The Gini co-efficient

Now that elections are coming around again, claims and counter-claims about which political party did how much to reduce poverty are bound to fly thick and fast. The trouble is, it is often very difficult to actually decide who is poor, and who is not.

A heated debate was sparked by the Planning Commission redrawing the poverty line, which appeared to suggest that the number of poor had fallen by a third over the past decade or so — a substantial achievement for the self-avowedly ‘pro-poor’ Congress Party, which has been in power for the past decade.

Of course, the others promptly dubbed the new poverty line — a daily consumption expenditure of Rs 32 — as a plot by the Commission and the government to paint a false picture of prosperity and worse, to deprive the actual poor of their benefits.

Enter the Gini co-efficient, as an alternative measure of ‘relative poverty’. A purely mathematical measure of inequality within a population, it is most commonly used to measure income inequality in a country. It is named after Italian statistician Corrado Gini, who first published a paper about it in 1912.

The Gini co-efficient works because people tend to consider themselves rich or poor not because they fall above or below a government-defined ‘poverty line’, but on how much others around them have. It ranges between zero (perfect equality, with everybody having the same income) and 1 (perfect inequality, with all the income enjoyed by one person). According to the World Bank, India had a Gini coefficient of 0.339 in 2010. South Africa’s, despite Nelson Mandela, was 0.63.

There’s a catch. The number is only as accurate as the GDP or income statistics. Also, non-monetary aid (food rations and so on) is not counted, which distort the picture. Plus, very different countries can have the same number.

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