India Has Eradicated Extreme Poverty; Economists At US Think–Tank Cite Reasons

New Delhi: India has eradicated extreme poverty, says a report by economists Surjit Bhalla and Karan Bhasin at The Brookings Institution, a prominent American think-tank. They have based their commentary citing the recently released consumption expenditure data for 2022-23.

The country’s real per capita consumption has increased by 2.9 percent per annum since 2011-12, the economists asserted. The duo cited the data to highlight that rural growth, standing at 3.1 percent, exceeds urban growth, which stands at 2.6 percent.

Furthermore, there has been an unparalleled decrease in both urban and rural inequality. The urban Gini coefficient dropped from 36.7 to 31.9, while the rural Gini coefficient decreased from 28.7 to 27.0. The Gini coefficient, or the Gini index, measures the inequality of income distribution, whereas a higher value closer to one (or 100 per cent) represents greater inequality.

“In the annals of inequality analysis, this decline is unheard of, and especially in the context of high per capita growth,” the article stated.

The convergence of robust economic growth and a substantial reduction in inequality has led to the eradication of poverty in India. It highlights the purchasing power parity (PPP) of USD 1.9 (based on purchasing power parity at 2011 prices) rather than the PPP USD 2.15 line at 2017 prices.

This, the economists argued, was more because the PPP of USD 1.9 closely corresponds to the official India Tendulkar poverty line.

Tendulkar Committee computed new poverty lines for rural and urban areas of each state based on the uniform poverty line basket and found that all India poverty line (2004-05) was Rs 446.68 per capita per month in rural areas and Rs 578.80 per capita per month in urban areas.

The Headcount Poverty Ratio (HCR), representing the percentage of the population living below the poverty line, has decreased from 12.2 percent in 2011-12 to 2 percent in 2022-23. This decline amounts to an average reduction of 0.93 percentage points per year.

Poverty in rural areas was documented at 2.5%, while in urban areas, it stood at 1%.
“These estimates do not take into account the free food (wheat and rice) supplied by the government to approximately two-thirds of the population, nor utilisation of public health and education,” the authors noted in the commentary.

“The data show a strikingly lower number of poor people in India. than those estimated by the World Bank,” the economists also wrote.

The report stated that the official data unequivocally affirms India’s eradication of extreme poverty, describing it as an encouraging development with positive implications for global poverty headcount rates.

This implies that, akin to other countries, India must now transition to a higher poverty line. This shift will, in turn, present an opportunity to more accurately identify intended beneficiaries and provide enhanced support to those who are truly impoverished.