Bivash Modi
(modi.bivash@yahoo.in)
India’s poverty reduction
The sharp decline in poverty reflects improvements in consumption, social protection and employment. The next challenge is to translate these gains into productive jobs and greater economic equality.
The World Bank’s October 2026 assessment of poverty in India has brought in encouraging news. Between 2011–12 and 2023–24, an estimated 496 million people moved above the lower-middle-income poverty threshold of $4.20 per person per day. The proportion of the population below this threshold declined from 57.7% to 16.1%. More significantly, extreme poverty fell from 27.1% to 2.6%. These figures represent a substantial improvement in the living conditions of millions of Indians. Yet, the achievement must be viewed alongside the challenges that remain.
Understanding the poverty benchmark
The World Bank uses different poverty thresholds to compare living standards across countries. It classifies economies into four income groups—low-income, lower-middle-income, upper-middle-income and high-income—on the basis of Gross National Income (GNI) per capita. GNI measures the total income earned by a country’s residents, including income from abroad, divided by its population. The Atlas method is used to minimise the impact of short-term exchange-rate fluctuations.
These income classifications should not be confused with poverty classifications. For measuring poverty, the World Bank currently uses three important international thresholds: $3 per person per day for extreme poverty, $4.20 for lower-middle-income economies and $8.30 for upper-middle-income economies, all expressed in 2021 Purchasing Power Parity (PPP) terms.
PPP is a method of comparing the purchasing power of different currencies by accounting for differences in the prices of goods and services. Thus, $3 in PPP terms does not mean that an Indian must earn the equivalent of three US dollars at the prevailing market exchange rate. It represents comparable purchasing power.
The latest assessment estimates that approximately 35 million Indians remain below the extreme poverty threshold, while another 232 million remain below the broader $4.20 threshold. The distinction is important: escaping extreme poverty does not necessarily mean attaining economic security.
The World Bank does not independently conduct household consumption surveys in every country. It relies on primary data collected by national statistical agencies and applies internationally comparable methodologies to analyse them. In India’s case, the estimates draw upon the Household Consumption Expenditure Surveys conducted by the government.
This approach allows international comparison, although changes in survey methods, purchasing power benchmarks and statistical adjustments can influence the estimates. Therefore, the decline should be understood as a significant improvement in measured consumption-based welfare rather than an absolute measure of every dimension of poverty.
The contribution of public policy
India’s progress cannot be attributed to a single intervention. Economic growth, infrastructure development, expanding access to basic services and targeted welfare programmes have collectively contributed to improved living conditions.
The Pradhan Mantri Garib Kalyan Anna Yojana, which provides free foodgrains to nearly 80 crore beneficiaries, has strengthened household food security. Direct Benefit Transfer has improved the delivery of financial assistance by reducing intermediaries. Pradhan Mantri Awas Yojana has facilitated access to permanent houses, while Ujjwala Yojana, Swachh Bharat Mission and Jal Jeevan Mission have improved access to cooking fuel, sanitation and drinking water.
Jan Dhan accounts and financial inclusion initiatives have brought millions into the formal banking system. Rural employment programmes, self-help groups and livelihood initiatives have also supported household incomes. Women’s participation in agriculture, rural enterprises and other informal economic activities has contributed to this changing landscape.
The transformation of rural India is visible in improved housing, roads, electricity and access to essential services. The spread of pucca houses, even in remote villages, is an encouraging sign of improved living standards. However, housing quality alone cannot determine whether a household has escaped poverty.
The unfinished agenda
Despite the encouraging national figures, poverty remains geographically concentrated. A substantial share of the poor population is located in the belt extending from Uttar Pradesh to West Bengal, covering Bihar. These regions require sustained investment in education, healthcare, infrastructure and employment opportunities.
Income inequality also remains a concern. The median earnings of workers in the top 10 per cent are approximately thirteen times those of workers in the bottom 10 per cent. Employment has expanded, particularly with greater participation by rural women, but the quality of employment deserves closer attention. Many workers remain engaged in low-productivity activities, with limited opportunities for income progression.
The next phase of poverty reduction must therefore focus on productive employment, skill development, entrepreneurship and opportunities matching educational qualifications. Economic growth must create not merely more jobs, but better-paying and more secure jobs.
Beyond subsidies
towards self-reliance
Welfare transfers and subsidies have played an important role in protecting vulnerable households. As incomes and economic opportunities improve, some forms of assistance may gradually become less necessary. However, essential social protection and targeted transfers will remain important for those who cannot independently meet their basic needs.
India’s reduction in poverty is undoubtedly a significant development achievement. Nevertheless, the presence of millions below the broader poverty threshold, persistent regional disparities and unequal earnings remind us that the task is incomplete. The real test of development lies not in lifting people above the poverty line, but in enabling them to lead dignified, productive and economically secure lives.
Time is a created thing. To say ‘I don’t have time, ‘is like saying, ‘I don’t want to— Lao Tzu