Extreme Poverty in India is Falling Fast. Here's why.

On June 30th, the Times of India ran a frontpage article, citing World Poverty Clock data, highlighting that India is no longer the country with the most number of people living in extreme poverty. This claim has drawn both support – and scrutiny – from observers on social media who question the pace by which our data suggest that India is advancing. This blog aims to provide some additional data to further inform the global discussion.   

On the face of it, no one could be blamed for raising an eyebrow at these claims. The data are striking indeed. We estimate that the number of Indians living on less than $1.90 (considered “extreme poor” by the UN’s Sustainable Development Agenda) has fallen from 306 million in 2011 to some 70 million today.  Moreover, we expect that extreme poverty in India will continue to decline sharply over the next two years. By early 2021, we forecast that the number of Indians living in extreme poverty will fall below 3% of the population, a benchmark which some development economists consider as a watershed moment in a country’s efforts to eradicate extreme poverty.

For some, this story may run counter to preconceived – or long-held – notions about the state of poverty in India. While such a narrative may have been valid in the past, the perception no-longer fits the reality. Over the last four decades, the country has experimented with numerous economic development models – including the famous agricultural-oriented “green revolution” as well as more recent economic liberalization efforts. Between 2011-2018 alone, India’s per capita GDP growth rate was 5.6% per annum, far out-pacing average population growth (1.2% per year).

The upshot of this economic performance has been the “shattering” of the international poverty line in India. In 2011, we estimate that 14% of the population (or some 175 million people) lived between 1.50-1.90 a day, just under the poverty line. Strong growth has boosted many of these people beyond the $1.90 threshold to a higher standard of living which – while admittedly is still low  is no longer considered extreme poverty.  

Chart 1: Since 2011, economic growth has lifted millions of Indians across the international poverty line ($1.90 per day)

Some observers have argued that our data may be overly pessimistic and that the Indian government should consider redefining the poverty line to be better aligned to the new reality of India’s rising wealth.  Nevertheless, no matter how poverty is defined or re-defined in India, our data clearly suggest that the plight of the poorest has certainly improved over the last decade: we estimate that in 2011, 25% of India’s population lived on less than $1.90 per day, today that percentage is approximately 5%.