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India’s poverty headcount ratio projected to fall below 3% in FY25 .
In brief
- For several decades, economic welfare discussions in India have focused on poverty eradication.
- In 2025, poverty headcount ratio is estimated at only 1% for India with reference to a poverty line of PPP$2.15 as per the World Poverty Clock data.
- Weighted average poverty headcount ratio (recent estimates) for 19 states has fallen to 6.7% in FY23 from 31.1% in FY12 for rural areas and to 6.8% from 26.9% for urban areas.
The concept of poverty has been understood and defined in several ways. The World Poverty Clock1 provides an international benchmark in terms of defining extreme poverty while policy discussions within India have focused on concepts of poverty with respect to nutritional and supplementary thresholds. Mostly, poverty has been measured in terms of monthly per capita consumption expenditure benchmarks called poverty lines that are differentiated with respect to states as well as rural and urban areas.
Mitigating poverty
The World Poverty Clock provides alternative thresholds of poverty lines with the lowest benchmark for ‘extreme poverty’ at $1.9 in purchasing power parity (PPP) terms which has now been revised to $2.15. A country where extreme poverty headcount ratio2 is less than 3% in terms of this benchmark, is considered as having eradicated extreme poverty according to the World Poverty Clock3. As per the World Poverty Clock, the corresponding ratio for India is estimated to have fallen below 3% in 2021. At present, i.e., in 2025, with reference to a poverty line of $2.15, India’s extreme poverty headcount ratio is estimated at just 1% (Chart 1).
Expenditure surveys of 2022-23 and 2023-24
Estimates of poverty in India have traditionally relied on data from household consumption expenditure surveys (HCES), particularly thick sample or detailed surveys. The National Sample Survey Organisation (NSSO) conducts periodic HCES to capture detailed information on consumption patterns across rural and urban India. These surveys provide state-wise and fractile-wise data on per capita monthly consumption expenditure, enabling analysis of income inequality, spatial variation, poverty alleviation and rural–urban differences in the Indian economy. The 2011-12 NSSO household consumption survey was a ‘thick’ or detailed survey for household consumption expenditures in India. After a gap of few years, NSSO again conducted detailed consumption expenditure surveys for 2022-23 and 2023-24. These surveys marked a methodological shift, adopting a multi-visit canvassing approach where each of the 2.62 lakh sampled households were visited three times to account for seasonal variations and reduce recall bias. Together, these rounds provide a consistent and evolving picture of India’s consumption dynamics, with recent data expected to inform revisions in the Consumer Price Index (CPI) base year and analyses of post-pandemic consumption trends.
Highlights of RBI’s study on estimating state-wise poverty headcount ratio for FY23
A recent RBI study undertaken by Das, Gopalakrishnan and Mazumder4 has provided state-wise poverty estimates in India5 after revising the poverty lines using the Rangarajan methodology (2014)6 for FY23. In this study, a very sharp decline in poverty levels in India has been noted between FY12 and FY23 for many states. The highest percentage reductions in the headcount ratio are for Himachal Pradesh, Karnataka and Punjab for rural areas (Chart 2) and Tamil Nadu, Karnataka and Andhra Pradesh for urban areas (Chart 3). Some of the large population states such as Uttar Pradesh, Madhya Pradesh and Bihar also did quite well in terms of lowering the poverty headcount ratio. Since these states carry a relatively larger weight in total population, this explains the dramatic decline in the weighted average poverty headcount ratios for 19 states during this period. This ratio fell from 31.1% to 6.7% for rural areas and 26.9% to 6.8% for urban areas.
Estimation of poverty headcount ratios for FY24, FY25 and FY26
The estimated average annual rate of fall in the headcount ratios over the period FY12 to FY23 was 2.2% points for rural and 1.8% points for urban areas. Government social welfare programs such as direct benefit transfers, PM Garib Kalyan Anna Yojana and subsidized provision for education and health services may have played a key role in accelerating the rate of reduction in poverty headcount ratio. If we apply these annual rates of reduction on the FY23 poverty headcount ratios, the poverty headcount ratio for rural areas, considered as the weighted average for the selected 19 states, is estimated at 4.5%, 2.3% and 0.1% in FY24, FY25 and FY26 respectively. For urban areas, the projected poverty headcount ratios are 4.9%, 3.1% and 1.3%, respectively.
The World Poverty Clock considers a poverty headcount ratio of less than 3% for a country as amounting to eradication of poverty7. Measured in terms of Rangarajan Committee norms, considering the weighted sum of rural and urban headcount ratios, the overall poverty headcount ratio is estimated to have fallen below 3% in FY25. It is particularly notable that some of the large population states, namely Bihar, Uttar Pradesh and Madhya Pradesh are projected to have an overall poverty headcount ratio well below the 3% threshold by FY25/FY26. Some of the states with a large share of tribal population such as Chhattisgarh, Jharkhand and Maharashtra, whose poverty headcount ratios are projected to remain above 3%, may require policy attention aimed at reducing poverty.
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Summary
Considering the weighted sum of rural and urban headcount ratios of selected 19 states, the overall poverty headcount ratio in India is estimated to have fallen below 3% in FY25. The World Poverty Clock considers a poverty headcount ratio of less than 3% for a country as signaling eradication of poverty.
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