India’s Poverty Decline: A World Bank Analysis

General Studies Paper-3

Context: Recently, the World Bank’s released Poverty and Equity Brief on India offers a complex picture of the socio-economic landscape of India, and raises questions about broader economic inequality and the reliability of data in capturing socio-economic trends.

Key Findings of Poverty and Equity Brief on India

• Decline in Extreme Poverty: Extreme poverty, defined as living on less than $2.15 per day (2017 PPP terms), fell from 16.2% in 2011-12 to 2.3% in 2022-23, lifting 171 million people out of poverty.
  • Rural extreme poverty dropped from 18.4% to 2.8%, and urban extreme poverty from 10.7% to 1.1%, narrowing the rural-urban gap.
• Lower-Middle-Income Poverty Line: The World Bank introduces a broader measure of poverty at $3.65 a day (PPP terms), reflecting the challenges faced by low and middle-income countries.
  • Using it, poverty fell from 61.8% to 28.1%, lifting 378 million people out of poverty.
  • Rural poverty declined from 69% to 32.5%, and urban poverty from 43.5% to 17.2%, further reducing the rural-urban gap.
• Regional Contributions: Five populous Indian states — Uttar Pradesh, Maharashtra, Bihar, West Bengal, and Madhya Pradesh — accounted for 65% of the country’s extreme poor in 2011-12 and contributed to two-thirds of the overall decline by 2022-23.
• Inequality Trends: The consumption-based Gini index improved from 28.8 in 2011-12 to 25.5 in 2022-23, indicating reduced inequality.
  • However, income-based inequality remains high, with the median earnings of the top 10% being 13 times higher than the bottom 10%.
• Employment Growth: It has outpaced the working-age population since 2021-22, with rising employment rates among women.
  • Urban unemployment fell to 6.6% in Q1 FY24/25, the lowest since 2017-18.

Challenges Highlighted By World Bank

• Income & Gender Disparities: The median earnings of the top 10% were 13 times higher than those of the bottom 10% in 2023-24, reflecting persistent income inequality.
  • Gender disparities also persist, with 234 million more men in paid work compared to women.
  • Youth unemployment remains high at 13.3%, increasing to 29% among tertiary education graduates.
• Urban-Rural Divide: While the urban-rural gap has narrowed from 84% in 2011-12 to 70% in 2023-24, disparities in access to opportunities and resources remain significant.
• Conflicting Observations on Migration Trends (Data Inconsistencies): The brief notes a recent shift of male workers from rural to urban areas since 2018-19, which contradicts Periodic Labour Force Survey (PLFS) data showing an increase in agricultural employment.
  • A 2024 study by the Economic Advisory Council to the Prime Minister reported a decline in rural-to-urban migration, creating data inconsistencies that require closer examination.

Key Factors Behind the Decline in Extreme Poverty

• Impact of Household Consumer Expenditure Surveys (HCESs) Methodology: The decline is captured through the revised methodology of the HCESs of 2022-23 and 2023-24, allowing a more granular understanding of consumption patterns.
• While extreme poverty is fading, the data reveals that many individuals still struggle with basic living costs.
• Food Security Schemes: The distribution of food grains to 80 crore people has played a pivotal role in reducing extreme poverty.
  • These measures have ensured basic survival needs for millions, contributing to the sharp decline in poverty rates.
• Direct Benefit Transfers (DBTs): Programs like Jan Dhan Yojana and PM Kisan Samman Nidhi Yojana have provided financial support to vulnerable populations.
  • The impact of these schemes, though not fully understood, has been captured through revised methodologies in the HCESs of 2022-23 and 2023-24.

Other Flagship Initiatives

• Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA): It provides 100 days of guaranteed wage employment annually to rural households.
  • It focuses on strengthening the livelihood resource base of marginalized communities.
• Mission Antyodaya: A convergence framework to optimize resources allocated by 26 ministries for rural development.
  • Gram Panchayats serve as focal points for implementation.
• Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM): It empowers rural women through community institutions that provide financial, technical, and marketing support.
  • It facilitates access to government schemes like Swachh Bharat Mission and Poshan Abhiyan.
• Pradhan Mantri Awas Yojana – Gramin (PMAY-G): It aims to provide housing for the poorest segments of society.
  • It uses a three-stage validation process to ensure aid reaches deserving individuals.
• Pradhan Mantri Gram Sadak Yojana (PMGSY): It aims to provide connectivity to unconnected habitations as part of a poverty reduction strategy.
  • It ensures high technical and management standards for rural road networks.
• Multidimensional Poverty Reduction Initiatives: India’s multidimensional poverty declined from 29.17% in 2013-14 to 11.28% in 2022-23, lifting 24.82 crore people out of poverty.
  • The National Multidimensional Poverty Index (MPI) assesses deprivation across health, education, and living standards.

Conclusion

• India’s remarkable reduction in extreme poverty demonstrates the effectiveness of targeted government programs and robust food security measures.
• However, challenges such as persistent inequality, inconsistent data, and the struggle of millions to sustain a basic standard of living highlight the need for continued efforts.
• As India moves forward, balancing welfare schemes with sustainable economic policies will be crucial for building an equitable and inclusive society.