A Study titled “Four Facts on Inclusive Growth in India” by economists Surjit S. Bhalla and Karan Bhasin revealed a groundbreaking analysis of India’s poverty trends. The study, based on the Household Consumption Expenditure Survey (HCES) for 2022-23 and 2023-24, claims that India has successfully eliminated extreme poverty and witnessed the sharpest decline in poverty levels in the past decade.
Outcomes of the Study
Extreme Poverty Eliminated: Data from the surveys indicate that India’s extreme poverty rate has dropped to below 1 per cent in 2023-24. Going by the numbers in 2011-12 over 12.2 per cent people were poor and in 2023-24 merely 1 per cent are below poverty line. The World Bank’s 1.9 dollar PPP and 2.15 dollar PPP poverty lines confirm this dramatic reduction, marking a significant milestone in India’s economic progress.
Declining Inequality: Contrary to popular belief, the study finds that inequality in India has decreased over the past twelve years. The Gini coefficient, which measures income disparity, has fallen from 37.5 in 2011-12 to 29.1 in 2023-24. This decline in inequality is unique among high-growth economies. India is now among the few countries where inequality is decreasing rather than increasing. Only Bhutan and the Dominican Republic have seen a bigger decline, but both nations have much smaller populations. Typically, economic growth leads to higher inequality, where the rich get richer, and the poor remain poor. However, India is proving to be an exception, where the economic gap is shrinking instead of expanding.
Rising Consumption Among the Poor: The bottom three deciles of India’s population have experienced unprecedented growth in consumption levels. The study reports a substantial increase in monthly per capita consumption expenditures, particularly in food, household consumables, and durable goods. Between 2022-23 and 2023-24, food spending among the poorest increased by 10.7 percent, and spending on durable goods (such as appliances and furniture) rose by 24.2 per cent. Overall, the monthly per capita consumption of the bottom 30 per cent of the population grew by 11.9 per cent. This suggests that welfare programs, rising incomes, and economic growth have helped India’s poorest households gain better financial stability.
Need for a New Poverty Line: These findings directly challenge the common belief that poverty is still high in India. The researchers assert that India has nearly wiped out extreme poverty, an achievement very few developing countries have managed. The authors argue that India’s existing poverty lines are outdated and fail to capture the broader spectrum of deprivation. They propose adopting a relative poverty line, similar to European standards, which considers 60 per cent of median income as the poverty threshold.
Validity of the Data
There were concerns that the new HCES 2022-23 survey, which used three visits to collect data, might not be comparable to the HCES 2011-12 survey, which used only one visit. However, Bhalla and Bhasin studied this issue and found no problems with data comparability.
To verify this, they compared survey data with national economic records using the Survey-to-National-Accounts (S/NA) ratio. The results remained consistent over time i.e. 52.4 per cent in 2011-12, 46.9 per cent in 2022-23, and 47.9 per cent in 2023-24. This proves that the decline in poverty is not due to survey changes but is a real improvement in people’s living conditions.
Currently, India uses the Tendulkar Poverty Line (Rs. 870 per person per month) and the Rangarajan Poverty Line (Rs. 1,098 per person per month)—both based on old calculations. The researchers propose using a “relative poverty line”, similar to Europe, where poverty is defined as 60 per cent of the median income. If this system were used in India, 16.5 per cent of the population would be classified as poor. Another method, using 50 per cent of the average income, would place 24.7 per cent of people in poverty. This highlights the need for a new, more relevant poverty threshold that adjusts as India’s economy grows.
Policy Implications
The study underscores the need for a revised poverty line that reflects India’s growing economic status. The authors propose two alternative benchmarks:
· A poverty line based on the bottom 33rd percentile of consumption.
· A European-style relative poverty measure based on 60 per cent of median income.
Additionally, Bhalla and Bhasin underscores the necessity for NITI Aayog to actively engage in revising poverty metrics, given that most poverty research over the last decade has emerged from independent scholars rather than government institutions.
A Shift in the Poverty Debate
The study marks a shift from debating poverty levels to understanding policies that have contributed to poverty alleviation. The findings align with previous research by Bhalla et al. (2022) and Roy & Van Der Weide (2025), reinforcing the conclusion that India’s poverty has declined significantly over the last decade.
Additionally, with the eradication of abject poverty, the attention now has to be given to consolidating the middle class and taking measures for sustainable economic growth.The study indicates that India’s economic strategies such as targeted welfare schemes and enhanced consumption capacity have been crucial to achieve inclusive growth.
India’s success in declining Poverty
This study challenges the common narrative that poverty and inequality are increasing in India. Instead, it presents strong evidence that extreme poverty has almost disappeared, the poor are spending more, and inequality is decreasing.
India’s success in reducing poverty and inequality challenges long-standing assumptions about economic disparities in the country. The study by Bhalla and Bhasin’s calls for a reinterpretation of methodologies used to measure poverty and demonstrates the necessity for revised official poverty lines to suit modern economic circumstances. As India continues its economic change, these findings are useful for policymakers as well as economists.
