India's Poverty Rate: Recent Developments and Analysis
In recent months, significant updates regarding India's poverty rate have emerged, notably from the World Bank and the Government of India, highlighting a substantial reduction in poverty levels.
Key Announcements and Statistics
- According to the World Bank's "Poverty and Equity Brief" of April 2025, 171 million Indians have been lifted from extreme poverty in the past decade.
- The World Bank updated its poverty line to $3 a day, stating that only 5.75% of Indians now live in extreme poverty, a decrease from 27% in 2011-12.
Revised Estimates and Implications
- The new estimates show that past poverty levels were lower than previously assumed, with India's poverty rate in 1977-78 recorded at 47% instead of 64%.
- Under the new poverty line, the number of Indians in extreme poverty dropped from approximately 344.4 million in 2011-12 to about 75.22 million in 2022-23.
Interpreting the Poverty Line
The $3-a-day poverty line is calculated based on purchasing power parity (PPP) rather than direct currency conversion, with a conversion rate of 20.6 to the Indian rupee, not 85.
The Role of Context in Poverty Measurement
Understanding poverty requires considering temporal and locational context. Income levels that defined poverty in the past may not apply today, underscoring the importance of continuously updating poverty measures.
India's Historical Approach to Poverty Estimation
- India's last official poverty line was established in 2011-12, based on the Tendulkar Committee’s 2009 formula.
- The 2014 Rangarajan Committee's recommendations for a new poverty line were not officially adopted, leading to reliance on the World Bank and alternative indices like the Niti Aayog's multidimensional poverty index.
Global Poverty Line Evolution
Initially set at $1 a day in 1990, the international poverty line has been adjusted over time due to rising global prices, currently standing at $3 a day.
Domestic Poverty Lines in India
- India’s 2009 poverty line was Rs 17/day for urban and Rs 12/day for rural areas, later adjusted to Rs 36 and Rs 30 respectively in 2011-12 by Tendulkar.
- Rangarajan proposed a rise to Rs 47 in urban and Rs 33 in rural areas in 2014, though not officially recognized.
The Complexity of Poverty Assessment
Estimates of poverty in India vary widely depending on the methodology used, with figures ranging from as low as 2% to as high as 82%.
Current Economic Context
While the reduction in extreme poverty is positive, a broader look at economic well-being shows that 83% of Indians live on Rs 171 a day, highlighting ongoing economic challenges.