Is poverty in India, especially in rural areas, on the decline? A new study by the State Bank of India's (SBI) research department sees a sharp decline in the poverty ratio and a key reason for that it believes is higher consumption growth aided by significant government support among the lowest 0-5 per cent decline.
According to the study, based on the 2023-24 fractile distribution, the sample proportion for poverty in rural areas was 4.86 per cent in the financial year ended March 2024, which is significantly lower than the previous year's estimates of rural poverty at 7.2 per cent. Similarly, it pegs poverty in urban areas at 4.09 per cent for 2023-24, down from 4.6 per cent estimated in 2022-23.
While these numbers could undergo minor revisions once the 2021 census is completed and new rural-urban population share is published, the analysts believe urban poverty could decline even further.
On an aggregate level, it believes poverty rates in India could be in the 4.0-4.5 per cent range with almost "minimal existence" of extreme poverty.
"The difference between rural and urban monthly per capita consumption expenditure/MPCE to rural MPCE is now at 69.7 per cent, a rapid decline from 88.2 per cent in 2009-10…mostly due to the initiatives the government has taken in terms of direct benefit transfers (DBT), building rural infrastructure, augmenting farmer’s income, improving the rural livelihood significantly," it said.
The SBI research report states that enhanced physical infrastructure is scripting a new story in rural mobility, and that is one of the reasons for the increasingly shrinking horizontal income gap between rural and urban and the vertical income gap within rural Income classes.
Importantly, the report noted that states that were once considered laggards were showing the maximum improvement in the rural and urban gap.
Also, it noted that in general, an increase in inflation led to a fall in monthly per capita consumption expenditure.
"The impact of the rise in food prices is severe on rural consumption demand, particularly for low-income states," the SBI research report pointed out.
Starting with the 2011-12 (based on MRP consumption) poverty line estimate of Rs 816 in rural areas and Rs 1000 in urban areas, the new poverty line was adjusted for decadal inflation and imputation factor derived from NSSO (National Sample Survey Office) report. The new estimated poverty line is Rs 1,632 in rural areas and Rs 1,944 in urban areas in 2023-24.
