Prominent American think tank Brookings Institution, in its latest report, commended India for eliminating extreme poverty. Economists Surjit Bhalla and Karan Bhasin in their report attribute this success to the Indian government’s decade-long commitment to robust policy initiatives, emphasizing redistribution and fostering inclusive growth.
The study shows statistics portraying a substantial decrease in the headcount poverty ratio and a simultaneous rise in household consumption. These findings challenge previous World Bank estimates and indicate a reduced number of impoverished individuals in India.
The success is credited to the combination of heightened economic growth and a significant reduction in income inequality. This affirmation stems from recently disclosed consumption expenditure data for 2022-23, revealing a substantial annual growth of 2.9% in real per capita consumption since 2011-12.
This assertion is supported by the decline in the Headcount Poverty Ratio, decreasing from 12.2% in 2011-12 to 2% in 2022-23, equivalent to an annual decrease of 0.93 percentage points.
According to the report, rural poverty now stands at 2.5%, while urban poverty has diminished to 1%. Further, rural areas experienced a notably higher growth rate of 3.1%, surpassing urban areas at 2.6%.
The authors say that increased consumption growth in rural areas is a result of the government’s commitment to redistribution. Crucial roles are played by publicly funded initiatives such as the national mission for constructing toilets and ensuring universal access to electricity, modern cooking fuel, and piped water, they say.
The authors highlight the remarkable pace of poverty reduction, noting that a similar decline in the past required 30 years, whereas the current achievement occurred in just 11 years.
With extreme poverty nearly eradicated, the economists propose that India should reevaluate its poverty line, providing an opportunity to redefine social protection programs. They advocate for a higher poverty line to better identify intended beneficiaries and offer increased support to those genuinely in need.
This report emerges at a time when two leading economies, Japan and the UK, face recession. Britain recently disclosed a 0.3% contraction in the fourth quarter of 2023, officially entering a recession. Japan, once positioned to become the world’s largest economy, continues to struggle with recovery after the Covid pandemic severely impacted the country’s finances.
Projections from the International Monetary Fund suggest that India is poised to surpass both Japan and Germany in economic output, with estimates projecting this shift to occur in 2026 and 2027, respectively.
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