Context: According to the latest World Bank data on poverty levels across the world, India has recorded a sharp decline in extreme poverty. Despite the World Bank raising the threshold, India achieves a big dip in extreme poverty
Relevance of the Topic: Prelims: Key facts related to World Bank latest data on extreme poverty.
India has recorded a sharp decline in extreme poverty over the past decade, as per the latest World Bank estimates even under a higher global poverty benchmark.
Decline in Extreme Poverty in India
The World Bank revised the extreme poverty threshold to $3 per day (2021 PPP), a 15% increase from the earlier $2.15/day standard (adjusted for inflation from 2017-2021).
- Based on the revised extreme poverty threshold, India's extreme poverty rate fell from 27.1% in 2011-12 to 5.3% in 2022-23.
- The number of people living in extreme poverty in India fell from 344.47 million to 75.24 million over this period. Nearly 270 million were lifted out of extreme poverty during the same period.
- Poverty rate: In 2024, about 54.7 million Indians lived on less than $3/day. This equals a poverty rate of 5.44% (2021 PPP).
- The World Bank sets different poverty lines depending on the income level of countries. The poverty line for lower-middle income countries of $4.2 per day (revised upwards from $3.65), India’s poverty rate declined from 57.7% in 2011-12 to 23.9% in 2022-23.
Data used by World Bank
- The World Bank used Household Consumer Expenditure Survey data as a proxy for income, but removed ‘lumpy expenditures’ such as hospitalisation, durable expenses and house rental values. The government conducted two rounds of household consumption expenditure surveys for 2022-23 and 2023-24.
- HCES 2023-24 adopted the Modified Mixed Recall Period method (to capture different items of consumption), replacing the Uniform Reference Period (URP). The MMRP method used different recall periods (7 days, one month, one year) for different items while the URP uses the same reference period for all items.
Decline in Multidimensional Poverty & Inequality in India:
- Earlier, NITI Aayog had estimated that multidimensional poverty in India had also registered a steep decline from 55.34% in 2005-06 to 14.96% in 2019-21. This estimate of poverty was based on 12 indicators and drew on data from the National Family Healthy Surveys.
- The World Bank estimated that inequality in India based on the Gini Index fell from 28.78 in 2011 to 25.51 in 2022. However, these estimates of inequality are based on the household consumption expenditure data, which typically tends to be lower than estimates based on household income.
Need for an Official Poverty Line:
- The country lacks an official estimate of poverty, and needs to incorporate income or expenditure metrics in poverty measurement.
- The Rangarajan Committee (2014) provided a revised poverty line, but it was never officially adopted.
- The existing Multidimensional Poverty Index (MDPI), unlike the Human Development Index, fails to include income or expenditure measures.
Government Interventions in Poverty Reduction
India’s success in reducing poverty has been supported by a range of targeted welfare schemes, such as:
- MGNREGA
- National Food Security Act (NFSA)
- Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY)
- Pradhan Mantri Jan Dhan Yojana (PMJDY)
- Direct Benefit Transfer (DBT)
- Ayushman Bharat PMJAY
- Deendayal Antyodaya Yojana NRLM
- PM-KISAN
- Pradhan Mantri Awas Yojana (PMAY)
- Ujjwala Yojana (PMUY)
These schemes have played a crucial role in addressing income, food, health, and housing insecurity among India’s poor.