India's Poverty in Decline: SBI Report The poverty line is now set at INR 1,632 for rural areas and INR 1,944 for urban areas, significantly higher than the INR 816 (rural) and INR 1,000 (urban) benchmarks established in 2011-12.
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According to the 2023-24 fractile distribution, the poverty rate in rural areas has dropped to 4.86 per cent, while urban areas report an even lower figure of 4.09 per cent. A report by the State Bank of India (SBI) has revealed progress in reducing poverty levels in India.These figures mark a decline from FY23 estimates, which placed rural poverty at 7.2 per cent and urban poverty at 4.6 per cent.
Notably, the report predicts that with the completion of the 2021 Census and the release of updated rural-urban population data, these numbers could undergo minor revisions. However, SBI believes that urban poverty is likely to decline further, consolidating the nation's achievements in poverty alleviation. At an aggregate level, poverty rates in India are now estimated to be between 4 per cent and 4.5 per cent, with almost negligible instances of extreme poverty.
One of the critical drivers behind this progress is the enhanced physical infrastructure in rural areas, which is scripting a new narrative in mobility and economic inclusion. This development is narrowing the horizontal income gap between rural and urban areas, as well as the vertical income gap within rural income classes.
Data from the report indicates a steep decline in the rural-urban consumption gap. The difference between rural and urban monthly per capita consumption expenditure (MPCE) relative to rural MPCE has dropped from 88.2 per cent in 2009-10 to 69.7 per cent in 2023-24. This reduction reflects the success of government initiatives such as direct benefit transfers (DBT), infrastructure development and programs to augment farmers' incomes. By improving rural livelihoods, these measures have catalyzed consumption growth in the lowest income deciles, further reducing poverty.
The poverty line
India's poverty line for 2023-24 has been recalibrated based on inflation adjustments and imputation factors derived from National Sample Survey Office (NSSO) reports. The poverty line is now set at INR 1,632 for rural areas and INR 1,944 for urban areas, significantly higher than the INR 816 (rural) and INR 1,000 (urban) benchmarks established in 2011-12. This recalibration reflects economic shifts over the past decade, as well as improved consumption patterns across income classes.
Using the 2023-24 fractile distribution, the poverty ratios were determined through linear interpolation of the relevant income deciles. The findings suggest that higher consumption growth in the 0-5 per cent income decile has pushed the poverty line into this category, down from the 5-10 per cent decile in the previous year. This shift highlights a structural improvement in consumption patterns among the poorest households.
The report also delves into the impact of inflation on consumption patterns, particularly in lower-income states. Food inflation, for instance, dampens consumption demand more acutely in these regions, underscoring the risk-averse nature of rural populations in low-income states compared to their counterparts in high-income states.
On a broader scale, with the recalibration of inflation weights, the report suggests that inflation in November 2024 could stand at 5 per cent, down from the earlier estimate of 5.5 per cent. This moderation is expected to further support consumption growth and poverty reduction.
