India’s poverty rate has significantly declined to 8.5% in 2022-24 from 21.2% in 2011-12, according to a research paper by the National Council of Applied Economic Research (NCAER). The study, titled “Rethinking Social Safety Nets in a Changing Society,” was authored by Sonalde Desai and utilized data from the India Human Development Survey (IHDS) across three waves. Despite the challenges posed by the COVID-19 pandemic, the report suggests that poverty in India continued to decline steadily.
Steady decline in poverty rates
The IHDS data reveals that India’s poverty rate has been on a continuous decline since 2004-2005. According to the report, poverty dropped from 38.6% in 2004-05 to 21.2% in 2011-12, marking a sharp reduction in poverty levels during this period of strong economic growth. Furthermore, the downward trend continued between 2011-12 and 2022-24, with poverty declining further to 8.5%.
The paper attributes this consistent reduction in poverty to several factors, including economic growth, improved living conditions, and effective poverty alleviation programs. Despite the hardships posed by the COVID-19 pandemic, which strained the economy and led to widespread job losses, the long-term trajectory of poverty reduction in India has remained intact.
Economic growth and social safety nets
The report highlights the important role of economic growth in driving poverty reduction, but it also calls for the rethinking of social protection programs in light of the evolving economic and social landscape. The paper notes that traditional strategies designed to address chronic poverty may no longer be as effective, given that the reasons people fall into poverty are changing.
As the economy grows and opportunities expand, the primary factors driving poverty—referred to as “accidents of birth”—may become less significant. These factors include a person’s socioeconomic background or geographic location, which often determine long-term poverty. In contrast, “accidents of life,” such as illness, natural disasters, or occupational changes, are becoming more critical in determining who temporarily falls below the poverty line.
The paper suggests that India’s social protection programs must evolve to be more dynamic and flexible to accommodate these shifting realities. As the country’s society transforms due to economic progress, social safety nets need to be nimble and responsive to new risks, such as health crises, sudden job losses, and environmental disasters.
Challenges in expanding social protection systems
One of the key challenges for India as it continues on its path toward equitable development will be ensuring that its social protection systems can keep pace with the changing nature of poverty. As economic growth brings new opportunities, the paper suggests that long-term poverty may decrease, but transitory poverty—where individuals or families fall into poverty due to unexpected life events—may become more prevalent.
The paper stresses the importance of implementing targeted interventions to address these shifting causes of poverty. Programs that once focused on lifting large populations out of chronic poverty may need to be redesigned to provide short-term support to people who experience sudden and temporary income losses.
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Other estimates of poverty reduction
In a related statement earlier this year, NITI Aayog CEO BVR Subrahmanyam had suggested that poverty in India has dropped to as low as 5%, based on the latest consumer expenditure survey. He noted that people in both rural and urban areas are becoming more prosperous. By adjusting the poverty line with the Consumer Price Index (CPI), the data indicated that poverty is now concentrated in the lowest 0-5% income bracket.
The National Sample Survey Office (NSSO) released data earlier this year on household consumption expenditure for 2022-23, which showed a significant increase in per capita monthly expenditure compared to 2011-12. This data supports the notion that living standards in India have improved, leading to further reductions in poverty.
Evolving poverty line
The poverty line in India was initially recommended by the Tendulkar Committee Report in 2004-05, setting the threshold at ₹447 for rural areas and ₹579 for urban areas. These thresholds were later adjusted by the Planning Commission to ₹860 and ₹1,000 for 2011-12, reflecting inflation and cost of living increases.
As living standards continue to improve and India’s economy grows, it is likely that the definition of poverty and the corresponding poverty line will evolve further. The challenge, as highlighted in the NCAER paper, is to ensure that social protection programs evolve in tandem to address the changing nature of poverty.
India’s steady decline in poverty, reaching 8.5% in 2022-24, is a testament to the country’s economic resilience and the effectiveness of poverty alleviation programs. However, as the factors that drive poverty continue to shift, policymakers will need to adapt social safety nets to ensure they remain effective in addressing both chronic and transitory poverty. This will be critical to achieving India’s goal of inclusive and equitable development.
