Despite World Bank raising threshold, India achieves big dip in extreme poverty

Time of India

08-06-2025

NEW DELHI: India's extreme poverty rate has fallen sharply over the past decade after the World Bank updated its international poverty line definition and included updated data in its June upgrade of the methodology.
Based on the update, the latest World Bank data showed that the extreme poverty rate had declined from 27.1% in 2011-12 to 5.3% in 2022-23. The number of people living in extreme poverty also fell sharply during this period from 344.47 million in 2011-12 to 75.24 million in 2022-23. This would mean that nearly 270 million were lifted out of extreme poverty during the same period.
In a blog, the World Bank said that the international poverty line for low-income countries has been raised to $3 per person per day from the existing $2.15 per person per day, and for lower middle-income countries it's changed from $3.65 to $4.20 per day and for upper middle-income countries it went up from $6.85 to $8.40.
Given India's inflation rate, between 2017 and 2021, a revised extreme poverty line of $3 would constitute a 15% higher threshold than $2.15 expressed in 2021 prices and result in a 5.3% poverty rate in 2022-23. A new LMIC line of $4.20 would imply a 5% lower threshold for poverty than $3.65 adjusted in 2021 prices and yield a poverty rate of 23.9%, according to the World Bank.
Using the new poverty line for low middle income countries (LMIC), which is at $4.20 per day per person, India's poverty rate fell to 23.9% in 2022-23 from 57.7% in 2011-12.
The number of people in extreme poverty was down from 732.48 million in 2011-12 to 342.32 million in 2022-23, according to the data available on the World Bank's Poverty and Inequality Platform.
Free and subsidised food transfers supported poverty reduction, and the rural-urban poverty gap narrowed. The five most populous states account for 54% of the extremely poor, it had said.
According to the poverty and equity brief published by World Bank in April, extreme poverty (living on less than $2.15 per day) fell from 16.2% in 2011- 12 to 2.3% in 2022-23, lifting 171 million people above this line.
Rural extreme poverty dropped from 18.4% to 2.8% , and urban from 10.7% to 1.1% , narrowing the rural-urban gap from 7.7 to 1.7 percentage points-a 16% annual decline.
The poverty report had also said India has transitioned into the lower-middle-income category. Using the $3.65 per day LMIC poverty line, poverty fell from 61.8% to 28.1%, lifting 378 million people out of poverty. Rural poverty dropped from 69% to 32.5%, and urban poverty from 43.5% to 17.2%, reducing the rural-urban gap from 25 to 15 percentage points with a 7% annual decline, the April report had said.
The updated World Bank data is expected to come as a shot in the arm for the govt and bolster its record of handling the economy and pursuing policies to push inclusive growth and lift millions out of poverty.
Last year, Niti Aayog CEO BVR Subhramanyam had indicated that the poverty level could be less than 5% based on preliminary estimates on the household consumption expenditure (HCES) data released by the statistics office.
World Bank has said that in recent years, the scope and quality of information provided by household surveys has improved enormously, particularly in low-income and lower-middle-income countries, offering a clearer view into people's welfare and day-to-day lives.
Several research papers have also indicated the reduction in extreme poverty over the last decade thanks to robust growth. A survey released last year estimated poverty to have declined to 8.5% from 21% in 2011-12 and pointed out that chronic poverty has come down but there is a significant proportion of people who can slip back into poverty due to "accident of life".
World Bank, which introduced the international poverty line (IPL) in 1990, has undertaken several updates to include changing prices and costs, and the latest update was undertaken on June 5.
The first update to IPL happened in 2001, with subsequent revisions in 2008, 2015, 2022, and more recently this month. This latest update, which also applies to the poverty lines for middle-income countries, follows the release last year of a new set of PPPs based on prices collected in 2021 by the International Comparison Programme.
It also reflects changes in national poverty lines, which is a big reason for the increase, especially for the line that tracks extreme poverty, according to the World Bank.