6 minute read 25 Nov 2022
Poverty reduction in India

India: taking giant strides in meeting SDG target on poverty

By D. K. Srivastava

EY India Chief Policy Advisor

A noted economist, D.K. Srivastava is an Honorary Professor at Madras School of Economics and Member of the Advisory Council to the 15th Finance Commission.

6 minute read 25 Nov 2022
Related topics Tax COVID-19

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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.

FY24 Union Budget: continued emphasis on poverty reduction while restoring fiscal consolidation

With CPI inflation falling to 6.8% in October 2022 and GoI’s gross tax revenues (GTR) growing by 17.6% during 1HFY23, GoI would be well placed to not only achieve the budgeted fiscal deficit target of 6.4% in FY23 but also spell out a credible fiscal consolidation glide path in the FY24 Budget. The FY24 Union Budget may also continue supporting the poor through well-targeted subsidies and income support with policy emphasis on health and education services, along with infrastructure expansion. These would help India effectively eliminate extreme poverty in the next few years while substantially reducing its multidimensional poverty.

For sustaining medium-term growth and attracting global investment, it is also important to indicate a convincing glide path for reducing GoI’s fiscal deficit to its FRBMA (2018) benchmark of 3%. Alongside, GoI’s debt-GDP ratio which had increased from 51% in FY20 to 61% in FY21 can also be reduced by 5-6% points in the FY24 Budget to about 55%. This would imply an effective lowering of the interest payment burden and create fiscal space for the future. The FY24 Budget may target a reduction in the GoI’s fiscal deficit to GDP ratio by at least 1% point from the FY23 (BE). This may be feasible because of high real and nominal GDP growth in FY23 and in the medium-term up to FY28 as indicated by the recent IMF forecasts.

Muralikrishna Bharadwaj (Senior Manager), Tarrung Kapur (Manager), and Ragini Trehan (Senior Manager) also contributed to the article.

  • Show article references#Hide article references

    1. Pandemic, Poverty, and Inequality: Evidence from India’ Bhalla, S., Bhasin, K., & Virmani, A. (2022)
    2. Crespo Cuaresma et al. Will the Sustainable Development Goals be fulfilled? Assessing present and future global poverty. Palgrave Commun 4, 29 (2018). https://doi.org/10.1057/s41599-018-0083-y
    3. The UN SDG number 1 considers bringing extreme poverty below 3% of population as equivalent to abolition of poverty.


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As per the World Poverty Clock, extreme poverty headcount ratio in India would fall below 3% by 2024 qualifying India to be classified as a zero-poverty country. The FY24 Union Budget may continue the thrust on poverty reduction by supporting the extremely poor through subsidized food transfers and policy emphasis on health and education services along with infrastructure expansion.

About this article

By D. K. Srivastava

EY India Chief Policy Advisor

A noted economist, D.K. Srivastava is an Honorary Professor at Madras School of Economics and Member of the Advisory Council to the 15th Finance Commission.

Related topics Tax COVID-19