India, one of the fastest-growing economies globally, is also home to 129 million citizens living in extreme poverty as of 2024, according to the World Bank (WB). These individuals, about 13 crore people, survive on less than Rs 180 per day ($2.5) or Rs 5400 per month, based on official statistics. Despite years of economic growth and various poverty alleviation programs, poverty remains a daunting challenge for India.
At the current pace, eliminating poverty could take over a century. This bleak forecast comes as half the world’s lower middle-class population continues to struggle with incomes below $6.85 per day, according to the World Bank’s Poverty, Prosperity, and Planet Report. A global policy shift might be necessary to address this widening gap.
Niti Aayog’s Optimism Amidst a Crisis
The Niti Aayog reported a sharp decline in the proportion of poor people in India, from 24.8% to 14.9% between 2015–16 and 2019–21. However, the COVID-19 pandemic caused unprecedented economic challenges, pushing many back into poverty. Even after the pandemic, India’s lower middle class continues to grapple with rising living costs, job instability, income inequality, and inflationary pressures.
The costs of essential goods have soared by a staggering 50% between 2015 and 2022, with real wage rates increasing by just 22% in the same period. This mismatch between rising prices and wage growth has worsened the plight of lower-middle-class and rural communities in particular.
The 2023 Global Hunger Index: A Serious Warning
India ranked 111th out of 125 countries in the 2023 Global Hunger Index, signaling a “serious” hunger crisis. This marked a drop from the previous year’s rank of 107. With millions of citizens still living on the brink of hunger and malnutrition, addressing food security is a pressing issue. As the World Bank pointed out in 2022, even a 1% increase in food prices pushes an additional 10 million people into extreme poverty.
Despite these troubling statistics, a State Bank of India (SBI) study in 2024 estimated that the poverty rate had dropped to 4.5-5% in 2022-23. The report credited this decline to government programs targeting the nation’s most vulnerable populations. However, these findings stand in stark contrast to the broader picture painted by the World Bank and UN reports.
According to the United Nations, India successfully lifted 415 million citizens out of multidimensional poverty between 2005-06 and 2019-21. But the pandemic reversed much of this progress, with the Pew Research Center estimating that 75 million Indians slipped back into extreme poverty due to the economic fallout from COVID-19.
Inconsistent Poverty Estimates: A National Dilemma
One of the main hurdles in addressing poverty in India is the lack of updated official poverty data. Since the last official estimates in 2011-12, there has been no uniform poverty line adopted. In 2014, the proposed poverty line was Rs 972 ($12) per month for rural areas and Rs 1,407 ($17) for urban regions. Current estimates place the poverty line at Rs 1,059.42 ($62) per month in rural areas and Rs 1,286 ($75) in urban areas. These figures reflect a minimal threshold that does not account for rising inflation and living costs.
Former Reserve Bank of India Governor, Duvvuri Subbarao, emphasized that despite India’s status as the world’s third-largest economy with a $3 trillion GDP, it remains one of the poorest among the BRICS and G-20 nations. India’s per capita income of $2,600 ranks it 139th globally, highlighting significant income disparity.
Subbarao further stressed that economic growth alone does not translate into poverty reduction. In India’s case, growth has primarily benefitted the wealthiest citizens, with the top 1% holding an outsized share of the nation’s wealth. The World Bank’s India Development Update (IDU) indicated that India’s growth in 2023-24 was driven by public infrastructure investment and household investments in real estate, neither of which significantly alleviated poverty.
The High Cost of Food Prices and Lack of Employment Growth
Food inflation remains a significant concern for India’s poor. Decades of studies show a direct correlation between rising food prices and poverty rates in the country. Over the years, the National Sample Survey revealed that as the relative cost of food rises, the poverty rate tends to increase, especially among the most vulnerable sections of society.
The World Bank notes that 24 rounds of the National Sample Survey, conducted from 1959 to 1994, established a clear link between rising food prices and the increase in poverty levels. This relationship continues today, as inflation disproportionately affects the lower-middle-class and poor communities.
Income inequality in India remains high, as measured by the Gini index, which has been consistently elevated over the past decades. According to Professor Kalim Siddiqui from the University of Huddersfield, India’s economic growth has disproportionately benefitted the corporate sector, while the working class and poor have been left behind.
Despite high GDP growth, employment opportunities have not expanded at the same pace. The service sector, which is a significant contributor to GDP, employs a far smaller share of the population than its economic weight would suggest. Neo-liberal economic policies, which prioritize corporate growth, have failed to significantly improve living conditions for India’s poor.
A Call for a Global Policy Change
In light of these challenges, the World Bank and various other international organizations are calling for a shift away from policies that focus solely on economic growth. The emphasis, instead, should be on improving working conditions, stabilizing food prices, and fostering inclusive development. This new policy direction could potentially reverse decades of inequality and provide a more equitable distribution of resources to address extreme poverty worldwide.
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