India has witnessed a significant decline in extreme poverty over the past decade, even as the World Bank revised its threshold for measuring poverty upwards. The extreme poverty rate in India has fallen to 5.3% from 27.1% in 2011-12, according to a recent World Bank report. This decline occurred despite the World Bank raising the poverty line to USD 3 per day, up from the earlier USD 2.15 benchmark adjusted for 2021 prices.
The World Bank's report indicates that approximately 54.7 million people in India were living on less than USD 3 per day in 2024, which accounts for 5.44% of the population. This demonstrates the impact of poverty reduction initiatives, even with a higher standard for defining poverty. The revised poverty line takes into account the inflation between 2017 and 2021, providing a more accurate reflection of the current living costs.
The report highlights that India has lifted 171 million people out of extreme poverty between 2011-12 and 2022-23. The extreme poverty rate, calculated using the USD 2.15 per day threshold, fell from 16.2% in 2011-12 to 2.3% in 2022-23. The rural extreme poverty rate also dropped significantly from 18.4% to 2.8%, while urban poverty declined from 10.7% to 1.1%, narrowing the rural-urban gap from 7.7 to 1.7 percentage points, which translates to a 16% annual decline.
The World Bank attributes this poverty reduction to free and subsidized food transfers, which have played a crucial role in supporting vulnerable populations. Additionally, a decline of poverty was recorded at the lower-middle-income country (LMIC) line by 33.7 percentage points.
Notably, five of India's most populous states, namely Uttar Pradesh, Maharashtra, Bihar, West Bengal, and Madhya Pradesh, which previously accounted for 65% of India's extreme poor in 2011-12, were responsible for two-thirds of the total reduction in extreme poverty by 2022-23.
West Bengal's economic performance, particularly in rural areas, has contributed to the state's role in poverty reduction. The growth rate of consumption expenditure in rural West Bengal, where 72% of the population resides, has been higher than the national average. However, it is important to note that West Bengal's urban poverty rate has, at times, trailed the national average due to slower growth in manufacturing and limited employment opportunities.
The World Bank has also adjusted its lower-middle-income category poverty threshold to USD 4.20 per day, increased from USD 3.65 (2017 prices). According to this revised measure, the proportion of Indians below this line decreased significantly from 57.7% in 2011-12 to 23.9% in 2022-23. The number of people under the LMIC threshold reduced from 732.48 million to 342.32 million during this period.
Globally, the World Bank's revisions have led to an upward adjustment in the extreme poverty rate for 2022, from 9% to 10.5%. This has increased the estimated number of people living in extreme poverty worldwide from 713 million to 838 million. Despite this global increase, India has emerged as a statistical outlier, demonstrating a substantial reduction in poverty even with stricter measurement criteria. According to the World Bank’s global poverty update, the number of people living under extreme poverty in India dipped from 344.47 million to 75.24 million between 2011-12 and 2022-23, meaning approximately 269 million people came out of poverty during that time.
