India has managed to successfully eliminate extreme poverty—a development of historic and economic import—confirmed by recent household expenditure surveys for 2022-23 and 2023-24 released by the government of India.
The significant milestone, highlighted in the paper Four Facts on Inclusive Growth in India by Surjit S. Bhalla and Karan Bhasin, underscores a progressive shift in India’s developmental trajectory. The data offers compelling evidence of a significant reduction in poverty levels and a sharp decline in inequality, defying conventional perceptions of the country’s economic disparities.
Declining Poverty: What the data says?
For a long time now, India has been involved in debating poverty estimation based on a range of methodologies producing varying results. However, the recent Household Consumption Expenditure Surveys (HCES) for 2022-23 and 2023-24 provide the most comprehensive and up-to-date insights.
The findings reveal extreme poverty, as measured by the $1.90 PPP international poverty line, has declined to below 1 per cent in 2023-24. At the $3.65 PPP poverty line, poverty has decreased from 52% in 2011-12 to just 15.1% in 2023-24. From 51.9 per cent in 2011-12 to 14.9 per cent in 2023-24 the poverty headcount ratio (HCR) at the lower middle-income benchmark of $3.20 PPP has dropped dramatically.
These numbers reflect a remarkable enhancement in living standards over the past decade. The significant decline in poverty corresponds with overall economic progress, especially benefiting the lower-income groups.
Economic growth and welfare schemes: Two key drivers
Several factors have contributed to this historic achievement, with sustained economic growth and targeted social welfare programs playing crucial roles.
- High economic growth rates:
- India has maintained an average GDP growth rate of 6-7% over the past decade. This growth has translated into increased income levels, higher employment opportunities, and enhanced consumption patterns, particularly among the lower deciles of the population.
- Welfare and social protection programs:
- Food Assistance Programs: Initiatives like the Public Distribution System (PDS) and the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) have played a crucial role in ensuring food availability for millions.
- Direct Benefit Transfers (DBT): The government’s adoption of direct benefit transfers has reduced inefficiencies and improved the effectiveness of social welfare programs.
- Employment and Skill Development: Schemes such as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) have provided consistent financial support to low-income individuals through job opportunities.
- Housing and Sanitation Programs: Initiatives like the Pradhan Mantri Awas Yojana (PMAY) and Swachh Bharat Abhiyan have enhanced living conditions, fostering overall socio-economic upliftment for disadvantaged communities.
Sharp rise in consumption and drastic fall in economic inequality
The study also dispels the myth of widening economic inequality in India. A major takeaway from the report is the unprecedented increase in consumption for the bottom three deciles of the population. The monthly per capita expenditure (MPCE) of the poorest sections has risen at a significantly higher rate than that of the wealthier groups.
The Gini coefficient (a measure of inequality) has declined from 37.5 in 2011-12 to 29.1 in 2023-24. Consumption expenditure has increased across all categories, with the largest gains recorded among the bottom 30% of the population. The bottom three deciles have experienced double-digit growth in consumption across food, consumer goods, and durable items.
Such a decline in inequality, combined with poverty reduction, sets India apart as one of the few large economies to have achieved inclusive growth at this scale.
Rethinking the poverty line: A need for new benchmarks
The authors argue that India’s existing poverty lines are outdated given the significant economic progress the nation has made, which data confirms. Traditionally, poverty lines in India were set using calorie-based thresholds and have been periodically updated by expert committees such as the Tendulkar and Rangarajan Committees.
However, the report suggests a shift towards relative poverty measures, similar to those used in European countries. Two new poverty lines have been proposed:
- One is based on the Mean Per Capita Expenditure (MPCE) of the 33rd percentile.
- Another uses the European model, which defines poverty as 60% of the median income.
These benchmarks would provide a more accurate and dynamic understanding of deprivation in a rapidly growing economy, Bhasin and Bhalla argue in the paper.
The road ahead: Maintaining the gains
While the elimination of extreme poverty is a historic achievement, sustaining and expanding these gains requires continued policy focus and conscious efforts. The study contends the next steps in sustaining the gains should include:
- Enhancing human capital: Allocating resources to education and healthcare will help sustain economic progress and contribute to long-term development.
- Strengthening employment in urban and rural areas: As urbanization progresses, creating more job opportunities in manufacturing and services will be essential for economic stability.
- Expanding financial access and digital connectivity: Strengthening digital infrastructure and promoting financial inclusion will enable marginalized communities to participate more actively in the economy.
- Building Climate Resilience and Sustainable Development: Ensuring that economic advancements align with environmental sustainability will be vital for securing a prosperous future for upcoming generations.
Conclusion
India’s success in eliminating extreme poverty is a striking testament to its economic resilience, social policies, and inclusive growth strategies. The findings from the HCES 2023-24 report affirm that not only has poverty declined sharply, but inequality has also reduced—a rare feat among developing economies. As the nation moves forward, updating poverty benchmarks and sustaining economic inclusion will be key to building a truly equitable and prosperous society. This success story serves as a model for other developing nations striving for inclusive economic growth.
