The number of poor are falling in India; is it time to shift the poverty line now?

The above estimates are based on 2017 purchasing power parity terms and if you consider 2021 PPPs, we’ll get a revised extreme poverty line of $3.00 (constituting a 15% higher threshold than $2.15 expressed in 2021 prices) and result in a 5.3% poverty rate in 2022-23. Similarly, a new lower-middle-income line of $4.20 would imply a 5% lower threshold for poverty than $3.65 adjusted in 2021 prices and yield a poverty rate of 23.9%.

Which is why experts are batting for a higher poverty line. Currently, we use the Tendulkar poverty threshold, where a person living on a monthly expenditure of Rs 1,000 per month or Rs 33 or less per day in cities, and Rs 816 per month or Rs 27 or less per day in villages is considered poor.

Adjusted for purchasing power parity rates, it falls closer to the World Bank’s extreme poverty measure of $2.15 per person per day (earlier $1.90).

For long, the Tendulkar estimate is considered low for a growing economy like India, and hence the government formed another expert group led by Dr C Rangarajan to relook. Subsequently in 2014, the Rangarajan Committee suggested a slightly higher monthly threshold of Rs 1,407 (Rs 47 per day) for urban areas and Rs 972 (Rs 33 per day) for rural areas. But this wasn’t accepted and so we continue to live with the Tendulkar poverty line adopted way back in 2009.

Incidentally, the latest consumption expenditure survey too confirms the changing expenditure patterns of households, reinforcing the need to move away from the existing extreme poverty line of $2.15 per person per day to the lower-middle income poverty line of $3.65.

Another reason that supports the call for an increase in the threshold is the positive trends in employment growth, particularly since 2021-22, with significant improvements in both rural and urban areas. Official data shows that employment growth has outpaced the working-age population since 2021-22, with rising employment rates, especially among women. Urban employment fell to 6.6% in Q1, FY24-25, the lowest since 2017-18.

Even as it remains unclear if India has indeed crossed the poverty divide, the question is if we can continue to lift more poor people during the current decade?

Last October, the World Bank noted that global poverty reduction has slowed to a near standstill, and concluded 2020-2030 will most likely be a lost decade. At the current pace of progress, the report noted that it would take decades to eradicate extreme poverty and more than a century to lift people above $6.85 per day mark.

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