India Takes Giant Strides in Reducing Poverty

It is no secret that in the past one decade India has eliminated the worst forms of poverty. In 2024, the Niti Aayog estimated that Multidimensional Poverty in India had fallen from 55.34% in 2005-06 to 24.85% in 2015-16 and to 14.96% in 2019-21.

Now these findings have been confirmed by the World Bank that has reported almost identical data on poverty in its latest “Factsheet” this month. The Bank noted that, “Over the past decade, India has significantly reduced poverty. Extreme poverty (living on less than $2.15 per day) fell from 16.2 per cent in 2011-12 to 2.3 per cent in 2022-23, lifting 171 million people above this line. Rural extreme poverty dropped from 18.4 per cent to 2.8 per cent, and urban from 10.7 per cent to 1.1 per cent, narrowing the rural-urban gap from 7.7 to 1.7 percentage points—a 16 per cent annual decline.”

Equally significantly, poverty in India as measured by a larger poverty line—the $3.65 per day, the Lower Middle Income Category (LMIC) poverty line—has also reduced considerably. The proportion of people who are below the LMIC line has come down from 61.8% to 28.1% during the same period. Measured by this yardstick, India has lifted 378 million people out of poverty. The rural-urban gap in this respect has also come down.

The Bank also noted that, “As measured by the multidimensional poverty index (MPI), non-monetary poverty declined from 53.8 per cent in 2005-06 to 16.4 per cent by 2019-21. The World Bank’s Multidimensional Poverty Measure is at 15.5 per cent in 2022-23.” These estimates are broadly in line with the government estimates.

It is also interesting to note that consumption inequality—as measured by the consumption-based Gini Index—improved from 28.8 in 2011-12 to 25.5 in 2022-23. But the Bank added a caveat that, “inequality may be underestimated due to data limitations.” One reason for this reduction in consumption inequality in recent years is the huge free-food programme launched by the government in 2020 in the wake of the Covid19 pandemic that has continued uninterrupted since then. More than 80 crore (800 million) persons have benefited from the programme.

At the same time the Bank said that, “In contrast, the World Inequality Database shows income inequality rising from a Gini of 52 in 2004 to 62 in 2023. Wage disparity remains high, with the median earnings of the top 10 per cent being 13 times higher than the bottom 10 per cent in 2023-24.”

The “fact sheet” had positive news on employment as well. It noted that, “Employment growth has outpaced the working-age population since 2021-22. Employment rates, especially among women, are rising, and urban unemployment fell to 6.6 per cent in Q1 FY24/25, the lowest since 2017-18. Recent data indicates a shift of male workers from rural to urban areas for the first time since 2018-19, while rural female employment in agriculture has grown.”

Indian economyLMICmultidimensional povertyReducing povertyWorld Bank