Has Poverty In India Really Dropped Big, Or Has The Country Simply Stopped Counting Its Poor?

The sharp drop in poverty numbers will likely have serious implications for policy making, provided the estimates by the New Delhi-based think tank are seen as credible. And the latter may not necessarily be the case.  

To be sure, the government has not officially reviewed the poverty line for nearly two decades and no survey has been done to check how many people actually lived below this notional line dividing the poor and the not so poor in this country.

The number of poor was last officially calculated in 2011-12, at 21.9 per cent. It was based on the recommendations of a committee under economist SD Tendulkar, which pegged the poverty line at a monthly income of Rs 447 per capita for rural areas and Rs 579 for urban areas, at 2004-05 prices.

Adopting the Tendulkar methodology, the poverty lines for 2011-12 were estimated at Rs. 816 and Rs. 1,000 for rural and urban India respectively.

Later a new poverty count based on a different poverty line was done by a committee led by former RBI governor Dr C Rangarajan. The committee set up by the Manmohan Singh government submitted its report in 2014, placing the figure at a higher 29.5 per cent, but it never saw the light of the day as the government changed soon after.

The NCAER report bases its calculations on yardsticks such as household consumption data and then references them with the poverty line drawn up by the Tendulkar Committee, adjusted for inflation.

Can We Estimate The Poor Without Counting Them?

The question that is being now asked is how can we calculate the number of poor if we don’t have any current yardsticks for doing so? And are we even trying to do a fair exercise in counting the marginalised?

Earlier this year NITI Aayog's CEO BVR Subrahmanyam had also claimed that the latest consumer expenditure survey indicated that the number of poor in India has come down to a mere 5 per cent of the total population -- a contention that was promptly contested by many professional economists.

It is well known that India’s GDP has grown substantially over the past two decades, but much of that income growth has gone to people in the top 1 per cent income bracket. The bottom 50 per cent has seen far slower income growth and been hit by inflationary pressures in a manner far worse than the rich as it has seen its purchasing power eaten up by persistent surges in food prices.

A recent  SBI Report estimated 2022-23 poverty ratios after updating the poverty lines to Rs 1,622 for rural and Rs 1,929 for urban areas, which would mean just Rs 54 a day per person in rural areas and Rs 64 a day per person in urban centres. 

This would indicate a level of earnings that is abysmally low to survive anywhere in India and certainly far lower than what most feel should be the ballpark amount needed to just stay alive. Consequently, the decline in poverty estimated by SBI to 7.2 per cent and 4.6 per cent in 2022-23 in rural and urban India respectively would appear to be magical figures.

Since India does not have any national-level income survey, all the estimates are based on Household Consumption Expenditure Survey (HCES). Internationally, the World Bank's definition of poverty puts the line at US$ 2.15 per day, which amounts to around Rs 178 per person, per day. As can be seen, our outdated poverty lines are way below this.

There have also been talks about including non-income criteria to measure poverty. But nothing concrete has been worked out on that score till now.

According to the World Bank data series, poverty had indeed fallen in India in the last two decades. It has fallen drastically to 12.9 per cent in 2021 from 40.6 per cent in 2004. However, in the same time period global poverty reduction has also been no less drastic. It has fallen to 9.0 per cent in 2022 from 23.4 per cent in 2004.

India’s poverty alleviation has been in line with this global trend. The notable point here is that after the pandemic, more people have turned poor across the world. In India, sections of the population sometimes manage to climb out of poverty, only to fall back below the poverty line after some time. Therefore, periodic surveys of the same household are necessary to track poverty.

The NCAER paper titled ‘Rethinking Social Safety Nets in a Changing Society’, used data from the newly completed  Wave 3 of the India Human Development Survey (IHDS) as well as data from Waves 1 and 2 of the IHDS.

However, the fact remains that the Household Consumption Expenditure Survey of 2022-23 shows that the average monthly household expenditure (at 2011-12 prices) is about Rs 68.5 a day in rural (US $ 0.8 at an exchange rate of 83) and Rs 118.1(US $ 1.4) in urban areas.

Earning less than a dollar can hardly qualify to push an individual out of poverty. Especially in a country where 57 per cent of the population depends on free rations to survive.

In fact, the Periodic Labour Force Survey data from 2017-18 to 2022-23 show that there has been a substantial increase in informal and low-paying jobs besides a surge in self-employment.

At the same time, the number of people seeking jobs under the Mahatma Gandhi National Rural Employment Scheme has increased, as of 2024-25, to 131 million individuals, according to official sources.

The latest Jan-March 2024 periodic survey of the labour force brought out by the central government, showed that urban unemployment for those in the age group 15-29 was as high as 17 per cent during January- March 2024, with a dozen states reporting an over 20 per cent unemployment rate during this period.

The data sets tend to reinforce the suspicion that while poverty may have come down, India still has a long way to go before claiming it has managed to rid itself of that economic curse.

Possibly, the time has come to institute an income-based national population survey to track poverty, among other socio-economic indicators. To do so, the government of course has to come out with a clear definition of poverty.

Otherwise, different researchers and agencies will keep on employing different yardsticks to measure poverty. Eradication of poverty cannot be achieved with these ad hoc estimates, many a time suffering from confirmation bias.

Getting into the top GDP league of nations means nothing if a sizeable population goes hungry, suffers malnutrition, does not have access to basic needs of health, education, and shelter, and struggles each day to make ends meet.