A line of caution

To know how many Indians are poor is a desperate pursuit. Without any official count since 2011-12, and after the much-delayed consumption expenditure survey, which was released in 2023, it does not seem that an official poverty estimate is underway anytime soon. Consumption expenditure data is used to gauge income, and, ultimately, to draw a poverty line that will help measuring poverty level in the country. However, individual economists—mostly associated with government agencies—have used the survey to claim deep, unprecedented poverty over the past decade. These estimates remain unacknowledged by the Union government. Instead, the government now uses multidimensional poverty data (which shows deprivation rather than monetary status)
from its think tank Niti Aayog to credit itself with “historic” poverty reduction over the past 10 years.

In June came the World Bank’s global poverty estimate that included India’s latest consumption survey to estimate the country’s poverty level. The estimate followed the Bank’s update of the global poverty line representing extreme poverty—from the $2.15 adopted in 2022 (based on 2017 purchasing power parity) to the new one of $3 per person per day (based on 2021 data). Under this updated poverty line, India’s extreme poverty level has dropped like never before: to 5.3 per cent now, from 27.1 per cent in 2011-12. This means some 171 million people have escaped from extreme poverty in a decade. In 2024, nearly 54.6 million Indians lived on less than $3 per day.

As India is home to the world’s largest population of poor people, any reduction in its poverty levels is bound to have a significant global impact. The new estimate, though, is particularly striking: the global number of people living in extreme poverty has risen by 125 million to 838 million under the new poverty line—yet all regions have reported an increase in poverty except South Asia, primarily due to India’s decline.

The global poverty line reflects that of the world’s poorest countries and captures the monetary capacity needed to afford the three basics—roti (food), kapda (clothing) and makaan (shelter).  The Bank based the new $3 poverty line on the median national poverty line of 23 designated low-income countries; in fact, it reflects the poverty line of Burkina Faso, where two-thirds of the population live below it.

As this poverty line is intended to reflect extreme poverty, the Bank also maintains two additional poverty lines for lower- and upper-middle-income countries. India falls into the lower-middle-income category, for which the new poverty line is $4.20 per person per day. For upper-middle-income countries, it is $6.85. India has reported a decline in poverty under these thresholds as well, further pulling down global numbers.

What does this steep decline mean? First, the World Bank has clarified that a change in a country’s survey methodology can significantly affect measured poverty levels. In India’s case, the latest consumption survey adopted a new methodology. The Bank used this data to estimate poverty, noting: “By itself (change in survey methodology), this transition shifts the poverty trend significantly.” More fundamentally, the Bank discourages the use of the global poverty line to assess national trends. It advises: “When analysing trends for a single country, the national poverty line is the appropriate standard to use. It captures the definition of poverty that is most relevant for this context, as well as how it should be updated over time to reflect changes in survey methodologies and evolving needs.”
But India still lacks an updated national poverty line—and a corresponding poverty estimate to assess the real situation.