Explanation: The World Bank uses a specific poverty line to measure poverty globally, which is a critical tool for understanding economic conditions and development needs across different countries. The poverty line is set at $1.90 per day, adjusted for purchasing power parity (PPP). This means that the amount is not a fixed value in US dollars but is adjusted to reflect the cost of living in different countries.
The concept of purchasing power parity (PPP) is essential to understand why the World Bank uses a global standard in US dollars. PPP is an economic theory that compares different countries' currencies through a "basket of goods" approach. It measures the relative value of currencies based on the cost of a standard set of goods and services in different countries. This adjustment ensures that the poverty line reflects the actual cost of living in each country, making it a more accurate measure of poverty.
The $1.90 per day threshold is used to identify individuals living in extreme poverty. This standard is not arbitrary; it is based on extensive research and analysis of the minimum income required to meet basic needs such as food, shelter, and clothing. The World Bank updates this threshold periodically to reflect changes in the cost of living and economic conditions.
It is important to note that while the World Bank uses this global standard, other organizations and countries may use different poverty lines based on their specific economic conditions and needs. For example, the Indian government uses a different poverty line based on the cost of living in India, which is not directly comparable to the World Bank's global standard.
Understanding the World Bank's poverty measurement is crucial for students and professionals in fields such as economics, development studies, and public policy. It provides a standardized way to compare poverty levels across different countries and track progress in reducing poverty over time. This knowledge is particularly relevant for competitive examinations such as the UPSC, SSC, and other civil services exams, where questions on global economic indicators and development issues are common.