India made ‘remarkable progress’ in reducing poverty, says World Bank

Why in news?

The World Bank’s October 2026 Poverty and Equity Brief says India achieved one of the world’s fastest poverty reductions.

UPSC Relevance 

Prelims: Poverty lines, World Bank PPP lines, Multidimensional Poverty Index (MPI), poverty estimation committees, HCES, related schemes.

Mains GS2: Issues relating to poverty and hunger; welfare schemes for vulnerable sections.

Mains GS3: Inclusive growth, employment and issues arising from it.

Findings of the World Bank 

• Monetary poverty: Between 2011 and 2023, the share of people below the Lower Middle-Income Country (LMIC) line of $4.20/day fell from 57.7% to 16.1%, lifting about 496 million people out of poverty.
• Extreme poverty: Population below $3.00/day fell from 27.1% to 2.6%.
• Multidimensional poverty: As per the OPHI MPI, poverty fell from 53.8% (2005-06) to 16.4% (2019-21); the World Bank’s own MPI measure was 15.5% in 2022-23.
• Employment: Between 2017 and 2023, jobs grew by about 134 million, nearly twice the growth of the working-age population. Rural women entering paid work raised the number of earners per household.
• Areas of concern:
  • Median earnings of the top 10% of workers were about 13 times those of the bottom 10% (2023).
  • Youth unemployment rose from 14.6% to 15.9% between Q1 FY2026 and Q1 FY2027, especially among rural young women.
  • A contiguous belt from Uttar Pradesh to West Bengal holds 57% of India’s poor.
  • Future poverty decline is projected to be slower.

What is Poverty?

Poverty is a condition in which a person cannot meet the basic needs of a decent life. How we define these “basic needs” decides how we measure poverty.

• Absolute poverty: Lack of income or consumption needed for a minimum basket of food and non-food items. A fixed poverty line is drawn and people below it are counted as poor.
• Relative poverty: Being poor compared to others in the same society, e.g. earning less than 50% of median income. It is more common in developed countries.
• Monetary (uni-dimensional) poverty: Measures only income or consumption expenditure. Easy to calculate but ignores whether a person actually has access to health, schooling, clean water or housing.
• Multidimensional poverty: Looks at actual deprivations in a person’s life, such as nutrition, schooling, sanitation, electricity and housing. It draws from Amartya Sen’s capability approach, which says poverty is the lack of freedom to live the life one values, not just low income.
• Vulnerability: Many households just above the line can slip back due to an illness, crop failure or job loss. This is often called transient poverty, as against chronic poverty.

How is Poverty Measured in India?

1. Monetary poverty – the poverty line approach

• India uses consumption expenditure rather than income, since income data of informal workers and farmers is unreliable.
• Data comes from the Household Consumption Expenditure Survey (HCES) of the National Statistics Office (NSO), earlier the NSSO.
• A poverty line (Monthly Per Capita Expenditure needed for a minimum basket) is fixed, and the share of people below it gives the Head Count Ratio (HCR).
• Erstwhile Planning Commission was the nodal body for official poverty estimates; after it was replaced by NITI Aayog in 2015, no new official poverty line has been notified.

Major committees on poverty estimation

• Recent change: The HCES 2022-23 and 2023-24 used the Modified Mixed Reference Period (MMRP) and also recorded the value of free items received from welfare schemes. Monthly per capita consumption rose to about Rs 4,122 (rural) and Rs 6,996 (urban) in 2023-24, while consumption inequality (Gini) fell in both areas.
• World Bank lines: In 2025 the World Bank shifted to 2021 PPPs and revised the international extreme poverty line from $2.15 to $3.00 a day. Other lines are $4.20 (Lower Middle-Income) and $8.30 (Upper Middle-Income). India is a lower middle-income country, so the $4.20 line is more relevant to it.

2. Multidimensional poverty

• Global MPI: Launched in 2010 by UNDP and the Oxford Poverty and Human Development Initiative (OPHI). Uses 10 indicators under three dimensions.
• National MPI: Prepared by NITI Aayog using the Alkire-Foster method and NFHS data. It has 12 indicators (two more than the Global MPI: maternal health and bank account).
• A person is counted as multidimensionally poor if deprived in at least one-third of the weighted indicators.
• It gives both headcount (how many are poor) and intensity (how deprived the poor are on average). MPI = Headcount × Intensity.

Dimensions and indicators of India’s National MPI

India’s Achievements in Poverty Reduction

• Tendulkar line: Poverty fell from 37.2% (2004-05) to 21.9% (2011-12), helped by high growth and rising rural wages.
• National MPI (NITI Aayog, 2023): Poverty fell from 24.85% (2015-16) to 14.96% (2019-21); about 13.5 crore people moved out of multidimensional poverty.
• NITI Aayog discussion paper (2024): Estimated multidimensional poverty fell from 29.17% (2013-14) to 11.28% (2022-23), with about 24.82 crore people escaping it.
• Biggest gains: Uttar Pradesh, Bihar, Madhya Pradesh, Odisha and Rajasthan saw the largest absolute declines. Rural areas improved faster than urban areas.
• SDG 1.2: India is on track to halve multidimensional poverty well before the 2030 target.

Drivers of this progress

• Basic services at scale: Swachh Bharat (sanitation), Saubhagya (electricity), Ujjwala (clean cooking fuel), Jal Jeevan Mission (tap water), PM Awas Yojana (housing).
• Financial inclusion: Jan Dhan accounts and the JAM trinity enabled Direct Benefit Transfers with lower leakages.
• Food security: NFSA 2013 and PM Garib Kalyan Anna Yojana give free foodgrains to about 81 crore people (extended for five years from January 2024).
• Livelihood and employment: Rural wage employment guarantee, DAY-NRLM self-help groups (Lakhpati Didi), and rising women’s workforce participation.
• Health protection: Ayushman Bharat PM-JAY covers hospitalisation costs for poor households.

