Has India Eradicated Extreme Poverty? Check What World Bank Paper Has To Say

Bhubaneswar: Extreme poverty in India has declined by 12.3 percentage points between 2011 and 2019 with the poverty headcount rate falling from 22.5 per cent in 2011 to 10.2 per cent in 2019. Poverty reduction, however, was higher in the rural region than in urban areas, a working paper of the World Bank policy research said.

“Rural and urban poverty dropped by 14.7 and 7.9 percentage points during 2011-2019,” the paper jointly authored by economists Sutirtha Sinha Roy and Roy van der Weide said.

Rural poverty dropped from 26.3 per cent in 2011 to 11.6 per cent in 2019, while in urban areas the decline was from 14.2 per cent to 6.3 per cent during the corresponding period. The study said that farmers with small landholding sizes have experienced higher income growth. “Real incomes for farmers with the smallest landholdings have grown by 10 per cent in annualized terms between the two survey rounds [2013 and 2019] compared to a 2 per cent growth for farmers with the largest landholding,” it said.

According to the research paper, ‘Poverty in India Has Declined over the Last Decade But Not As Much As Previously Thought’, urban poverty rose by 2 percentage points in 2016 coinciding with the demonetisation, while rural poverty rose by 10 basis points in 2019, coinciding with a slowdown in the economy.

The authors also observed a slight moderation in consumption inequality since 2011, but by a margin smaller than what is reported in the unreleased NSS-2017 survey. “Finally, the extent of poverty reduction during 2015-2019 is estimated to be notably lower than earlier projections based on growth in private final consumption expenditure reported in national account statistics,” they added.

Notably, this is the second working paper after a recent International Monetary Fund paper talked about India almost eradicating extreme poverty and bringing down consumption inequality to its lowest levels in 40 years through state-provided food handouts.

“Extreme poverty was as low as 0.8 per cent in the pre-pandemic year 2019, and food transfers were instrumental in ensuring that it remained at that low level in the pandemic year 2020,” the IMF working paper had said.

Extreme poverty has been defined by World Bank as share of people living under $1.9 every day as per 2011 purchasing power parity terms.

The paper, however, flagged the effect of subsidy adjustments on inequality. “Real inequality, as measured by the Gini coefficient, has declined to near its lowest level reached in the last forty years — it was 0.284 in 1993-94 and in 2020-21 it reached 0.292…Possibly the more surprising result from the incorporation of food subsidies into the calculation of poverty is that extreme poverty has stayed below (or equal to) 1 per cent for the last three years.”