Poverty and Inequality Estimation in India
Poverty and inequality estimation in India has been a contentious topic, particularly with recent economic shocks. The core of the debate involves differences in opinion regarding:
- The accuracy of household survey data.
- The methodology for constructing poverty lines.
- Trends in poverty over the past decades.
Data Gaps and Recent Efforts
The government did not release the 2017-18 consumption expenditure survey due to “data quality issues”, prompting studies to estimate poverty using alternative sources like the Periodic Labour Force Surveys and CMIE data. Recently, the government conducted household consumption expenditure surveys for 2022-23 and 2023-24 to fill this data gap, allowing for a review of poverty trends over the past decade.
Trends in Poverty
According to the latest World Bank data, extreme poverty in India is estimated to have dropped from 27.1% in 2011-12 to 5.3% in 2022-23, despite the poverty threshold being raised from $2.15 to $3 a day. Consequently, the number of people living in extreme poverty declined from 344.47 million to 75.24 million during this period.
Even when considering the poverty line for lower-middle-income countries of $4.2 per day (up from $3.65), the poverty ratio fell from 57.7% in 2011-12 to 23.9% in 2022-23. The decline continued into the subsequent year.
Multidimensional Poverty
Earlier estimates by Niti Aayog indicated a significant decline in multidimensional poverty — from 55.34% in 2005-06 to 24.85% in 2015-16, and further to 14.96% in 2019-21. This estimation was based on 12 indicators using data from the National Family Health Surveys.
Inequality Trends
The World Bank also noted a decrease in inequality, using the Gini and Theil indices, between 2011 and 2022. However, these inequality estimates are based on household consumption expenditure data, which typically yields lower figures than household income-based estimates.
Policy Implications
The data from the latest consumption expenditure surveys and labor force surveys should be used as a critical input for policy-making, helping inform policymakers' decisions.
