In a breakthrough for India’s fight against poverty, the Modi government has made substantial progress in reducing the number of people living in extreme poverty. According to the World Bank's latest report, the percentage of people living in extreme poverty in India has seen a dramatic decline over the last decade. From 27.1% in 2011-12, the poverty rate has fallen to just 5.3% by 2022-23, marking a significant achievement.
Revised poverty line and data
The World Bank's updated figures come with an important revision to the global poverty line, which has been adjusted to $3 per day. The report stated that, considering India’s inflation between 2017 and 2021, this new poverty line of $3 would be 15% higher than the previous threshold of $2.15 per day. Consequently, the extreme poverty rate for India is now recorded at 5.3% for the year 2022-23.
Impact of free ration scheme on poverty reduction
The decline in poverty has been significantly aided by India's free food distribution programs. The government's free and subsidized food transfer initiatives have had a direct impact on reducing poverty, especially narrowing the gap between rural and urban poverty. The report highlighted that 54% of India's extremely poor population resides in the country’s five most populous states, showcasing a concentrated poverty problem in certain regions.
Economic outlook and global risks
While India’s economic growth has been relatively resilient, the report also pointed out challenges for the future. It noted that India's real GDP by the fiscal year 2024-25 would be around 5% lower than the pre-pandemic trajectory. However, if global uncertainties are addressed systematically, India’s economy could return to its potential growth rate by 2027-28.
The report also acknowledged significant global risks that could impede India's economic recovery, including ongoing trade tensions, which could affect export demand, and the delayed recovery of investments. Despite these challenges, the country’s economic fundamentals remain strong.
Sharp decline in extreme poverty over the last decade
The World Bank’s findings show that India has made remarkable progress in reducing extreme poverty over the last decade. According to the World Bank’s “Poverty and Shared Prosperity Brief,” the percentage of people living on less than $2.15 a day (extreme poverty) dropped from 16.2% in 2011-12 to just 2.3% in 2022-23, which means that around 171 million people have risen above this poverty line.
Rural areas have seen a significant drop in extreme poverty, from 18.4% to 2.8%, while urban areas have seen a decrease from 10.7% to 1.1%. This has reduced the rural-urban poverty gap from 7.7% to just 1.7%, reflecting a 16% annual decline in the rural-urban divide.
Global poverty estimates and India's role
The World Bank also revised global poverty estimates, noting a significant increase of 125 million extremely poor people worldwide. However, in India, the number of extremely poor people has dropped drastically, even with the increase in income levels. Despite the global rise in poverty, India’s success in drastically reducing poverty remains a notable achievement.
This report highlights India’s continued progress in alleviating extreme poverty, aided by government programs and economic reforms. While challenges remain, especially in the face of global uncertainties, India’s growing resilience in the fight against poverty is a positive sign for the country’s future. The significant decline in poverty rates proves that the country is on the right track, making it a leading example of poverty reduction in the world.
