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Indian Express
7 days ago
- Business
- Indian Express
ExplainSpeaking: The truth about poverty in India
Dear Readers, Over the past few months, there's been a flurry of news about India's poverty rate, or the ratio of people who are considered officially poor. First, on April 25, the Government of India came out with a press release titled 'India's Triumph in Combating Poverty', where it used the World Bank's 'Poverty and Equity Brief' of April 2025 to state that '171 million lifted from extreme poverty in 10 years'. Then, earlier this month, the World Bank came out with an update on the methodology and level of its poverty line and stated that just 5.75% of Indians now live under abject poverty — down from 27% in 2011-12. There are two key takeaways. One, according to new WB estimates, India's poverty levels in the past were actually lower than previously estimated (see TABLE 1). For instance, in 1977-78, India's poverty level was not 64% but 47%. The dialling back of poverty rates continues through the decades. The second key change in the WB update was the adoption of a new poverty line — $3 a day — and according to this new income level, the proportion of Indians living in abject or extreme poverty has fallen from 27% in 2011-12 (around 344.4 million or 34.44 crore Indians) to just under 6% (around 75.22 million or 7.5 crore) in 2022-23. As heartening as this news is, there are several common misconceptions about how to read this data, what it actually means and why many question it. For instance, when you look at the $3-a-day poverty line, do you multiply it by 85 (the current market exchange rate between the US dollar and Indian rupee) to arrive at Rs 255 a day as the income level for ascertaining whether an Indian is poor or not? If you do that, you are mistaken because the $3 poverty line is calculated on a purchasing power parity (PPP) basis, and the conversion rate to Indian rupee is not 85 but 20.6. Simply put, it is the level of income used as a cut-off point for deciding who is poor in any economy. It is important to note here that the context (both time period and location) is critical to arriving at a meaningful poverty line. For instance, an Indian receiving a salary of Rs 1,000 a month may not have been considered poor in 1975, but today that income (Rs 33 a day) will barely buy anything. Similarly, a monthly salary of Rs 1,00,000 (or Rs 3,333 a day) in today's Patna will be comfortable for a person to live by, but the same salary in Paris or New York may not buy the same lifestyle. Since there is no one level of poverty — what is a comfortable level for one is just okay for another and barely enough for the third — one can create several poverty lines to match the context and analytical use. Governments, especially in developing and poor countries, want to identify the extent of poverty in their countries. This has two uses. One, to help them gauge the extent of poverty and shape welfare policies for the poor. The second use is for governments, policymakers and analysts to understand whether a set of policies has actually worked over time to reduce poverty and improve wellbeing. Historically, India had been a leader in poverty estimation and India's poverty line methodology and data collection influenced the rest of the world in how to study poverty. However, India's last officially recognised poverty line was in 2011-12. It was built on a 2009 formula suggested by a committee led by noted Delhi School economist Suresh Tendulkar. Since then, there has been no update on the method. In 2014, a committee led by former RBI Governor C Rangarajan was commissioned to provide a new method, but this recommendation was never officially accepted. Since then, thanks to gaps and changes in relevant data collection, India has increasingly used either the Niti Aayog multidimensional poverty index (which is fundamentally different in how it measures poverty) or relied on the World Bank's poverty line. As explained, poverty lines make sense only when they can capture the context, like the purchasing power at a particular time and place. That is why for WB's poverty line to make sense, it has to be based on the purchasing power parity calculations. The first-ever poverty line was set at a dollar a day. Here's how it came about: 'In 1990, a group of independent researchers and the World Bank examined national poverty lines from some of the poorest countries in the world and converted those lines into a common currency by using purchasing power parity (PPP) exchange rates. The PPP exchange rates are constructed to ensure that the same quantity of goods and services are priced equivalently across countries. Once converted into a common currency, they found that in six of these very poor countries around the 1980s the value of the national poverty line was about $1 per day per person (in 1985 prices). This formed the basis for the first dollar-a-day