Extreme Poverty to neglible level, Decline in Gini Coefficient: Economic brightspots ignored by the Main Stream Media

A recent study, Four Facts on Inclusive Growth in India, by economists Surjit S. Bhalla and Karan Bhasin, has provided groundbreaking insights into India’s poverty trends. Using data from the Household Consumption Expenditure Survey (HCES) for 2022-23 and 2023-24, the study reveals that India has successfully eradicated extreme poverty and witnessed a historic reduction in poverty levels over the past decade. These findings challenge long-standing assumptions about economic disparity and demand a re-evaluation of how poverty is measured in India.

According to the study, India’s extreme poverty rate has fallen below 1% in 2023-24, a sharp contrast to the 12.2% in 2011-12. Even using the World Bank’s 1.9 and 2.15 PPP dollar poverty lines, the data confirms this dramatic reduction, making it one of the greatest economic achievements in modern history.

Contrary to the common belief that economic growth leads to increased inequality, the study shows that income inequality in India has declined. The Gini coefficient, which measures income disparity, has fallen from 37.5 in 2011-12 to 29.1 in 2023-24. This is a rare feat, as high-growth economies usually experience widening wealth gaps. In fact, India is among the few nations globally alongside Bhutan and the Dominican Republic—where inequality has decreased rather than expanded.

One of the strongest indicators of India’s economic progress is the increase in consumption among the poorest segments of society. The bottom 30% of India’s population has seen their monthly per capita expenditure rise by 11.9%, with spending on food increasing by 10.7% and on durable goods like appliances and furniture by 24.2%. This growth reflects improved financial stability due to targeted welfare programs, rising incomes, and sustained economic expansion.

The study calls for a revision of India’s outdated poverty benchmarks. Currently, poverty is measured using the Tendulkar Poverty Line (₹870 per person per month) and the Rangarajan Poverty Line (₹1,098 per person per month both of which fail to capture economic realities in a rapidly developing nation. The authors propose a relative poverty line, similar to European standards, which defines poverty as 60% of median income. Under this measure, 16.5% of India’s population would be classified as poor, while a 50% threshold would place 24.7% in poverty.

UPA’s Manipulation of Poverty Data

The study also highlights how past governments, particularly under the UPA regime, manipulated poverty figures to show artificial improvements. The Tendulkar Committee’s redefinition of poverty in 2009 significantly lowered the poverty line, making it easier to claim that poverty had declined. Instead of focusing on real income and living standards, the UPA-era policies relied on statistical gimmicks to fabricate economic progress. This distortion denied millions of poor Indians the opportunity for a genuine upliftment. In contrast, the current findings, based on consumption and economic growth, show a real and sustainable decline in poverty.

With extreme poverty nearly eradicated, India’s economic strategy must now focus on strengthening the middle class and ensuring sustainable growth. Bhalla and Bhasin’s study underscores the effectiveness of targeted welfare programs, consumption-driven growth, and pro-poor economic policies. The debate must now move beyond mere poverty figures to ensuring long-term prosperity and equitable economic opportunities for all.

India’s remarkable progress is a testament to sound policymaking and inclusive growth by the current government. The findings not only debunk opposition’s outdated narratives of rising inequality but also emphasize the need for a more realistic poverty threshold that reflects modern economic conditions. As India moves forward, these insights will serve as a crucial guide for policymakers and economists in shaping the country’s future economic strategy.