Rural economy undergoes structural changes

The government is strongly committed to reduce poverty, improve human development and reduce inequality. This commitment is rightly reflected in the Perspective Plan of Bangladesh 2010-2021 (Making Vision 2021 a Reality), the ongoing Sixth Five Year Plan FY11-FY15 (Accelerating Growth and Reducing Poverty) and, hopefully also be reflected in the upcoming Seventh Five Year Plan FY16-FY20 (Accelerating Growth, Empowering Citizens). In reducing poverty, Bangladesh has made tremendous improvement but in terms of reducing inequality it still remains a major challenge.
The article will initially try to conceptualise poverty, its different dimensions and measurement of poverty. Then it will analyse the poverty trends in Bangladesh. After that, the success of Millennium Development Goals (MDGs) related to poverty will be discussed. Drivers of improvement in poverty reduction in Bangladesh will be analysed then. Finally, the government policies and strategies for reducing poverty and inequality will be discussed.    
No common definition of poverty is accepted by all countries. Poverty is about not having enough money to meet basic needs including food, clothing and shelter. Poverty is by and large categorised as material deprivation measured in terms of income.
The World Bank defines poverty in absolute terms. The bank defines extreme poverty as living on less than US$1.25 per day (PPP), and moderate poverty as less than $2 a day. Poverty is by and large categorised as material deprivation measured in terms of income.
In Bangladesh, poverty is defined as the value of a 'minimum dietary energy requirement' of 2,122 K. calories per day. The hunger threshold (hardcore) is defined as the value equivalent to 1805 calories, significantly below the level recommended by the UN Food and Agriculture Organisation (FAO). However, the World Bank has categorised our poverty line income for UPL (upper poverty line) as Taka 1,600 per person per month and LPL (lower poverty line) as Taka 1300 per person per month.   
Poverty is generally of two types: absolute poverty and relative poverty. Absolute poverty is synonymous with destitution and occurs when people cannot obtain adequate resources/ income (measured in terms of calories or nutrition) to support a minimum level of physical health. On the other hand, relative poverty occurs when people do not enjoy a certain minimum level of living standards as determined by a government (and enjoyed by the bulk of the population) that vary from country to country, sometimes within the same country. Relative poverty occurs everywhere, is said to be increasing, and may never be eradicated.
Despite many definitions, one thing is certain that poverty is a complex societal issue. Social indicators and indicators of risk and vulnerability must also be considered and understood to obtain a clear picture of poverty. It is important that all members of our society work together to provide  opportunities for all our members to reach their full potential. It helps all of us to help one another.
We may now look into the measurement issue of poverty. A number of aggregate measures of poverty can be computed. By far, the most widely used measure is the headcount index. The headcount index is the proportion of the population for whom consumption (or other measures of living standard) is less than the poverty line.
Poverty gap measures the average distance of poor below the poverty line from the poverty line and can be said to indicate depth of poverty. If all are clustered near the poverty line, then depth of poverty is not much. On poverty line or above, it is zero.
Squared poverty gap measures inequality among the poor as well as the average distance from poverty line among the poor. It can be said to measure severity of poverty. If inequality among the poor is high, poverty is more severe. The squared poverty gap index is a weighted sum of poverty gaps (as a proportion of the poverty line), where the weights are the proportionate poverty gaps themselves.
The Foster-Greer-Thorbecke (FGT) indices are a family of poverty metrics. The indices were introduced in a 1984 paper by economists Erik Thorbecke, Joel Greer and James Foster. The individual indices within the family are derived by substituting different values of the parameter ? into the following equation:

Where z is the poverty threshold, N is the number of people in the economy, H is the number of poor (those with incomes at or below z), yi is the income of each individual i. The higher the value of a, the greater the weight placed on the poorest individuals. The higher the FGT statistics, the more poverty there is in an economy. Interestingly, if we put  a = 0, we get the headcount index, if we put a = 1, we get the poverty gap index and finally if we put  a = 2, we get the squared poverty gap index.  
NATURE AND TRENDS OF POVERTY: The Household Income and Expenditure Survey (HIES), conducted by the Bangladesh Bureau of Statistics (BBS), is the flagship survey and it normally provides the poverty level of the country. The startling characteristics of the trends in poverty reduction identified are given below:

