India: taking giant strides in meeting SDG target on poverty

Various reports suggest that India has achieved success in reducing extreme and multidimensional poverty. 

In brief

• The 2022 UNDP report on global multidimensional poverty indicated that India was successful in bringing 415 million people above the poverty line from 2005-06 to 2019-21.
• An IMF study has estimated that extreme poverty remained below 1% in 2019 and in the pandemic year of 2020.
• The World Poverty Clock assesses that the percentage of extremely poor in India would fall below 3% by 2024.

Multidimensional poverty: the 2022 UNDP Report

The conventional measurement of poverty such as the headcount ratio and the poverty gap ratio relate to the deprivation in the income dimension. More recently, multi-dimensional aspects of poverty have been considered by the UNDP and the Oxford Poverty and Human Development Initiative (OPHI). The latest UNDP Report (2022) undertook the measurement of multidimensional poverty across 111 countries covering 6.1 billion people. This study was based on three dimensions of poverty namely, health, education, and living standards captured by 10 indicators that are closely aligned to the Sustainable Development Goals (SDGs). Equal weights are assigned to the three broad dimensions. A multidimensional poverty index (MPI) poor is defined as someone who experiences one-third of the weighted deprivations or more, severely poor as someone with half or more, and vulnerable as someone with greater than 20% but less than one-third.

The MPI also captures the intensity of poverty faced by the households. An aggregate MPI is calculated by multiplying the proportion of the population that is multi-dimensionally poor (H) and the average proportion of dimensions in which poor people are deprived (A). Table 1 shows that in 2005-06, 55.1% of India’s population was deprived in at least one-third of the 10 weighted indicators. The headcount ratio had fallen to 27.7% in 2015-16. In 2019-21, this fell further to 16.4% and correspondingly, the number of MPI poor fell by 140 million over the period 2015-16 to 2019-21. The intensity of poverty which had reduced from 51.3% in 2005-06 to 44% in 2015-16, fell further to 42% in 2019-21. Thus, the MPI has fallen by 0.214 points over the period 2005-06 to 2019-21, a decline of more than 75%.

In 2019-21, with reference to the total MPI value of 6.9, the largest contribution came from deprivation in living standards followed by health and education. Other key findings of the UNDP report (2022) are:

1. For the poorest states and groups (children, lower castes and those living in rural areas), poverty reduced the fastest in absolute terms, although the data do not reflect post-COVID-19 pandemic changes.
2. The incidence of poverty fell from 36.6% in 2015-2016 to 21.2% in 2019-2021 in rural areas and from 9% to 5.5% in urban areas.
3. India’s incidence of multidimensional poverty is 6.1% points lower than the incidence of income poverty implying that individuals living below the income poverty line may have access to non-income resources.
4. India is relatively better placed in terms of the MPI as compared to some of its South Asian counterparts. For the latest period, India’s MPI value at 0.069 was lower than Bangladesh (0.104), Pakistan (0.198) and the South Asia region (0.091).

Pandemic poverty and inequality: the IMF report

Bhalla et. al. (2022)1 have recently provided findings based on some innovations towards study of poverty in India. They cover the pandemic years of 2020 and 2021, highlighting the critical role of food subsidies in containing extreme poverty in India. According to the official MMRP method that excludes the effect of food transfers, poverty in the pre-pandemic year of 2019 was just 1.4% indicating that India was close to eliminating extreme poverty prior to the pandemic. Bhalla et. al. assert that extreme poverty was even lower at 0.8% in 2019 after incorporating the effect of food transfers. 

Charts 1 and 2 show the steady fall in the incidence of extreme poverty with reference to two benchmarks namely, a poverty line of PPP$1.9 and of PPP$3.2. The fall is steady except for the pandemic years when there is a slight increase. With reference to the PPP$1.9 poverty line, extreme poverty fell to below 1% by 2020. Even with reference to the higher benchmark of PPP$3.2, poverty fell to about 14.8% and 18.1% in 2019 and 2020 respectively after inclusion of food subsidies.

Extreme poverty and the World Poverty Clock

The World Poverty Clock2 provides an online platform for monitoring poverty reduction across countries. According to this clock, India would be able to eliminate extreme poverty by 20243. Despite this, an estimated 36.8 million people would still remain in extreme poverty in 2024. In the COVID year of 2020, nearly 17 million people were pushed into extreme poverty (Table 2). However, in 2021, about 11 million people have moved out of extreme poverty largely due to government support through the pandemic stimulus packages. In 2022, close to 8.3 million people are expected to be lifted out of extreme poverty.