Sharp Drop In Poverty Last Year Largely Driven By GDP Growth

The Household Consumption Expenditure Surveys for 2022-23 and 2023-24 from the National Statistics Office (NSO) provide recent data on poverty and inequality. While many researchers have used the 2022-23 survey, few have analysed the 2023-24 data. We examine trends in head count ratio, poverty depth, and inequality from 2011-12 to 2023-24.

The poverty line (monthly per capita consumption) for rural areas was Rs 972 in 2011-12, Rs 1,837 in 2022-23, and Rs 1,940 in 2023-24. Urban poverty lines were Rs 1,407, Rs 2,603, and Rs 2,736, respectively. For a family of five in urban areas, the 2023-24 poverty line stands at Rs 13,680. The overall poverty ratio fell from 29.5% in 2011-12 to 9.5% in 2022-23, then further to 4.9% in 2023-24. This reflects a significant poverty decline of 2.05 percentage points annually since 2011-12, although slightly slower than the 2.2 points per year during 2004-05 to 2011-12.

According to the World Bank’s Poverty & Equity Brief, India reduced extreme poverty—living under $2.15 per day in PPP terms—from 16.2% in 2011-12 to 2.3% in 2022-23. Over 170 million people escaped extreme poverty in this period. Those below the lower-middle-income poverty line of $3.65 per day dropped from 61.8% to 28.1%.

Factors Behind the Recent Poverty Decline

Poverty fell sharply from 9.5% to 4.9% between 2022-23 and 2023-24. This achievement relates to several factors: GDP growth, inflation, and welfare programmes. GDP growth rose from 7.6% in 2022-23 to 9.2% in 2023-24. Meanwhile, the consumer price index (CPI) eased from 6.7% to 5.4%, although food inflation rose from 6.6% to 7.5%. Welfare safety nets showed little change during this period.

Therefore, GDP growth likely played a key role in the poverty decline. However, caution is necessary before drawing firm conclusions based on just one year of data. Future surveys must confirm if this trend continues.

Depth of Poverty and Inequality Trends

We also explored poverty depth by raising poverty line cut-offs from 100% to 150%. The poverty ratio decreased even more at higher thresholds, falling by 34.2 percentage points between 2011-12 and 2023-24 at 125% of the poverty line. This suggests that reductions reach beyond the poorest groups.

Critics argue the head count ratio overlooks poverty depth. Yet, over 50% of the poor live between 75% and 100% of the poverty line, both in 2011-12 and 2022-23. Similarly, many non-poor hover just above the poverty line, between 115% and 125%.

Consumption inequality also declined. The Gini coefficient dropped from 0.310 in 2011-12 to 0.282 in 2022-23. Surprisingly, inequality fell sharply in one year, to 0.253 in 2023-24—a 0.029-point drop comparable to the entire previous 11-year decline. This sharp fall requires further examination.

India has seen a remarkable poverty decline, with the poverty ratio now below 5%. Consumption inequality has also eased slightly. Most poor people remain close to the poverty line, making poverty easier to address. Yet, the steep reductions between 2022-23 and 2023-24 call for more data before confirming a sustained trend.

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