Rural Poverty Ratio Falls Below 5% In FY24, Marking Historic Milestone: SBI Research

The rural poverty in India has seen a sharp decline, with the poverty ratio dipping below 5% for the first time. The study, released on Friday, reported that the rural poverty ratio fell to 4.86% in FY24 from 7.2% in FY23.

In contrast, the poverty ratio in urban areas also decreased, though at a slower pace, dropping from 4.6% to 4.09% during the same period.

Rural Poverty Declines

The significant drop in rural poverty is attributed to several factors, most notably an increase in consumption growth in the 0-5% income fractile. This has led to a shift in the poverty line, moving from the 5-10% decile in FY23 to the 0-5% decile in FY24.

The report suggests that enhanced physical infrastructure, particularly in rural mobility, has contributed to this decline, helping bridge the income gap between rural and urban areas.

“The decline in rural poverty is largely due to higher consumption growth in rural areas, supported by better infrastructure,” the study noted. “Improved rural mobility has led to a shrinking horizontal income gap between rural and urban areas, as well as a narrowing vertical income gap within rural classes.”

Adjusted Poverty Line

SBI Research also examined the updated poverty line for FY24, adjusting for decadal inflation. The new poverty line is estimated at Rs 1,632 per month for rural areas and Rs 1,944 for urban areas. For comparison, the expert group led by Suresh Tendulkar set the poverty line in 2011-12 at Rs 816 for rural areas and Rs 1,000 for urban areas.

However, not everyone agrees with the methodology used in the SBI report. R Ramakumar, a professor at the Tata Institute of Social Sciences, criticized the use of an inflated poverty line based on the Tendulkar method.

Potential Revisions And Future Projections

While the report suggests that India’s overall poverty rate is now in the range of 4-4.5%, it also notes that these numbers could undergo minor revisions once the 2021 census is completed and new data on rural-urban population shares is published. The report further predicts that urban poverty could decline even more, based on future data.

Moreover, the report observes that the changes in food item consumption, despite a declining share of expenditure, have impacted overall consumption patterns.

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