India has achieved significant progress in cutting down extreme poverty, lifting 269 million people out of such conditions between 2011–12 and 2022–23. The latest figures from the World Bank’s Poverty and Equity Briefs report show a major decline in the extreme poverty rate, which dropped from 27.1 per cent in 2011–12 to 5.3 per cent in 2022–23. Back in 2011–12, approximately 344.47 million people in India were living in extreme poverty. By 2022–23, that number had reduced dramatically to 75.24 million.
The percentage of people living in extreme poverty is defined as those surviving on less than US$ 2.15 per day, based on the 2017 purchasing power parity (PPP). This decreased sharply from 16.2 per cent in 2011–12 to just 2.3 per cent in 2022–23. This significant reduction means that approximately 171 million individuals have moved above the extreme poverty line during this period.
Urban-Rural Divide in Extreme Poverty Reduction
The World Bank’s Poverty and Equity Brief for India has stated that there is a significant decline in extreme poverty which has been evident in both rural and urban areas. In rural India, the extreme poverty rate fell from 18.4 per cent to 2.8 per cent, while in urban areas, it dropped from 10.7 per cent to 1.1 per cent. This narrowed the rural-urban gap in extreme poverty from 7.7 percentage points to 1.7 percentage points, representing an annual decline rate of around 16 per cent.
Transition to Lower-Middle-Income Status and Moderate Poverty Reduction
India has transitioned into the lower-middle-income category (LMIC), which shifts the focus to a higher poverty threshold of US$ 3.65 per day. Under this measure, the poverty rate dropped from 61.8 per cent to 28.1 per cent, lifting 378 million people out of poverty.
- Rural poverty under this threshold declined from 69 per cent to 32.5 per cent.
- Urban poverty reduced from 43.5 per cent to 17.2 per cent.
- The rural-urban gap shrank from 25 percentage points to 15 percentage points, with an average annual decline of 7 per cent.
This improvement has positively impacted millions of people, with both rural and urban communities sharing in the benefits of widespread economic growth.
Role of Major States in Poverty Alleviation
India’s five most populous states—Uttar Pradesh, Maharashtra, Bihar, West Bengal, and Madhya Pradesh—have been pivotal in the nation’s poverty reduction story. In 2011–12, these states together accounted for 65 per cent of the country’s extreme poor. By 2022–23, they contributed to two-thirds of the national reduction in extreme poverty.
However, despite their contributions, these five states still housed disproportionate share of the poor. In 2022–23, they accounted for 54 per cent of India’s extreme poor and 51 per cent of the multidimensionally poor.
This indicates that while progress has been significant, continued efforts are needed in these states to sustain and accelerate poverty reduction.
Decline in Multidimensional Poverty
Multidimensional poverty, which includes non-income factors like education, housing and access to basic services, has also seen a dramatic decline, based on the Multidimensional Poverty Index (MPI). According to MPI, the non-monetary poverty fell from 53.8 per cent in 2005–06 to 16.4 per cent in 2019–21. As stated in the World Bank’s Multidimensional Poverty Measure (MPM), the rate stood at 15.5 per cent in 2022–23. According to the World Bank, India has made notable progress in addressing non-monetary aspects of poverty. Looking ahead, poverty estimates are likely to shift as new global benchmarks and standards are introduced.
Inequality and Wage Disparities
The Gini index measures the extent to which the distribution of income or consumption among individuals or households within an economy deviates from a perfectly equal distribution. A Gini index of zero represents perfect equality, while an index of 100 implies perfect inequality. India’s consumption-based Gini index improved modestly from 28.8 in 2011–12 to 25.5 in 2022–23. However, this may underestimate actual inequality due to data limitations.
In contrast, data from the World Inequality Database reveals that income inequality has worsened, with the income-based Gini coefficient rising from 52 in 2004 to 62 in 2023. Furthermore, the top 10 per cent of earners had median incomes 13 times higher than the bottom 10 per cent in 2023–24. Such disparities still arising, despite reductions in poverty, makes economic inequality a concern.
