Indian Government is developing national indicator to measure “extreme poverty”
What is extreme poverty?
Definition – According to World Bank, the people in extreme poverty is who live on less than $2.15 per day.
Currently, around 700 million people live on extreme poverty.
Vulnerability – Extreme poverty remains concentrated in parts of Sub-Saharan Africa, fragile and conflict-affected areas, and rural areas.
Global measures – The United Nations have adopted the Sustainable Development Goals (SDG) in 2015 and have set an explicit target of eradicating extreme poverty by 2030.
SDG 1 – End poverty in all its forms everywhere
Challenges – After decades of progress, the pace of global poverty reduction began to slow by 2015, in tandem with subdued economic growth.
Impact of COVID-19 – Global poverty reduction was dealt a severe blow by the COVID-19 pandemic and a series of major shocks during 2020-22, causing three years of lost progress.
In 2022, a total of 712 million people globally were living in extreme poverty, an increase of 23 million people compared to 2019.
Low-income countries were most impacted and have yet to recover.
Impact of Climate change – It is hindering poverty reduction and is a major threat going forward.
The lives and livelihoods of poor people are the most vulnerable to climate-related risks.
Millions of households are pushed into, or trapped in, poverty by natural disasters every year.
What is the status of Extreme Poverty in India?
Extreme poverty – According to ‘The World Poverty Clock’ report in 2024, India’s extreme poverty at less than 3%.
It has taken $2.15 a day income to present the finding.
The number of people living in extreme poverty has come down to 2.4% from 3.3% in 2022.
Extreme poverty line – India has been without an official poverty line for a while, and the policy has shifted to from income-based poverty estimates to one based on multi-dimensional deprivations.
Now, India government reckons anyone with income below $1.25/a day as living in “extreme poverty”.
Interestingly, the World Bank definition of extreme poverty roughly corresponds to the poverty line computed by Tendulkar committee for 2004-05 (Rs 33 per day), if adjusted for inflation.
Niti Aayog – It says that the proportion of men, women and children of all ages living in poverty in “all its dimensions” reduced to 14.96% in 2019-21 from 24.85% in 2015-16.
An estimated 248.2 million people moved out of multidimensional poverty between 2013-14 and 2022-23, a key SDG goal.
Multidimensional poverty index (MPI) estimates between 2005-06 and 2015-16, the headcount ratio for the year 2013-14 comes to 29.17%.
Consumption expenditure data for 2022-23 – It provided the first official survey-based poverty estimates for India in over ten years.
High growth and large decline in inequality have combined to eliminate poverty in India for the PPP$ 1.9 poverty line.
Poverty Headcount Ratio (HCR)
It is a measure that indicates the percentage of a population living below the poverty line.
It reflects the proportion of people in a specific region or country whose income or consumption levels fall below an established poverty threshold, such as $1.90 or $3.20 per day based on PPP.
The HCR provides a clear picture of the extent of poverty and is used to compare poverty levels across different regions and over time.
Reason for India’s poverty reduction - It has been possible due to sustained economic growth during the period (6.7% average growth between FY16-FY20), and implementation of several welfare schemes focused on
Nutrition
Health
Education
Housing
Drinking water
Sanitation
Skill development
Social protection
Future prospects – India is much ahead of the target of reducing poverty in all its dimensions by half, by the year 2030
Why India needs a new method to count its poor?
Different methodologies – There is vast difference in poverty estimates is the difference in the methodology of each paper.
No official data - There are no official poverty figures in India between 2013 and 2023.
Data mismatch – Various research estimates suggest that the people living in poverty varies from 2.5% to 29.5% of the population, depending on the source and the time between 2013 and 2023.
India's current official poverty line does not match its status as a lower-middle-income country.
The World Bank's $3.20 PPP poverty line is designed for such countries and is suitable for measuring poverty, especially for international comparisons.
What lies ahead?
There is a need to address intertwined global challenges, including slow economic growth, fragility and conflict, and climate change.
Countries need to improve people’s well-being in a comprehensive way, including through more equitable access to health, education, and basic infrastructure and services, including digital.
Policymakers must intensify efforts to grow their economies in a way that creates high quality jobs and employment, while protecting the most vulnerable.
Jobs and employment are the surest way to reduce poverty and inequality.
Impact is further multiplied in communities and across generations by empowering women and girls, and young people.
