Poverty below 5 per cent, urban-rural gap reducing: SBI Research

India’s poverty fell sharply from close to 22% in 2011-12 to well under 5% in 2023-24, with almost minimal incidence of extreme poverty, and a shrinking of urban-rural gap, researchers at the State Bank of India have said.

Citing the results of the Household Consumption Expenditure Survey (HCES) 2023-24 released last week, SBI group chief economic adviser Soumya Kanti Ghosh said that based on fractile distribution, rural poverty plunged from 25.7% in 2011-12 to 7.2% in 2022-23 to 4.86% in 2023-24. Urban poverty declined from 4.6% in 2022-23 to 4.09% in 2023-24.

“At an aggregate level, we believe poverty rates in India could now be in the range of 4-4.5% with almost minimal existence of extreme poverty,” noted Ghosh. In 2011-12, the poverty rate was 21.9% and in 2004-05, it was 37.2%.

These observations corroborate a statement made by Niti Aayog CEO BVR Subrahmanyam in February this year, following the release of HCES 2022-23 results, that population of the poor in India is already below 5%. The monetary threshold for poverty set by the Tendulkar committee (2009) was extrapolated by the think tank for making that assessment. SBI Reserach has drawn, based on the HCES 2023-24, the new poverty line for rural areas at monthly per capita consumption expenditure (MPCE) of Rs 1,632 and for urban areas at Rs 1,944. 2011-12, the respective figures were Rs 816 and Rs 1,000.

However, the negative growth rates in real wages for rural occupations over the recent years appear to be at variance with these estimates.

According to the HCES 2023-24, the lowest fractile class in rural areas, 0-5%, had MPCE of Rs 1,677 in 2023-24, up 22% from Rs 1,373 in 2022-23. In urban areas, the corresponding MPCE was Rs 2,376 in 2023-24, up 18.7% from Rs 2,001 in 2022-23. In 2023-24, the consumption inequality, both in rural and urban areas, declined from 2022-23. The Gini coefficient has declined to 0.24 in 2023-24 from 0.27 in 2022-23 for rural areas, and to 0.28 from 0.31 for urban areas.

“Enhanced physical infrastructure is scripting a new story in rural mobility. One of the reasons for the increasingly shrinking horizontal income gap between rural and urban and the vertical income gap within rural income classes,” said the SBI Research report. Additionally, the difference between rural and urban MPCEs is now at 69.7%, a rapid decline from 88.2% in 2009-10, mostly due to the initiatives the government has taken in terms of DBT transfers, building rural infrastructure, augmenting farmer’s income, improving the rural livelihood significantly, it added.