Redefining poverty: A reality
Javed Bin Kamal | Tuesday, 5 November 2013
Poverty measurement is not GNI (gross national income) or GDP (gross domestic product) per capita. This writer feels poverty is found when a person's income is not sufficient to make inflation adjusted with consumption. It also refers to absence of ability to repay the debt i.e. equities are not less than debt. Hence people in a high income city may be poorer due to inflation than people in monga region.
There must be supply of services and goods to buy; a poor man having more money in arctic region cannot buy anything. In addition to that, resources are irrelevant. Africa has a lot of resources but lacks in management. Dubai too has a lot of resources and wealth. They transformed the resources into wealth. Income flow is very important and it is fixed in the short run. Services are very important. Shift the geography and see that the Saudis will continue to serve the Hajis and earn money for an infinite time.
Quantity of calorie taken cannot be a yardstick for poverty measurement. Many people, who are on diet, are satisfied with low calorie. Many people borrow money to take calorie. A person with low income cannot sustain consumption; they borrow or take aid.
Macro policies are not as effective as micro policies. Such policies should be directed at micro factors. Policy is made on expected response whereas expected responses are made on expected policies.
Micro insurance should be tagged with microfinance; a person will be encouraged to pay if such interest on borrowed amount works as insurance premium for them.
Global markets are open. That is why it is in equilibrium. If the economies are closed, there would be disequilibrium as it is in Congo. Gold is very precious and its price is high but no one asks for gold because of low income. Either supply or demand comes from external sources.
So we should take care more not to reduce gap but to ensure the ability to pay and also customise consumption level with manageable inflation.
The writer is Assistant Manager, the Structured Finance. b_bubble@live.com