5.75% Indians Live in Extreme Poverty: World Bank

WORLD BANK: 5.75% INDIANS LIVE IN EXTREME POVERTY

Why in the News?

  • Recent estimates: World Bank’s April 2025 poverty report states 5.75% of Indians are below the global poverty line of $3/day (PPP), highlighting ongoing challenges in global extreme poverty reduction and the persistence of poverty in developing nations.
  • Sharp decline: The percentage of people in extreme poverty dropped from 27% in 2011-12 to 5.75% in 2022-23, equal to 7.5 crore people, showcasing significant progress in poverty alleviation efforts and reflecting positive poverty trends in India’s fight against poverty.
  • Government highlight: India claimed 171 million people were lifted from extreme poverty in the last 10 years, demonstrating the country’s commitment to poverty reduction and sustainable development in addressing multidimensional poverty.

5.75% Indians Live in Extreme Poverty: World Bank

Understanding the World Bank Methodology

  • PPP-based calculation: The $3/day international poverty line is adjusted for purchasing power parity, not direct currency conversion. For India in 2025, it equals Rs 62/day, providing a standardized measure for global poverty estimates and tracking poverty trends across different economies.
  • Updated benchmarks: Previous thresholds were $1/day (1985) and $1.90/day; raised over time due to inflation and global cost changes, reflecting evolving trends in extreme poverty and the need for dynamic poverty measurement.
  • Comparable metrics: Designed to standardize poverty levels across countries with different costs of living, allowing for more accurate world poverty assessments and comprehensive poverty analysis.

India’s Domestic Poverty Debate

  • Outdated lines: Last official domestic line (2011-12) used Tendulkar’s method; later Rangarajan’s 2014 proposal never implemented, highlighting the need for updated poverty statistics to better understand current poverty trends and address both rural and urban poverty.
  • Multiple estimates: Depending on method, India’s poverty rate ranges from 2% to 82%, causing confusion and emphasizing the complexity of measuring poverty in diverse contexts, including chronic poverty and transient poverty.
  • No recent update: India now relies on World Bank data or NITI Aayog’s Multidimensional Poverty Index, showcasing the importance of international poverty reports in shaping national policies and poverty reduction strategies to combat various forms of poverty.

POVERTY LINE & MEASUREMENT IN INDIA

POVERTY LINE & MEASUREMENT IN INDIA

● Poverty line: Income threshold below which a person is considered below poverty line, varies by region and time, crucial for understanding both rural poverty and urban poverty.

● Tendulkar Committee (2009): Rs 29/day urban and Rs 22/day rural; raised to Rs 36 and Rs 30 in 2011-12, establishing a national poverty line for poverty measurement.

● Rangarajan Committee (2014): Suggested Rs 47/day urban and Rs 33/day rural, but not adopted, highlighting ongoing debates in poverty measurement and the need for updated poverty lines.

● Multidimensional Index: Measures poverty across health, education, and standard of living, not just income, providing a more comprehensive view of poverty beyond monetary poverty and addressing various poverty dimensions.

● Policy relevance: Accurate poverty lines are critical for targeted welfare, budget planning, and inclusion, supporting effective social protection schemes and public distribution systems to combat extreme poverty and promote shared prosperity.