Syllabus:
GS 2: Issues relating to poverty and hunger.
GS 3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
Context:
The World Bank’s Poverty and Equity Brief (Spring 2025) report acknowledges India’s decisive fight against poverty.
Poverty Reduction in India: Key Trends (2011–2023)
The World Bank’s Poverty and Equity Brief for India finds that the sharp reduction in extreme poverty has been broad-based, covering both rural and urban areas.
• Decline in Extreme Poverty ($2.15/day threshold)
- Extreme poverty dropped from 16.2% in 2011–12 to 2.3% in 2022–23, lifting 171 million people above the poverty line.
- Rural poverty declined from 18.4% to 2.8%, and urban poverty fell from 10.7% to 1.1%.
- The rural-urban poverty gap narrowed from 7.7 to 1.7 percentage points, reflecting a 16% annual decline.
• Lower-Middle-Income (LMIC) Poverty Line ($3.65/day):
The brief finds that India has made strong gains in reducing poverty at the lower-middle-income level, measured at 3.65 US dollars per day.
- Poverty rate reduced from 61.8% to 28.1%, lifting 378 million people out of poverty.
- Rural poverty declined from 69% to 32.5%, and urban poverty from 43.5% to 17.2%.
- Rural-urban gap reduced from 25 to 15 percentage points, with a 7% annual decline.
State-wise Contributions
• The five most populous states—Uttar Pradesh, Maharashtra, Bihar, West Bengal, and Madhya Pradesh—accounted for:
- 65% of the extreme poor in 2011–12.
- These states contribute to Two-thirds of the total reduction in extreme poverty by 2022–23.
Multidimensional Poverty Index (MPI)
- MPI-based poverty dropped from 53.8% in 2005–06 to 16.4% in 2019–21.
- World Bank’s Multidimensional Poverty Measure estimated poverty at 15.5% in 2022–23.
Inequality Trends
- Revised international poverty lines now reflect higher minimum income thresholds required to meet basic needs, altering global poverty measurements.
- The adoption of 2021 Purchasing Power Parities (PPPs) accounts for cross-country differences in living costs, enabling more accurate poverty comparisons.
- Based on these updates, 2022-23 projections show 5.3% of people in extreme poverty and 23.9% in lower-middle-income poverty globally.
- India’s consumption-based Gini index improved from 28.8 in 2011-12 to 25.5 in 2022-23, indicating a reduction in income inequality.
Employment and Labour Market Trends
- Employment growth has outpaced the working-age population since 2021–22, especially among women
- Female employment is rising; urban unemployment dropped to 6.6% in Q1 FY24/25 (lowest since 2017–18).
- Migration trend: Male workers are shifting from rural to urban areas (first time since 2018–19).
- Rural female employment in agriculture has increased.
- Self-employment has risen, particularly among rural workers and women, contributing to economic participation.
World Bank: Poverty and Equity Briefs (PEBs)
- It highlights key trends in poverty, shared prosperity, and inequality across more than 100 developing countries.
- These briefs are released twice a year—during the Spring and Annual Meetings of the World Bank Group and the International Monetary Fund (IMF).
• The main objective of the PEBs is to:
- Provide a snapshot of a country’s poverty and inequality context.
- Ensure that poverty reduction remains a global development priority.
• These indicators cover various aspects of poverty, including rates of poverty and the total number of poor, using both national poverty lines and international benchmarks ($2.15 for extreme poverty, $3.65 for lower-middle-income, and $6.85 for upper-middle-income).
PYQ:
The incidence and intensity of poverty are more important in determining poverty based on income alone”. In this context analyse the latest United Nations Multidimensional Poverty Index Report. (UPSC CSE 2020)
UPSC Mains Practice Question:
Q: Discuss the key drivers behind India’s recent decline in poverty and analyse the emerging concerns related to income inequality and informal employment.