The rate of poverty has declined at an impressive rate of 1.74 percentage points per year in 2000-10 period. In the previous decade (1990-2000), the rate of reduction was about only 0.7 percentage points per year. This steep decline in poverty in 2000s suggests that price shock, slowdown in global economy, natural disasters and domestic political turmoil could not impact the rate of poverty reduction. It also means that anti-poverty programmes are very effective in safeguarding the vulnerable from descending into the chronic poverty trap.
In order for anti-poverty interventions to be effective, certain levels of assets or income are critical. This is so-called trap-centric view of extreme poverty. When this type of extreme poor exists, overall growth of the economy can hardly move extreme poor out of poverty. Sen and Ali (2015) argued that this type of non-linearity or threshold hardly exists in Bangladesh where both moderate poor and extreme poor move up the ladder of prosperity almost at the equal pace.
The poorest of the country has also progressed in human development over the past two decades. Sen and Ali (2015) shows that illiteracy among the extreme people has declined from 64 per cent to 46 per cent in just seven years. Further, infant and child mortality rates have also declined substantially for the poorest. The under-five mortality rate dropped from 121 deaths per 1000 live births in 2004 to 64 in 2011. Women from the poorest group now have better access to reproductive healthcare, with the proportion of those with access to antenatal care rising from 34 per cent to 48 per cent between 2004 and 2011.

The extreme poor are mostly from rural areas as the reduction of extreme poverty there has been slower than that of urban. The Word Bank (2013) showed that 21.1 per cent of the rural population was extremely poor in 2010, compared to 37.9 per cent in 2000. Extreme poverty declined by 44 per cent in rural areas as opposed to 61 per cent in urban areas.
The dynamics of poverty status of households is not unidirectional. Osmani and Sen (2010) has categorised households based on the change of poverty status - there are households which move out of poverty (movers), some fall into poverty (fallers), some keep falling into and out of poverty (churners) and some rarely get out of poverty. Using data from various sources, the study shows that the share of 'fallers' in total population has also decreased from 17.6 per cent in 2000-07 to 15.1 per cent in 2005-10.
The natural barrier - the river Jamuna - divides the country into two parts vertically where eastern part is closer to the growth poles (e.g., Dhaka and Chittagong) than the western part. This natural division has a strong bearing on the well-being of the people from both sides.  The poverty maps based on headcount ratio also clearly distinguish these two parts of the country, with western part being the more impoverished one. Khondker and Mahzab (2014) showed that there are also underdeveloped districts in the east and developed districts in the west in terms of income and other socioeconomic dimensions. While the stark division has been blurred, regional pockets have also emerged where poverty is higher than its neighbourhood areas.
The rural economy has gone through substantial structural changes in terms of occupation. The relative size of daily wage labour in agriculture as primary occupation has decreased substantially. Hossain and Bayes (2009) showed that 22.8 per cent were agricultural wage labour in 1987 and this share was reduced to only 13 per cent in 2007. Of those who were agricultural labourers in 1987, about 35 per cent have become self-employed farmers while only 29 per cent remained as agricultural labour.
The World Bank (2013) attributed larger share of working population and growth of farm income to the recent decline in poverty rate. It is also documented that significant improvements in the geographic coverage of safety net programmes took place between 2005 and 2010.
National Social Security Strategy (NSSS, 2015) also confirms the importance of safety nets in poverty reduction. Further, share of non-farm income in total rural income has increased over time (Hossain and Bayes, 2009). This increasing share in non-farm income is associated with reduction in poverty in rural areas.
MDG TARGETS RELATED TO POVERTY AND INEQUA-LITY: Bangladesh has made commendable progress in respect of eradication of poverty and hunger. It has sustained a GDP (gross domestic product) growth rate of 6.0 per cent or above in last seven years that has played a positive role in eradicating poverty.
Moreover, while Bangladesh has demonstrated its capacity for achieving the goal of poverty reduction within the targeted timeframe, attaining food security and nutritional well-being still remains a challenge. The challenges with regard to reducing income inequality and the low economic participation of women also remain as major concerns.  
Professor Shamsul Alam is Member (Senior Secretary), General Economics Division (GED), Bangladesh Planning Commission. He led the preparation of the Sixth Five-Year Plan (2011-15) and is leading the preparation of the Seventh Five-Year Plan (2016-20) which is at the final stage now. The article is adapted from a paper prepared for the participants of National Defence Course (NDC), Dhaka and  presented on May 18, 2015 at Defence College, Mirpur. In preparing the paper research support was provided by Mohd. Monirul Islam, Deputy Chief,
GED, Planning Commission.
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