Solving India's poverty puzzle
Has poverty been nearly eradicated in India? Yes, if one goes by the findings of a World Bank brief on poverty and equity released in April. As per the report, the proportion of people in India living below the revised international poverty line of $3 per capita per day at 2021's purchasing power parity (PPP) has declined sharply from 27.1 percent in 2011-12 to 5.3 percent in 2022-23.
If one uses the previous international poverty line of $2.15 per capita per day (2017 PPP) the proportion below the poverty line in India fell from 16.2 percent in 2011-12 to 2.3 percent in 2022- 23. This implies that over the period from 2011-12 to 2022-23, about 171 million people were lifted above the poverty line. If, on the other hand, one uses the international poverty line of $3.65, applicable for lower middle-income countries such as India, the proportion declined from 61.8 percent to 28.1 percent during the same period.
The World Bank's findings are based on data from India's Household Consumer Expenditure Surveys of 2011-12 and 2022-23. Given that the methodology used for these two surveys was different, the World Bank has not clarified how these two sets of data were made comparable. The Indian government did not release the 2017-18 HCES due to data quality issues, although it followed the same methodology as the 2011-12 survey.
In a recent article, former RBI Governor C Rangarajan and Mahendra Dev, Chairman of the Economic Advisory Council to the Prime Minister, argue that India's GDP growth primarily explains this decline in poverty. This is questionable considering the history of East Asian economies, which experienced a sharp decline in poverty levels only at high economic growth rates. China, for instance, reported a sharp decline in poverty levels only when GDP growth exceeded 10 percent between 1978 to 2010. India's average GDP growth rates have ranged between 3.8 percent and around 7 percent in the last 10 years, except for -5.38 percent in 2020 due to the Covid pandemic.
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