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The SBI research revealed a sharp decline in rural poverty to 4.86% in FY24 (from 7.2% in FY23 and 25.7% in FY12) and urban poverty to 4.09% in FY24 (from 4.6% in FY23 and 13.7% in FY12).
SBI Research attributes the sharp reduction in rural poverty to increased consumption growth among the lowest income groups, bolstered by robust government support.
Rural poverty in India has witnessed a significant decline, dropping to 4.86 per cent in FY24, compared to 25.7 per cent in 2011-12, largely driven by government support initiatives, according to an SBI research report. Urban poverty has also decreased sharply, now estimated at 4.09 per cent, down from 13.7 per cent in 2011-12.
The report attributes the sharp reduction in rural poverty to increased consumption growth among the lowest-income groups, bolstered by robust government support.
“The sharp decline in rural poverty ratio is on account of higher consumption growth in lowest 0-5 per cent decile with significant government support and such support is important as we also find that change in food prices has a significant impact on not just food expenditures, but overall expenditure in general,” said the SBI research on consumption expenditure survey.
Declining Consumption Inequality
The Ministry of Statistics & Programme Implementation recently released a Household Consumption Expenditure Survey. It revealed a decline in consumption inequality between August 2023 and July 2024 across both rural and urban areas compared to the previous year.
The SBI research said that the Consumption Expenditure Survey reveals a remarkable decline in rural poverty estimated at 4.86 per cent in 2023-24 (7.2 per cent in FY23 and 25.7 per cent in FY12) and urban poverty estimated at 4.09 per cent (4.6 per cent in FY23 and 13.7 per cent in 2011-12).
SBI Research said these figures could undergo minor revisions after the 2021 Census is completed, which may provide updated rural-urban population ratios.
“We believe urban poverty could decline even further. At an aggregate level, we believe poverty rates in India could now be in the range of 4-4.5 per cent with almost minimal existence of extreme poverty,” it said.
Role of Infrastructure and Government Programmes
Enhanced physical infrastructure is scripting a new story in rural mobility, it said and added that one of the reasons for the increasingly shrinking horizontal income gap between rural and urban and the vertical income gap within rural income classes,” SBI said.
“The difference between rural and urban monthly per capita consumption expenditure/ Monthly Per Capita Consumption Expenditure (MPCE) to rural MPCE is now at 69.7 per cent, a rapid decline from 88.2 per cent in 2009-10…mostly due to the initiatives the government has taken in terms of DBT transfers, building rural infrastructures, augmenting farmer’s income, (and) improving the rural livelihood significantly,” it said.
Food Inflation Impact
The research estimates that food inflation dampens consumption demand more in lower-income states as compared to higher-income states, reflecting that rural people are comparatively more risk-averse in low-income states than in high-income states.
Most of the high-income states delineate a savings rate greater than the national average (31 per cent).
Uttar Pradesh and Bihar show low savings rates possibly due to higher outward migration, the SBI report said.
The new estimated poverty line is Rs 1,632 in rural areas and Rs 1,944 in urban areas in 2023-24.
