India’s Poverty Reduction: Progress, Inequality and the Challenge of Inclusive Growth

Context

The World Bank’s October 2026 Poverty & Equity Brief highlighted a significant decline in poverty in India. The proportion of people living in extreme poverty, measured against the $3.00 per day threshold (2021 PPP), declined to 2.6% in 2023, compared to 27.1% in 2011. However, regional disparities, unequal wages and limited access to productive employment remain important concerns.

About the World Bank’s Poverty & Equity Brief

• It is a semi-annual publication of the World Bank that examines country-level trends in poverty, inequality and shared prosperity.
• It uses standardized household-level data to assess monetary and multidimensional poverty.
• It also evaluates changes in living standards and the distribution of economic benefits across different population groups.

Poverty Measurement Benchmarks (2021 PPP)

Poverty Category	Daily Income Threshold
Extreme poverty	$3.00
Lower-middle-income poverty	$4.20
Upper-middle-income poverty	$8.30

The assessment draws upon data from Household Consumption Expenditure Surveys (HCES) and Periodic Labour Force Surveys (PLFS).

Major Findings of the Report

1. Significant Reduction in Extreme Poverty

• Extreme poverty declined from 27.1% in 2011 to 2.6% in 2023.
• The poverty rate also fell from 5.3% in 2022–23 to 2.6% in 2023.
• Approximately 7.52 crore people remained below the $3.00 daily poverty threshold in 2023.

2. Improvement in Lower-Middle-Income Poverty

• The proportion of people living below the $4.20 threshold declined from 57.7% in 2011 to 16.1% in 2023.
• Nearly 49.6 crore people moved above this poverty threshold during the period.
• Nevertheless, a substantial section of the population continues to experience economic vulnerability.

3. Progress under the Upper-Middle-Income Poverty Benchmark

• The population living below the $8.30 daily threshold declined from over 90% in 2011 to 80% in 2023.
• This indicates improving household consumption levels, although a large proportion of Indians remain economically vulnerable.

4. Narrowing Rural-Urban Poverty Differences

• At the $4.20 threshold, rural poverty declined to 19.3%, while urban poverty stood at 8.6%.
• The improvement in rural living standards indicates progress in reducing the traditional rural-urban poverty divide.

5. Decline in Multidimensional Poverty

• Multidimensional poverty declined to 15.5% in 2022–23.
• The Multidimensional Poverty Index (MPI) also recorded a substantial reduction, falling from 53.8% in 2005–06 to 16.4% in 2019–21.
• Improvements in housing, sanitation, electricity, drinking water and other essential services contributed to better living conditions.

6. Reduction in Consumption Inequality

• India’s consumption-based Gini index declined from 28.8 in 2011–12 to 23.0 in 2023.
• However, the World Bank cautioned that consumption-based measurements may not fully capture inequality because wealthier households can be underrepresented in surveys.

7. Future Poverty Estimates

• Poverty at the $4.20 threshold is projected to decline to 14.2% in 2026.
• It may further decrease to 12.1% by 2028, indicating the possibility of continued improvement in household economic conditions.

Factors Contributing to Poverty Reduction

1. Expansion of Employment Opportunities

• Employment increased by approximately 13.4 crore between 2017 and 2023.
• Employment growth exceeded the expansion of the working-age population, increasing the number of earning members in households.

2. Greater Female Workforce Participation

• Rural women entering paid employment contributed significantly to employment expansion.
• Increased female participation improved household income opportunities and economic independence.

3. Strengthening of Social Protection

• Food subsidies, targeted welfare transfers and social security interventions helped vulnerable households manage economic shocks.
• Public investment in rural infrastructure also improved access to essential services and livelihood opportunities.

4. Expansion of Basic Infrastructure

• Access to electricity and drinking water improved considerably.
• Only 1% of the population lacked electricity, while 6.4% remained without basic drinking water access, according to the report.

Major Challenges Highlighted

1. Concentration of Poverty in Specific Regions

• Nearly 57% of India’s remaining poor are concentrated in a contiguous northern and eastern belt extending from Uttar Pradesh to West Bengal.
• Uneven industrial development, infrastructure gaps and limited livelihood opportunities contribute to regional disparities.

2. Persistent Wage Inequality

• The top 10% of wage earners received approximately 13 times the earnings of the bottom 10% in 2023.
• Such disparities indicate that declining consumption inequality has not necessarily translated into equitable income distribution.

3. Stagnant Real Wages and Low Productivity

• A considerable share of employment remains concentrated in agriculture and low-productivity informal activities.
• Limited wage growth and inadequate employment security restrict improvements in household purchasing power.

4. Increasing Youth Unemployment

• Youth unemployment increased from 14.6% in Q1 FY2025–26 to 15.9% in Q1 FY2026–27.
• The increase was particularly noticeable among young rural women, highlighting the mismatch between education, skills and available employment opportunities.

5. Uneven Distribution of Economic Opportunities

• Poverty reduction has not benefited all regions and social groups equally.
• Limited access to quality education, healthcare, skill development and formal employment continues to reinforce intergenerational poverty.

Way Forward

1. Region-Specific Development Strategies

• Prioritise industrial investment, infrastructure development and MSME expansion in high-poverty states, particularly across the Uttar Pradesh–West Bengal belt.
• Promote local economic clusters to generate employment closer to vulnerable communities.

2. Promote Productive and Formal Employment

• Encourage labour-intensive manufacturing, food processing and rural non-farm activities.
• Improve access to formal jobs, social security and stable wages, particularly for informal workers.

3. Strengthen Women’s Economic Participation

• Expand affordable childcare, safe transportation, workplace facilities and access to credit.
• Support women’s participation in manufacturing, services, entrepreneurship and digital economic activities.

4. Address Youth Unemployment through Skill Development

• Align vocational education and technical training with emerging industry requirements.
• Strengthen apprenticeships, industry partnerships and employment-linked training programmes.

5. Improve Poverty and Inequality Measurement

• Modernise household consumption and employment surveys to capture changing economic realities.
• Update the population and sampling frameworks to account for migration, urbanisation and demographic changes.

6. Strengthen Social Protection Mechanisms

• Improve the delivery and coverage of food security, healthcare, housing and income-support programmes.
• Ensure that vulnerable households are protected against inflation, economic shocks and employment disruptions.

Conclusion

India’s reduction in extreme poverty to 2.6% represents significant progress in improving living standards and expanding economic opportunities. However, poverty reduction must increasingly be accompanied by better-quality employment, higher real wages and equitable regional development. Moving towards Viksit Bharat 2047 requires a transition from poverty alleviation driven by welfare support to sustainable poverty reduction through productive employment, human capital development and inclusive economic growth.

Source : The Indian Express