Shifting poverty line

Garibi Hatao Desh Bachao (remove poverty, save the country) was the late Indira Gandhi’s slogan for the 1971 election campaign. The slogan, along with proposed anti-poverty programmes, was designed to give Indira Gandhi an independent national support base, particularly among the rural and urban poor, enabling her to bypass the dominant rural castes both within and outside state and local government, as well as the urban commercial class. In return, the previously voiceless poor—particularly the Dalits and Adivasis—would gain both political and economic recognition.

Indira Gandhi secured a resounding victory, and the war with Pakistan, which resulted in the creation of Bangladesh, cemented her position as an indispensable leader. More than 50 years later, it is imperative to ask: Where does India stand today in terms of poverty?

How poor is India? 

As of now, there is no official and reliable answer to this question. This is due to the lack of recent data on consumption patterns in India since 2012. For nearly half a decade, there was complicit silence regarding India’s poverty levels, despite the critical need for updated data to ensure targeted developmental policies. However, in the absence of official figures, multiple estimates have been made over the past two years. While these are not officially endorsed, they have been widely used by policymakers and political leaders.

Last month, New Delhi released a fact sheet on the 2023-2024 Household Consumption Expenditure Survey (HCES), which indicated a decline in poverty across both urban and rural areas. Over the past few years, policymakers and academics have debated issues related to data comparability, unavailability of data, and defining an adequate consumption basket to determine the poverty line. This raises a key question: Is poverty in India being underestimated?

The latest addition to the list of non-official poverty estimates comes from the State Bank of India’s SBI Research. Using data from the HCES 2023-24 released by the Union Ministry of Statistics and Programme Implementation, SBI Research estimated in early January 2025 that India’s poverty level is between 4 and 4.5%, the lowest ever recorded. This suggests that poverty in India has nearly been eradicated.

According to the report, the monthly per capita consumption expenditure (MPCE) for 2023-24 was Rs 4,122 (Rs 137 per day) for rural areas and Rs 6,996 (Rs 233 per day) for urban areas. This expenditure includes all essential survival needs but excludes government benefits.

MPCE serves as a proxy for income, helping measure a nation’s economic well-being. However, assessing real poverty lines is based on those from 2011-2012, which stood at Rs 816 and Rs 1,000, respectively. Over the past decade, the rural-urban differential has doubled, reflecting rising inflation in India. 

Is India’s poverty at a historic low? 

The credibility of the new poverty lines is highly questionable—just as the 2011-12 estimates were criticised for being out of sync with economic realities and flawed methodologies. Over the past decade, the rupee’s exchange rate against the US dollar has depreciated from around Rs 60 to Rs 87, indicating increased inflationary pressure on citizens.  

Both the 2011-12 and 2023-24 poverty lines were based on the Tendulkar Committee methodology (2009), chaired by economist Suresh Tendulkar. However, this methodology was widely criticised, leading to the Rangarajan Committee (2014), chaired by C Rangarajan, a former governor of the Reserve Bank of India, to review poverty estimation.

The difference between these two committees is stark: Tendulkar methodology estimated that 25.7% of rural India and 13.7% of urban India were poor in 2011-12. But the 2014 Rangarajan methodology found that 30.9% of rural India and 26.4% of urban India were poor in the same period.

The United Progressive Alliance (UPA-II) government under Manmohan Singh did not accept the 2014 estimates. The Modi government strongly opposed the Tendulkar methodology.

It is widely acknowledged that the Rangarajan Committee estimates are more reflective of ground realities. If applied to the latest expenditure data, what would India’s poverty rate look like today? A study published in the July-December 2024 edition of the Review of Agrarian Studies applies the Rangarajan methodology to the 2022-23 HCES and estimates the poverty lines as Rs 2,515 per capita per month for rural India and Rs 3,639 for urban India. Based on these poverty lines, the study finds that 27.4% of the rural population and 23.7% of the urban population are still poor. This means that one in every four Indians continues to live in poverty.

(The writer is a former professor at The Royal Society, Belgium)