Reduction of Poverty in India
The last two decades have seen a significant decrease in absolute poverty in India. However, official poverty estimates have been contentious due to disagreements over an accurate poverty line. In the absence of a national consensus, the World Bank's poverty line has often been used for reference.
World Bank Poverty Line
- The World Bank introduced a poverty line of “a dollar a day” in 1990, updated in subsequent years including 2001, 2008, 2015, and 2022.
- For low income, the line is now set at $3 per day, up from $2.15.
- For lower middle-income nations, the cutoff is increased to $4.20 per day from $3.65.
India's Poverty Progress
- The percentage of people living on less than $3 a day has dropped from 27.1% in 2011-12 to 5.3%.
- Those living under $4.20 a day fell from 57.7% to 23.9% during the same period.
- This reflects increased human welfare through economic growth and targeted poverty-alleviation programs.
Geographical and Socio-economic Disparities
Despite overall progress, disparities in poverty reduction persist, especially between rural and urban areas.
- Rural poverty rates remain higher, potentially exaggerated by differing price levels.
- Consumer surveys should substantiate these differences.
Need for Updated Poverty Estimates
India has not conducted a clear poverty estimation exercise in a decade, despite two recent consumption surveys. Updated poverty lines are crucial for eliminating absolute poverty and identifying problem areas.
Challenges and Considerations
- The emergence from poverty is fragile; economic shocks can push people back into destitution.
- Questions remain about the effectiveness of welfare programs in reducing poverty.
- Indian policy should rely on national data rather than multilateral estimates.