Changes in Poverty Metrics and Thresholds
Poverty estimates are subject to change due to adjustments in international poverty line updates to PPP calculations. When recalibrated using 2021 PPPs, the extreme poverty line increases to US$ 3.00 per day, which is 15 per cent higher than the older US$ 2.15 threshold in 2021. The lower-middle-income poverty line adjusts to US$ 4.20 per day, which is five per cent lower than the prior US$ 3.65. Under these revised thresholds, extreme poverty in 2022–23 would be 5.3 per cent and LMIC poverty would be 23.9 per cent.
Employment Trends and Labour Market Shifts
According to the World Bank findings, notable progress has been seen across both rural and urban employment. Since 2021–22, employment growth has exceeded the growth of the working-age population. Several positive developments have emerged, such as rise in female labour participation. Urban unemployment has declined to 6.6 per cent in the first quarter of FY 2024–25, the lowest since 2017–18. For the first time since 2018–19, there is net shift of male workers from rural to urban employment.
Meanwhile, rural female employment in agriculture has increased, suggesting a return or continuation of agricultural labour among women. However, key challenges persist in youth unemployment which stands at 13.3 per cent and rises to 29 per cent for those with tertiary education. The report further states that informal employment dominates the agricultural sector. Additionally, self-employment is on the rise, especially in rural areas and among women. While female employment rate has reached 31 per cent, a significant gender gap persists. Around 234 million more men than women are engaged in paid work, highlighting continued disparities.
Data Sources and Methodological Considerations
International poverty estimates for the World Bank report for India were derived from:
- The 2011–12 Consumption Expenditure Survey (CES) and
- The 2022–23 Household CES.
These surveys use the modified mixed reference period method and a spatially and temporally deflated welfare aggregate. The 2022–23 survey incorporates improvements in questionnaire design, sampling, and implementation. However, these changes further pose challenges for comparing data over time.
Moreover, due to sampling and data limitations, actual inequality, especially consumption inequality, might be underestimated.
Some key metrics include:
- Extreme poverty: US$ 2.15 per day (2017 PPP)
- Lower-middle-income poverty: US$ 3.65 per day
- Revised thresholds: US$ 3.00 and US$ 4.20 (2021 PPP)
The World Bank’s MPM is a modified version of the Oxford Poverty and Human Development Initiative’s (OPHI) MPI. While it captures extreme poverty, it does not include indicators related to nutrition and health deprivation.
About the Data Platform
The data presented is based on the South Asia Regional Micro Database (SARMD), established in 2014. SARMD is a regional socio-economic database managed by the South Asia Region Data and Statistics team. It covers household surveys from eight countries and adheres to the global monitoring database (GMD) harmonisation guidelines. The welfare aggregate, central to global poverty monitoring, is constructed following these guidelines. All data usage complies with agreements set by original data providers.
About the Report
This report provides concise updates on poverty, inequality, and shared prosperity, in over 100 developing nations. It is published twice a year to coincide with the World Bank Group and International Monetary Fund’s spring and annual meetings. These briefs are designed to offer a quick understanding of a country’s progress and challenges in reducing poverty, helping to maintain global attention on this critical issue.
Each brief includes a two-page summary for a specific country, outlining recent data trends in poverty reduction and presenting the latest figures on key indicators.
The key indicators include:
- Poverty levels and the number of people living in poverty, based on both national benchmarks and international standards, including the extreme poverty line, US$ 2.15, as well as thresholds for lower-middle-income (US$ 3.65) and upper-middle-income (US$ 6.85) groups, all adjusted to 2017 PPP.
- Consistent data that allows for meaningful comparisons of poverty and inequality over time and between countries.
- Measures of multidimensional poverty, capturing non-financial aspects of deprivation such as limited access to education and basic services.
- Levels of inequality reflected through the Gini Index.
Conclusion
To conclude, India has made significant progress in lifting poverty over the past decade. The report underscores the country’s commitment to inclusive development. The rise in employment, especially among women, and multidimensional poverty reduction indicate towards improvements in living standards. These achievements would further strengthen the foundation for sustained progress in removing poverty as well as inequality.
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