international poverty line,' according to the World Bank. Over time, as prices went up in every country, the WB had to raise its poverty line. In June, they have now raised it to $3 a day. The PPP exchange rate for Indian rupees in 2025 is 20.6. As such, the poverty line delineating abject or extreme poverty for an individual in the US is an income of $3 a day, while for India it is Rs 62 a day. For the UK, the PPP conversion rate is just 0.67, while for China it is 3.45 and for Iran it is a whopping 1,65,350. India's own (domestically formulated) poverty line in 2009, before the Tendulkar recommendation, was Rs 17 a day per person for urban areas and Rs 12 a day per person for rural areas. In 2009, Tendulkar raised the poverty line to Rs 29 per day per person in urban areas and Rs 22 per day per person in rural areas, and later to Rs 36 and Rs 30, respectively, in 2011-12. In 2014, Rangarajan recommended raising the domestic poverty line to Rs 47 per person per day in urban areas and Rs 33 in rural areas. Many economists, such as Himanshu, professor of economics at the Jawaharlal Nehru University in New Delhi, and someone who worked with Tendulkar during the formulation of the last official poverty line, have written extensively on the subject. He showed how, in the absence of a robust and updated domestic poverty line and given the gaps and changes in data collection, India's poverty estimates exhibit wide variation, creating both confusion and controversy (see TABLE 2). Poverty in India could be as low as 2% or as high as 82% depending on the choice of poverty line and methodology. The same trend of variation exists in the reduction in poverty rates — they could be steep or fairly gradual. Upshot Bizarre as it may seem, especially for a country with so many people at low levels of income and consumption, as well as a country with an enviable record of studying poverty, India's poverty lies in the eyes of the beholder. How do you know if a person is poor or not? How many are poor? Should one quote 5.75% who live in abject poverty (Rs 62 a day)? Or look at 24%, the poverty line for 'lower middle-income countries' such as India? Should one consider 20% as the rate, the proportion of Indians who voluntarily line up to offer labour instead of a paltry amount? Or 66% who are provided free food by law? TABLE 3 attempts to provide some context on the World Bank's poverty lines and how they compare with India's reality as evidenced by official government surveys and data. Earlier this year, when the Union Budget was unveiled, the government waived off all income tax for those earning an income upto Rs 12 lakhs per annum — that works out to be Rs 3,288 per day. In essence, the government believes that imposing any income tax on such an Indian will be overtaxing them and holding back their consumption and the growth of the broader economy. There are two ways to look at the WB data, although they are not mutually exclusive. One, to celebrate the reduction in the proportion of Indians living in what is defined as abject poverty ($3 or Rs 62). Two, to give ourselves pause to understand the actual state of economic well-being (or the lack of it) of an average Indian when as many as 83% of Indians are living off Rs 171 a day. Remember, these poverty lines are inclusive of all income or expenditures. How much did you spend or earn today? Share your views and queries on Take care, Udit Udit Misra is Deputy Associate Editor. Follow him on Twitter @ieuditmisra ... Read More
News18
11-06-2025
- Business
- News18
PM Modi's Five Pledges Fulfil Deendayal's Five Suggestions
As early as 1949, Deendayal Upadhyaya articulated the need for 'economic, social, cultural as well as spiritual freedom". Within each of these dimensions, he envisioned the fulfilment of freedom and selfhood. No dimension could be overlooked in his schema for national rejuvenation through integral growth and progress. Over the past eleven years, under Narendra Modi's leadership, each of these dimensions has received significant focus and innovative action. It is pertinent to briefly examine some of these. Financial Inclusion: Financial inclusion has broadened and reinforced economic freedom, achieving unprecedented reach and impact in the last eleven years. This is manifested in the flagship Jan Dhan scheme and is evident in the 250 million people lifted out of multidimensional poverty over the past decade. In its Spring 2025 World Bank's Poverty and Equity Brief, a global poverty update, the World Bank noted a significant decline in extreme poverty in India over the past decade. This sharp decline, from 27.1% to 5.3%, has lifted 171 million people out of extreme poverty. These are definitive indicators of enhanced economic freedom. India's surpassing of Japan to become the world's fourth-largest economy further signifies India's resolute progress towards deepening its economic freedom, marking a decisive milestone in realising this vision.
