Extreme poverty in India halved to 2.6% in 2023 from year ago: World Bank data

Why in the News

The World Bank now puts India’s extreme poverty, meaning people living on less than $3 a day, at 2.6% in 2023, half the 5.3% of 2022 to 2023 and a tenth of the 27.1% of 2011. The same brief warns that wages remain very unequal and that poverty is increasingly concentrated in particular regions.

What does the new World Bank estimate measure?

1. Extreme poverty line: Extremely poor means living on less than $3 a day in 2021 Purchasing Power Parity (PPP) terms. PPP converts money by what it buys, not by the exchange rate.
2. Why PPP: Goods cost less in India than in the United States, so $3 of PPP buys more than the Rs 285 that the market exchange rate would give.
3. Why the numbers moved: The Bank updated its poverty lines, base year (the year whose prices set the yardstick) and survey data last year. India’s 2022 to 2023 consumption survey then cut the count of poor in lower middle income countries by 180 million.
4. The takeaway: The headline figure depends on the line, the price base and the survey, so compare years with care.

How far has poverty fallen on other yardsticks?

1. Lower middle income line: The Bank uses a higher line for countries such as India. The share below it fell from more than half of the population in 2011 to 16.1% in 2023.
2. Scale of the fall: The decline lifted an estimated 496 million people out of poverty.
3. Multidimensional Poverty Index (MPI): The MPI tracks deprivations beyond income, such as health, education and living standards. On the Oxford Poverty and Human Development Initiative measure, it fell from more than half of the population in 2005 to 2006 to about one in six in 2019 to 2021.

What drove the fall?

1. Jobs: Employment rose by 13.4 crore between 2017 and 2023, nearly twice the growth of the working age population.
2. Women at work: Much of the gain came from rural women entering paid work, which also raised the number of earners per household.
3. Government view: The Finance Minister also credited strong consumption growth, rising employment and expanded social transfers such as food subsidies.

Is the fall as complete as it looks?

1. Wage gap: Median earnings of the best paid tenth of workers are about 13 times those of the lowest paid tenth.
2. Flat earnings: Real earnings stayed broadly unchanged because job growth is concentrated in low productivity activities.
3. Regional concentration: About 57% of India’s poor live in a belt from Uttar Pradesh to West Bengal, so further reduction depends on productive employment in these States.
4. Youth unemployment: Youth unemployment rose from 14.6% to 15.9% between the first quarters of the last two fiscal years.

Challenges

1. Survey gaps: The estimates rest on three household consumption surveys, which may miss the spending of wealthier households and so understate inequality.
2. Higher line: A large group remains poor on the lower middle income line, so the fall in extreme poverty does not mean deprivation has ended.
3. Slower pace ahead: The Bank expects only a gradual fall to 14.2% in 2026 and 12.1% by 2028 on the lower middle income line.

Way Forward

1. Jobs in the belt: Target labour intensive manufacturing and services in the Uttar Pradesh to West Bengal belt, the Bank’s named route.
2. Productivity: Raise skills and formal employment so that wages rise along with the number of jobs.
3. Regular surveys: Run consumption surveys at fixed intervals and widen coverage of richer households so inequality is measured fully.

Conclusion

The fall in extreme poverty shifts the question from how many are destitute to how good the available jobs are. The next marker is whether fresh survey data show wages rising in the region where most of the poor now live.

Key numbers

1. Lower middle income line ($4.2 a day): 57.7% of the population in 2011 and 23.9% in 2022 to 2023.
2. Multidimensional Poverty Index (MPI): 53.8% in 2005 to 2006 and 16.4% in 2019 to 2021.
3. Urban and rural, lower middle income line: 8.6% urban and 19.3% rural.
4. Consumption inequality (Gini index, 0 to 100, higher means more unequal): 23.0 in 2023, from 28.8 in 2011 to 2012 and 25.5 in 2022 to 2023.
5. People below each line: 7.5 crore below $3, 34 crore below $4.2 and 115 crore below $8.3 a day.
6. Upper middle income line of $8.3: 80% of the population in 2023, from over 90% in 2011.

Matching Previous Year Question

“[2020, GS2, 15 marks] “The incidence and intensity of poverty are more important in determining poverty based on income alone”. In this context analyse the latest United Nations Multidimensional Poverty Index Report.”