty alleviation programmes. At its core, these new estimates of the World Bank are based on a revised definition of the global poverty line to $1.25 per day as per 2005 purchasing power parity (PPP) as opposed to the $1.08 per day of their earlier 1993 PPP estimates. What is interesting is that the World Bank has also revised its PPP estimates.   Put simply, while comparing the strength of economies of various nation-states around the world, the comparison is sought to be made on the basis of their respective purchasing power within their own political boundaries. This is calculated on the basis of a methodology that was originally suggested in a joint project of the United Nations and the University of Pennsylvania in 1968, popularly known as the ‘Penn effect’. In this a common ‘basket of goods and services’ is evolved based on what is the minimum common consumption around the world. Then the ‘quantity & quality’ of these goods and services that $1 can buy in the US is measured in terms of its cost in other countries which becomes their PPP. It is on this basis that, since 1993, China and India have emerged at the centre of global debates and have been lately projected as the world’s second and fourth largest economies.   What is interesting is that this recent revision in PPP has been triggered by the unprecedented economic growth in China and India in the last 12 years as also the fact that the World Bank PPP calculations have expanded the scope of survey from 117 countries in 1993 to 146 in 2005. As a result, compared to 1993, in 2005 the value of $1 in terms of PPP has risen from 7 to 16 rupees for India and from 1.8 to 3.46 yuan for the People’s Republic of China. This clearly shrinks their PPP economies and may further slow down their foreign trade and investment led growth matrix. All this clearly has serious implications for their poverty and hunger profiles where their existing projections may now look less impressive. This is likely to hit the already sliding growth rates in their rural and agricultural sectors which represent ...

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