The Print
28-04-2025
- Business
- The Print
Over 170 million lifted above poverty line in India, Modi government and Congress claim credit
According to a World Bank report, extreme poverty (defined as living on less than USD 2.15 per day) decreased from 16.2 per cent in 2011-12 to 2.3 per cent in 2022-23, lifting 171 million people in India above this threshold. New Delhi [India], April 27 (ANI): The World Bank's recent report shows a significant drop in extreme poverty in India, with the government and opposition Congress both claiming credit for the improvement, as over 170 million people moved above the poverty line between 2011-12 and 2022-23. The government views this as an endorsement of Prime Minister Narendra Modi's claims regarding poverty reduction. Citing the World Bank report, the Ministry of Information and Broadcasting released a statement saying that the Poverty and Equity Brief from the multilateral bank was an acknowledgement of India's 'decisive fight' against poverty. 'This achievement is a testament to the Government of India's commitment to inclusive development, focusing on both rural and urban areas. Through targeted welfare schemes, economic reforms, and increased access to essential services, India has made substantial strides in reducing poverty levels,' the government said in the statement on Saturday evening. On Sunday, Senior Congress leader and Rajya Sabha member Jairam Ramesh attributed this success to the economic reforms of 1991 and several social welfare interventions developed by former Prime Minister Manmohan Singh's government during 2004-14. 'The most important intervention is the MGNREGA, 2005, which has effectively set a floor on the annual income for crores of families, acting as a safety net to keep families out of poverty, and the National Food Security Act, 2013, that provides the foundation for the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY),' Jairam Ramesh, General Secretary (Communications) of Congress, said in the statement. 'As per calculations based on the international poverty line (USD 2.15/day), poverty has continued its downward trend in recent years to reach extremely low levels. This reflects the success of India's growth story, which began with liberalisation in June 1991 and which has since taken a momentum of its own – and that of several social welfare interventions developed by Dr Manmohan Singh's Government during 2004-14,' the Congress veteran added. The World Bank's Poverty and Equity Brief report, released earlier this week, revealed that rural extreme poverty dropped from 18.4 per cent to 2.8 per cent, and urban extreme poverty fell from 10.7 per cent to 1.1 per cent, narrowing the rural-urban gap from 7.7 to 1.7 percentage points–a 16 per cent annual decline. Using the USD 3.65 per day lower-middle-income category poverty line, poverty dropped from 61.8 per cent to 28.1 per cent, lifting 378 million people out of poverty. Rural poverty fell from 69 per cent to 32.5 per cent, and urban poverty dropped from 43.5 per cent to 17.2 per cent, reducing the rural-urban gap from 25 to 15 percentage points with a 7 per cent annual decline. The five most populous states–Uttar Pradesh, Maharashtra, Bihar, West Bengal, and Madhya Pradesh–accounted for 65 per cent of the country's extreme poor in 2011-12 and contributed to two-thirds of the overall decline in extreme poverty by 2022-23. (ANI) This report is auto-generated from ANI news service. ThePrint holds no responsibility for its content.
Time of India
27-04-2025
- Business
- Time of India
Sharpening inequality now firmly embedded in nature of country's economic growth: Congress
Attacking the Centre citing a World Bank report , the Congress on Sunday claimed that sharpening inequality is now firmly embedded in the nature of the country's economic growth, and asserted there is a compelling need for tax reforms in GST, ending "brazen corporate favouritism" and providing income support for families. Congress general secretary in-charge communications Jairam Ramesh said the World Bank has released its Poverty and Equity Brief for India this month, and the report raises several concerns even as the Modi government spins it to its benefit. #Pahalgam Terrorist Attack India stares at a 'water bomb' threat as it freezes Indus Treaty India readies short, mid & long-term Indus River plans Shehbaz Sharif calls India's stand "worn-out narrative" In its report, the World Bank has said, "Over the past decade, India has significantly reduced poverty. Extreme poverty (living on less than USD 2.15 per day) fell from 16.2 per cent in 2011-12 to 2.3 per cent in 2022-23, lifting 171 million people above this line." In his statement on the report, Ramesh noted that as per calculations based on the international poverty line (USD 2.15/ day), poverty has continued its downward trend in recent years to reach extremely low levels. Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Google Brain Co-Founder Breaks His Silence: Read These 5 Books And Turn Your Life Around Blinkist: Andrew Ng's Reading List Undo "This reflects the success of India's growth story - which began with liberalisation in June 1991 and which has since taken a momentum of its own - and that of several social welfare interventions developed by Dr Manmohan Singh's government during 2004-14," he said. Ramesh claimed the most important intervention is the MGNREGA , 2005 which has effectively set a floor on the annual income for crores of families, acting as a safety net to keep families out of poverty and the National Food Security Act, 2013 that provides the foundation for the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKY). Live Events He, however, pointed out that the World Bank has also warned that more