Context:
India has made substantial strides in poverty reduction, with notable improvements in both rural and urban areas. The World Bank‘s recent report highlights several key aspects of this progress, including the decline in extreme poverty, multidimensional poverty, and significant changes in income inequality and employment dynamics.
Extreme Poverty Decline
- Global Poverty Line (PPP $2.15 per day):
- Overall Decline: Extreme poverty dropped from 16% in 2011–12 to 2.3% in 2022–23.
- Rural vs Urban:
- Rural extreme poverty fell from 18.4% to 2.8%.
- Urban extreme poverty dropped from 10.7% to 1.1%.
- Rural-Urban Gap: The rural-urban poverty gap decreased from 7.7 percentage points in 2011–12 to 1.7 percentage points in 2022–23, reflecting a 16% annual reduction.
- LMIC Poverty Threshold ($3.65 per day):
- Overall Decline: Poverty fell from 61.8% to 28.1%, lifting 378 million people out of poverty.
- Rural vs Urban:
- Rural poverty decreased from 69% to 32.5%.
- Urban poverty dropped from 43.5% to 17.2%.
- Rural-Urban Gap: Reduced from 25 to 15 percentage points, indicating a 7% annual decline.
- Multidimensional Poverty Index (MPI):
- Excluding nutrition and health deprivations, non-monetary poverty fell from 53.8% in 2005–06 to 16.4% in 2019–21, and further to 15.5% in 2022–23.
Challenges in Data Comparability
- N C Saxena, former Planning Commission secretary, pointed out that changes in data collection methodology may pose challenges to comparability. He emphasized the need for independent data sources such as the Census and NFHS to ensure accurate poverty assessments.
State Contributions to Poverty
- Key States:
- Uttar Pradesh, Maharashtra, Bihar, West Bengal, and Madhya Pradesh together accounted for 54% of the extreme poor in 2022–23.
- These states represented 65% of the extreme poor in 2011–12 and contributed to two-thirds of the poverty reduction by 2022–23.
Potential Adjustments to Poverty Estimates
- Revised estimates under new poverty lines and 2021 PPPs could show:
- $3 per day threshold: 5.3% poverty rate in 2022–23.
- $4.20 per day threshold: 23.9% poverty rate.
Income Inequality and Employment Trends
- Wage Disparities:
- In 2023–24, the top 10% earned 13 times more than the bottom 10%.
- The Gini index based on consumption improved from 28.8 in 2011–12 to 25.5 in 2022–23, but income inequality worsened, with the Gini coefficient rising from 52 in 2004 to 62 in 2023.
- Employment Challenges:
- Youth Unemployment: 13.3% overall, rising to 29% among tertiary-educated graduates.
- Informal Employment: 23% of non-farm paid jobs are formal, while most agricultural jobs remain informal.
- Self-Employment: Rising among rural workers and women.
- Female Employment: The female employment rate stands at 31%, with 234 million more men in paid employment.
- Employment Growth: Since 2021–22, employment growth has outpaced the expansion of the working-age population.
India has made remarkable progress in reducing extreme poverty, with significant gains in both rural and urban areas. However, challenges remain in addressing income inequality, ensuring sustainable employment, and overcoming data comparability issues. The focus on improving employment opportunities, particularly for youth and women, and maintaining inclusive economic growth will be crucial for sustaining this progress in the future.