Why Does Poverty Persist in India? 

• Over-dependence on agriculture: Around 46% of workers are still in agriculture, which produces less than one-fifth of GDP. Small and fragmented holdings keep incomes low.
• Informal and low-quality jobs: About 90% of the workforce is informal, with no job security, social security or regular wages. Growth has created fewer good manufacturing jobs.
• Regional imbalance: Poverty is concentrated in the Gangetic belt (UP, Bihar, Jharkhand, West Bengal) and central tribal regions, which have weak industry, high population density and poor infrastructure.
• Social exclusion: SCs, STs and minorities face higher deprivation due to historical disadvantage, landlessness and discrimination. Tribal areas also suffer from displacement and forest-rights issues.
• Health shocks: Out-of-pocket health spending is still about 39% of total health expenditure. A single serious illness can push a family into debt and poverty.
• Malnutrition and poor human capital: 35.5% of children under five are stunted (NFHS-5). Weak learning outcomes reduce future earning ability, keeping poverty inter-generational.
• Low female participation: Even with recent improvement, female labour force participation (about 42% in 2023-24) is low, so many households depend on one earner.
• Climate and disaster shocks: Droughts, floods and heatwaves hit rain-fed farmers and outdoor workers the hardest.
• Rising inequality: Gains from growth are unevenly shared, as shown by the 13-times wage gap between the top and bottom 10% of workers.

Challenges in Tackling Poverty

• No official poverty line: India has had no official poverty estimate since 2011-12, making it hard to target schemes and track progress.
• Data gaps: The delay in the Census, the gap in consumption surveys (2011-12 to 2022-23) and changes in survey methods make comparisons difficult.
• High vulnerability: 16.1% are still below the $4.20 line and a large population sits just above it. Small shocks can reverse gains, as seen during COVID-19.
• Measurement debates: Free foodgrains and other transfers raise consumption, so poverty may look lower even if earning capacity has not improved much. Also, a low poverty line may hide real hardship.
• Targeting errors: Beneficiary lists based on old data lead to inclusion and exclusion errors, especially for migrants and the urban poor.
• Jobless or low-wage growth: Rising youth unemployment and stagnant real wages in many sectors limit the exit route from poverty.
• Fiscal pressure: Large welfare spending on subsidies competes with investment in health, education and infrastructure.
• Implementation capacity: Poorer States often have weaker administration, so funds are under-utilised exactly where they are needed most.
• Urban poverty is less visible: Slums, informal housing and migrant workers are often missed by schemes designed for rural areas.

Way Forward

• Fix a new poverty line: Use HCES 2022-24 data to notify an updated official line, and track both monetary and multidimensional poverty together.
• Jobs-led growth: Promote labour-intensive manufacturing (textiles, food processing, footwear), MSMEs and services in smaller towns to absorb workers leaving farms.
• Focus on lagging regions: Special packages for the UP-West Bengal belt and tribal districts, building on the Aspirational Districts and Aspirational Blocks model.
• Raise farm incomes: Crop diversification, allied activities (dairy, fisheries), FPOs, better market access and irrigation.
• Build human capital: Better nutrition (Poshan 2.0), foundational learning, and skilling linked to actual job placement.
• Protect against shocks: Expand health insurance, crop insurance and universal social security for informal and gig workers under the Labour Codes.
• Support women’s work: Childcare near workplaces, safe transport, and moving SHGs from microcredit to enterprise.
• Better targeting: Use a dynamic database (e.g. linking ration cards with e-Shram and family ID systems) and One Nation One Ration Card for migrants.
• Shift from support to graduation: Combine transfers with assets and skills so families can move out of poverty and not just survive above the line (the ‘graduation approach’).

India has shown that poverty can fall fast when growth is combined with basic services and welfare. The next phase is harder: the remaining poor are concentrated, vulnerable and need good jobs, not just support.

Practice MCQ

Q1. Consider the following statements regarding India’s National Multidimensional Poverty Index (MPI):

1. It is prepared by NITI Aayog using data from the National Family Health Survey (NFHS).

2. It gives equal weight to the dimensions of health, education and standard of living.

3. It includes ‘bank account’ as an indicator, which is not part of the Global MPI.

How many of the above statements are correct?

(a) Only one     (b) Only two     (c) All three     (d) None

Answer: (c)

Explanation: The National MPI has 12 indicators under three equally weighted dimensions. Maternal health and bank account are the two indicators added over the 10 indicators of the Global MPI.

Q2. Consider the following statements:

Statement-I: In 2025, the World Bank raised the international extreme poverty line from $2.15 to $3.00 per person per day.

Statement-II: The World Bank adopted 2021 Purchasing Power Parities (PPPs) in place of 2017 PPPs for measuring global poverty.

Which one of the following is correct in respect of the above statements?

(a) Both Statement-I and Statement-II are correct and Statement-II explains Statement-I

(b) Both Statement-I and Statement-II are correct but Statement-II does not explain Statement-I

(c) Statement-I is correct but Statement-II is incorrect

(d) Statement-I is incorrect but Statement-II is correct

Answer: (a)

Explanation: The poverty line was revised because the new 2021 PPPs and updated national poverty lines of poor countries changed the dollar value of the minimum basket.

Mains Practice Question

“India’s sharp decline in both monetary and multidimensional poverty has not removed the vulnerability of its poor.” Examine the reasons for persistent poverty in India and suggest measures to make poverty reduction sustainable. (15 Marks, 250 words)

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