updated data --adoption of purchasing power parity conversion factor from 2021 as compared to that of 2017 -- would result in a higher rate of extreme poverty. "Changes in the questionnaire design, survey implementation, and sampling in the Household Consumption Expenditure Survey 2022-23 present challenges from making comparisons over time', he said, citing the report. "It is worth recalling that these changes were made after the Government rejected the previous iteration of the survey (conducted in 2017-18) after it showed falling consumption in rural areas," he said. As a lower middle-income country, the appropriate rate to measure poverty in India is that of YSD 3.65/day, Ramesh said, adding that by this measure, the poverty rate for India in 2022 is significantly higher at 28.1%. "Wage disparity in India remains high, with the median earnings of the top 10% being 13 times higher than the bottom 10% in 2023-24. Moreover sampling and data limitations suggest that consumption inequality [as measured by Government data] may be underestimated," he alleged. Ramesh argued that the report, therefore, has several takeaways for Indian policymakers such as the significant variance between differing poverty lines shows that large sections of the population are only marginally above the international extreme poverty line. "Social welfare systems such as MGNREGA and the National Food Security Act 2013 cannot be abandoned but must be strengthened to ensure that they protect these segments from negative shocks," he asserted. Ramesh said the Congress' long-standing demand to increase MGNREGA wages, and to conduct the decadal Population Census (due in 2021) and include 10 crore additional persons in the ambit of the NFSA, finds new urgency based on these numbers. "The lack of clarity and transparency over the prevalence of poverty in India is a result of this Government's confused and opaque policymaking. Since the Rangarajan Committee Report submitted in 2014, the Union Government has not set any updated poverty line for the country. The Government must do so immediately," he said. Asserting that data quality, consistency, and integrity are of the highest priority, Ramesh said the government's recent track record on this front -- best exemplified by the suppression of the Consumption Expenditure Survey 2017-18 - is not inspiring. "In fact, blatant data doctoring and manipulation is part of the Modi government's tool-kit when economic realities are contrary to its claims and boasts," he alleged. Ramesh claimed that "sharpening inequality" is now firmly embedded in the nature of our economic growth and its trajectory fuelled by the Modi government's policies and the widening gap between the privileged few and the dispossessed many can no longer be denied. "There is a compelling need for tax reforms in GST to mitigate its regressive impacts ending tax terrorism to stimulate private corporate investment, ending brazen corporate favouritism and providing income support for families and incentives for household savings," the Congress general secretary said. The World Bank report said that rural extreme poverty dropped from 18.4 per cent to 2.8 per cent, and urban from 10.7 per cent to 1.1 per cent, narrowing the rural-urban gap from 7.7 to 1.7 percentage points, a 16 per cent annual decline. The brief said that India also transitioned into the lower-middle-income category. Using the USD 3.65 per day LMIC poverty line, poverty fell from 61.8 per cent to 28.1 per cent, lifting 378 million people out of poverty.
Time of India
26-04-2025
- Business
- Time of India
171 million lifted above poverty line in 10 yrs: World Bank
NEW DELHI: Over the past decade, India has significantly reduced poverty with extreme poverty declining from 16.2% in 2011-12 to 2.3% in 2022-23, lifting 171 million people above the poverty line, a World Bank report said on Friday. 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, according to the multilateral agency's Poverty and Equity Brief. "India also transitioned into the lower-middle-income category. Using the $3.65 per day LMIC (lower middle income country) poverty line, poverty fell from 61.8% to 28.1%, lifting 378 million people out of poverty," said the report. It said 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. Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Sumatera Utara: AI guru Andrew Ng recommends: Read These 5 Books And Turn Your Life Aroun... Blinkist: Andrew Ng's Reading List Undo The five most populous states - Uttar Pradesh, Maharashtra, Bihar, West Bengal, and Madhya Pradesh - accounted for 65% of the country's extreme poor in 2011-12 and contributed to two-thirds of the overall decline in extreme poverty by 2022-23, according to the report. "Nevertheless, these states still accounted for 54% of India's extremely poor (2022-23) and 51% of the multidimensionally poor (2019-21). As measured by the multidimensional poverty index (MPI), non-monetary poverty declined from 53.8% in 2005-06 to 16.4% by 2019-21," it said. The World Bank's Multidimensional Poverty Measure is at 15.5% in 2022-23. India's consumption-based Gini index improved from 28.8 in 2011-12 to 25.5 in 2022-23, though inequality may be underestimated due to data limitations. In contrast, the World Inequality Database shows income inequality rising from a Gini of 52 in 2004 to 62 in 2023. It said employment growth has outpaced the working-age population since 2021-22. Employment rates, especially among women, are rising, and urban unemployment fell to 6.6% in Q1 FY24/25, the lowest since 2017-18. "Recent data indicates a shift of male workers from rural to urban areas for the first time since 2018-19, while rural female employment in agriculture has grown," said the report.
