22

Oct

13 crore Indians living in conditions of severe deprivation

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Prof Shivaji Sarkar

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New Delhi | Tuesday | 22 October 2024

India continues to face the challenge of extreme poverty, with 129 million citizens, or 13 crore people, living in conditions of severe deprivation in 2024. According to the World Bank, these individuals survive on less than Rs 180 a day (approximately $2.5) or Rs 5400 per month. The World Bank’s latest report, *Poverty, Prosperity, and Planet*, highlights that at the current slow pace of poverty alleviation, it may take over a century to eradicate poverty among lower-middle-class individuals globally, defined as those living on less than $6.85 per day. The report also hints at the need for global policy changes to address these issues.

Despite some progress, poverty remains a significant concern in India. On July 17, 2023, NITI Aayog reported that the proportion of poor people in the country had reduced from 24.8% during 2015–2016 to 14.9% in 2019–2021. However, the COVID-19 pandemic reversed some of this progress, pushing more people below the poverty line. Today, India's lower-middle class faces numerous challenges, including rising living costs, job instability, income inequality, high taxation, and inflation pressures.

One of the most pressing issues affecting these families is inflation, particularly the soaring prices of essential food products. Between 2015 and 2022, food prices increased by 50%, placing immense strain on households earning less than $6.85 a day. While the cost of living has skyrocketed, real wage growth has been insufficient, rising only by 22% since 2015. This disparity has disproportionately impacted rural areas, where a significant portion of India’s population resides.

Article at a Glance

India is grappling with extreme poverty, with 129 million people living on less than Rs 180 ($2.5) daily as of 2024. The World Bank's report indicates that poverty alleviation is progressing slowly, potentially taking over a century to eradicate global lower-middle-class poverty, defined as living on less than $6.85 daily.

Although there has been a decline in poverty rates—from 24.8% in 2015-2016 to 14.9% in 2019-2021—COVID-19 has reversed some gains, pushing millions back into poverty.

Inflation, particularly in food prices, has severely impacted low-income families, with real wages rising only 22% since 2015. Despite lifting 415 million people out of multidimensional poverty between 2005 and 2021, the pandemic caused an estimated 75 million Indians to fall back into poverty.

The need for effective policy changes is critical to ensure that economic growth translates into tangible benefits for the poorest citizens, addressing the widening wealth gap and improving living conditions.

The 2023 Global Hunger Index ranked India 111th out of 125 countries, indicating a "serious" hunger level. This is a decline from the previous year's rank of 107. Such a ranking highlights the ongoing food security crisis that affects millions of Indians, particularly those in poverty.

In February 2024, research conducted by the State Bank of India (SBI) suggested that the poverty rate in India fell to 4.5-5% in 2022-23, attributing this decline to government initiatives aimed at the bottom of the economic pyramid. These programs, designed to improve living conditions for the poorest citizens, have made some headway, but inflation remains a significant hurdle. According to the World Bank, for every one percentage point increase in food prices, an additional 10 million people are pushed into extreme poverty globally. In India, decadal inflation has averaged 55%, exacerbating the situation for those already struggling to meet basic needs.

The United Nations reports that India lifted 415 million people out of multidimensional poverty between 2005–2006 and 2019–2021. However, the impact of the COVID-19 recession cannot be overlooked. According to Pew Research Center, an estimated 75 million Indians fell into poverty as a result of the economic downturn caused by the pandemic. The World Bank also estimated that 71 million people globally were pushed into extreme poverty in 2020, with one-third of them being from India.

Despite these alarming figures, there is still no definitive measure of poverty in India, as official poverty estimates have not been published since 2011–12. While some researchers argue that poverty levels have increased in recent years, others suggest that extreme poverty rates did not rise significantly during the pandemic. In 2014, India proposed a poverty line of Rs 972 per month in rural areas and Rs 1,407 per month in urban areas. Today, these thresholds stand at Rs 1,059.42 per month in rural areas and Rs 1,286 per month in cities, illustrating the growing challenge of defining and addressing poverty.

Former Reserve Bank of India Governor Duvvuri Subbarao has remarked that even though India has become the world's third-largest economy, it remains a poor country in many respects. With a per capita income of $2,600, India ranks 139th globally. Subbarao pointed out that despite the nation's economic growth, wealth disparity remains a critical issue, and poverty is still prevalent.

The World Bank's India Development Update notes that the country's economic growth in recent years has been driven by public infrastructure investment and increased household investments in real estate. However, this growth has not led to significant poverty alleviation. The wealth disparity between the rich and poor continues to widen, with the top 1% of India's population—about 9.2 million people—earning an average of Rs 53 lakh per year and holding average wealth of Rs 5.4 crore.

Professor Kalim Siddiqui from the University of Huddersfield has criticized India's focus on economic growth without adequately addressing poverty and inequality. He argues that despite India's impressive GDP growth over the past two decades, overall employment has not kept pace. The rapidly expanding service sector, while contributing significantly to GDP, employs a smaller portion of the population. Siddiqui believes that neoliberal, pro-corporate policies have exacerbated poverty and inequality, leaving millions of people in substandard living conditions.

As India continues to pursue growth, it faces the challenge of ensuring that this growth translates into meaningful improvements for its poorest citizens. The World Bank now acknowledges that higher growth alone will not eradicate poverty. Instead, the global community, including India, must focus on improving working conditions, controlling prices, and promoting inclusive progress. With rising inflation, economic inequality, and the lingering effects of the pandemic, a shift in policy may be necessary to ensure that growth benefits all citizens, not just the wealthiest.

In the coming years, India and the world may see a shift in economic policy aimed at addressing these issues. While growth remains important, the focus must shift towards creating a more inclusive and equitable society where all citizens have the opportunity to thrive.

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