PYQ Relevance:
[UPSC 2015] Though there have been several different estimates of poverty in India, all indicate reduction in poverty levels over time. Do you agree? Critically examine with reference to urban and rural poverty indicators.
Linkage: The article highlights that the World Bank’s report, “India Poverty and Equity Brief: April 2025,” claims India has “almost eradicated extreme poverty” and “significantly reduced consumption inequality since 2011-12”. This directly supports the premise in the PYQ about a reduction in poverty levels. |
Mentor’s Comment: The World Bank’s April 2025 report highlights a decline in extreme poverty in India, supported by new HCES datarevealing insights into consumption inequality. The launch of the PMDDKY aims to reform agriculture through district-level planning, despite concerns over falling public investment in agriculture. Emphasis on inclusive participation and localised implementation is crucial for sustainable growth.
Today’s editorial analyses the World Bank’s report “India Poverty and Equity Brief: April 2025”. This topic is important for GS Paper I (Indian Society) and GS Paper II (Social Justice) in the UPSC mains exam.
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Let’s learn!
Why in the News?
Recently, the release of the World Bank’s report “India Poverty and Equity Brief: April 2025”, which made significant claims about the reduction in poverty and inequality in India.
What are the key findings of the World Bank’s April 2025 report on poverty in India?
- Extreme Poverty Has Nearly Been Eliminated: India has made substantial progress in poverty reduction over the past decade. Eg: About 27 crore people were lifted out of extreme poverty between 2011 and 2023, based on the International Poverty Line of $2.15/day (2017 PPP).
- Consumption Inequality Has Declined: The gap between the rich and poor in consumption patterns has reduced significantly.
- India Among Least Unequal Countries (by Consumption): In terms of consumption distribution, India now ranks among the top four least unequal countries globally. Eg: Both rural and urban households reported increased and more balanced access to milk, eggs, fruits, and vegetables, showing better consumption equity.
How has the HCES data helped understand consumption inequality?
The Household Consumption Expenditure Survey (HCES) 2022–23 data has provided deep insights into consumption inequality in India.
- Decline in Consumption Inequality: HCES showed a reduction in the consumption gap between the richest and the poorest households. Eg: The Gini coefficient for consumption dropped to 28.2 in rural areas and 31.9 in urban areas, indicating more equitable spending.
- Improved Nutritional Access Across Income Groups: Data showed that low-income households are consuming more nutritious food than before. Eg: Compared to 2011–12, rural poor households now consume more milk, eggs, fruits, and vegetables, narrowing the dietary gap.
- Urban-Rural Gap Has Narrowed: Consumption growth in rural India outpaced urban areas, helping to reduce regional inequality. Eg: The monthly per capita consumption rose by over 164% in rural and 146% in urban households (in nominal terms).
- Shift Towards Non-Food Expenditure: Rising non-food spending like education, transport, and health among lower-income groups suggests improving quality of life. Eg: In rural areas, non-food items made up 50.3% of total spending, indicating broader access to services.
- Policy Targeting Becomes Easier: The disaggregated data helps target welfare schemes better at both the state and district level. Eg: States like Odisha and Chhattisgarh, which showed rising consumption among poor households, can now be used as models for nutrition and cash transfer schemes.
Why is distinguishing between income and consumption inequality important?
- Households Smooth Consumption Despite Income Fluctuations: People often use savings, credit, or social networks to maintain consumption when incomes fall temporarily. Eg: A daily wage worker in Uttar Pradesh may lose work during the monsoon, but still manages basic consumption (food, rent) by borrowing from local moneylenders or using savings.
- Public Transfers Reduce Consumption Inequality: Government subsidies and welfare schemes help the poor consume more than their income alone would allow. Eg: A family in Odisha earning low wages may still access subsidised food under the Public Distribution System (PDS) and free school meals, narrowing consumption inequality even if income remains low.
- Informal Support Influences Consumption: Land, gold, livestock, and informal social support can enhance consumption even when income is unstable. Eg: In Maharashtra, a small farmer with seasonal income can sell stored grain or gold jewellery to fund household expenses during lean months—sustaining consumption better than someone with the same income but no assets.
What are the steps taken by the government?
- Expansion of Direct Benefit Transfers (DBT): The government has expanded cash transfer schemes like PM-KISAN, PM-Garib Kalyan Yojana, and Ujjwala 2.0 to ensure income support and reduce consumption inequality. Eg: As of 2024, over 11 crore farmers received ₹6,000 annually under PM-KISAN through DBT.
- Strengthening Food Security SystemsThrough the National Food Security Act (NFSA) and One Nation One Ration Card, subsidised food grains are provided to nearly 80 crore beneficiaries, helping smoothen consumption shocks. Eg: NFSA covers 75% of rural and 50% of urban population, ensuring minimum nutrition.
- Investment in Social Infrastructure and Welfare: Increased spending on education, health, rural housing (PMAY-G), and employment (MGNREGA) to reduce long-term structural inequality. Eg: In FY 2024-25, the budget for MGNREGA was over ₹86,000 crore, supporting rural livelihoods and stabilising consumption during crises.
Way forward:
- Enhance Targeting Through Data-Driven Welfare Delivery: Leverage HCES and SECC data to better identify vulnerable households and customize welfare delivery, especially in nutrition, health, and education. Eg: Use Aadhaar-linked data and digital platforms like PM Gati Shakti to streamline benefit distribution and plug leakages.
- Promote Employment-Led Growth in Rural and Urban Areas: Focus on labour-intensive sectors like agro-processing, textiles, and construction, while supporting MSMEs and skilling initiatives to boost income equality and domestic consumption. Eg: Scale up schemes like PM Vishwakarma and Skill India Mission to create sustainable livelihoods.
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