A commentary authored by economists Surjit Bhalla and Karan Bhasin in The Brookings Institution, a leading American think-tank, has revealed that India has achieved the remarkable feat of eliminating extreme poverty, citing recently released consumption expenditure data for 2022-23.
According to the economists, real per capita consumption in India has witnessed significant growth, averaging 2.9% per annum since 2011-12. Notably, rural areas have seen even higher growth at 3.1%, surpassing urban growth of 2.6%.
Moreover, there has been an unprecedented decline in urban and rural inequality, as indicated by the Gini coefficients. Urban inequality, measured by the Gini coefficient, dropped from 36.7 to 31.9, while rural inequality decreased from 28.7 to 27.0. This decline in inequality alongside high per capita growth has played a pivotal role in eliminating poverty in India.
The authors highlight that the Headcount Poverty Ratio (HCR), which measures the proportion of the population living below the poverty line, has plummeted from 12.2% in 2011-12 to a mere 2% in 2022-23, equivalent to an annual decline of 0.93 percentage points. Rural poverty now stands at 2.5%, with urban poverty reduced to 1%.
However, it’s important to note that these estimates do not account for government-provided free food and public health and education services utilized by a significant portion of the population.
The pace of decline in poverty levels is particularly remarkable, considering that similar declines in the past took around 30 years, whereas India has achieved it over just 11 years.
With extreme poverty virtually eradicated, the economists suggest that India should consider graduating to a higher poverty line. This transition would allow for the redefinition of existing social protection programs to better identify and support the genuinely poor.
The authors emphasize that official data now confirms India’s elimination of extreme poverty, aligning with international comparisons. This achievement not only holds positive implications for global poverty headcount rates but also signals the need for India to recalibrate its poverty line to address evolving socioeconomic realities.
