The government of India has got a shot in the arm from the World Bank Poverty and Equity Brief 2026, which says, “Over the past decade, India has made remarkable progress in reducing poverty… .” It shows that Indians living below the international extreme poverty line of $3 per person per day have dropped from 27.1% of the population in 2011 to 2.6% in 2023. The percentages have dropped whichever poverty line is taken.This goes counter to the oppositions’ narrative that poverty, inequity and unemployment are entrenched. Its manifestation has been the widespread youth agitation spilt on to the streets all over the country in July. In April, workers had protested in various parts of the country when energy shortages and black marketing of gas hit their budgets. The government had to increase workers’ wages. Further, NITI Aayog reported that about 9 crore young people are neither in employment nor in education (NEET). Unemployment results in poverty.Between 2011 and 2023, the unorganised sector had been hit hard by repeated shocks administered by the government – demonetisation, faulty GST, NBFC crisis and sudden lockdown. And, there are the shocks due to war in Ukraine and West Asia. This sector employing 94% of the workers has hardly recovered and has lost incomes.Also read: India’s Poverty Decline Is Not What it SeemsSo, the World Bank pronouncement does not square with ground reality. This is not surprising since the World Bank is not a data gathering agency and uses the government data with all its errors.Further, the World Bank adds to these errors. Its poverty estimation is in dollar terms and that brings in methodological errors in converting from rupee to dollars. Most importantly, it marginalises the Indian poor and shows them to be less poor.International comparisonThe World Bank is interested in comparing incomes and consumption across countries. So, it adopts a common yardstick, namely, the dollar. This is not simple since it requires using the nation’s dollar exchange rate, determined in the foreign exchange markets based on supply and demand for the national currency. This depends on multiple other local and global factors like, trade surplus or deficit, capital flows, interest rates, expectations of the future, etc. and not the actual strength of an economy.For instance, recently, India’s exchange rate is buffeted by balance of payment impacted by the war in West Asia, outward flow of portfolio investment, low net foreignIllustration: Pariplab Chakraborty.direct investment, supply bottlenecks, etc. In 2026, the rupee has depreciated compared to the dollar by 5.5%. Can it be said that the Indians are 5.5% worse off? And, do these factors have a differential impact on different segments of Indians?More than these external factors there is a greater impact of internal factors – unemployment, decline of the unorganised sector, impact of drought on agriculture, inflation impacting the living standards of people and wrong policies of Government of India.The World Bank compares consumption across countries by taking a basket of ‘ … around 3000 consumer goods and services, 30 occupations in government, 200 types of equipment goods and about 15 construction projects’. It calculates how much does this basket cost in a nation and in the USA. The ratio between them gives the worth of the local currency in dollars. This is referred to as the Purchasing Power Parity dollar (PPP$).For instance, many items are cheaper in India than in the USA so a rupee can buy more than what is implied in the exchange rate of rupee. So, if the exchange of the rupee in 2023 was Rs.82.5 to the dollar, in PPP terms it was Rs.23.5. That is one could buy 3.5 times more in India than implied by the exchange rate of rupee.So, in PPP terms an Indian is better off than indicated by exchange rate and poverty becomes less. And the size of the Indian economy becomes larger. So, it is said that India is already the third largest economy in the world behind China and the US.Methodological issueThe basket taken to compute PPP$ (against a currency) is an average for the nation. But, the poor hardly consume many of the things in the basket. And few occupations in the government, equipment goods and construction projects may be relevant to them. So, given their low incomes, the consumption of the poor is restricted and the basket used by the World Bank is not relevant to them. They largely consume essentials and few discretionary items or consumer durables or services. So, the PPP$ computed with the average does not represent their purchasing power.Also read: Poverty in India: World Bank’s Claims of Dramatic Decline MisleadingRich countries consume a lot of services and so do the well-off Indians. In the US, the production of services sector is about 78% of GDP while in India it is about 54%. So, the consumption basket of the USA is vastly different from the Indian basket and definitely not applicable for the Indian poor.Well off Indians consume a lot of services because the poor get a pittance as a wage. They can afford servants, gardeners, drivers, maids, etc., which even upper middle class US citizens cannot afford. They can afford fancy vacations, visits to five star hotels, eat hamburgers, etc. So, PPP$ is relevant for them. Does a hamburger maker in a restaurant eat the hamburger she makes? Can a steward in a three star hotel afford to live in that hotel for vacation? Can a driver afford a driver or a maid afford a house help in India?The cheap services that make the PPP$ stronger than the nominal dollar is because of the low wages of workers and because of their poverty. This was true in 2011 and now in 2026. For the poor, given their restricted consumption of mostly essentials, the nominal dollar is more relevant than PPP$.So, the World Bank report tells the poor you are not poor because your wages are low and the government of India promotes this myth.Arun Kumar retired as professor of economics at JNU and is author of Indian Economy Since Independence: Persisting Colonial Disruption, 2013.This piece was first published on The India Cable – a premium newsletter from The Wire – and has been updated and republished here. To subscribe to The India Cable, click here.