Extreme poverty dropped 12.3% in 2011-19, says World Bank report

Extreme poverty has gone down by 12.3 percentage points between 2011-2019, a rate significantly lower than that of the 2004-2011 period. Poverty headcount rate dropped from 22.5 per cent in 2011 to 10.2 per cent in 2019 with more pronounced deductions in rural areas compared to urban areas, according to a recent World Bank working paper.

The paper -- titled ‘Poverty in India has declined over the last decade but not as much as previously thought’ and authored by Sutirtha Sinha Roy and Roy van de Weide -- posited that the “rate of poverty reduction between 2004 and 2011 is estimated at approximately 2.5 percentage points per year. After 2011, poverty reduction has slowed down."

The paper further claimed that by the authors' estimates, poverty has declined by an average of 1.3 percentage points per year between 2011 and 2018.

It further noted that the rate at which poverty went down between 2015 and 2019 is much lower basis private final consumption expenditure reported in this period. In order to sustain more reduction in the rates of poverty, it would take much higher rates of consumption growth and/or reductions in inequality, according to this paper.

It added that higher poverty reduction was reported in rural areas compared to urban areas. The paper stated, “Rural and urban poverty dropped by 14.7 and 7.9 percentage points during 2011-2019.”

The paper identified two instances that gave rise to poverty in India—urban poverty, which rose by 2 percentage points in 2016 due to demonetisation of Rs 500 and Rs 1,000 notes whereas rural poverty, which went up 10 basis points (bps) in 2019 due to the growth slowdown.

It underscored, “Our estimates of poverty for recent periods are more conservative than earlier projections based on consumption growth in national accounts and other survey data. Finally, we do not find evidence of rising consumption inequality in our analysis. Our findings are supported by a comprehensive set of independent data sources.”

The paper also mentioned that farmers having small landholding sizes have reported higher income growth.  It read, “Real incomes for farmers with the smallest landholdings have grown by 10 per cent in annualised terms between the two survey rounds compared to a 2 per cent growth for farmers with the largest landholding. Rural households owning smaller pieces of land are more likely to be poorer than others.”

The paper further argued that the growth in incomes of smallest landholders in rural areas provides more evidence of moderation in income disparity in rural areas. Smallest landholders comprise larger share of the poor population. This income includes wages, net receipt from crop production, net receipt from farming of animal farming and net receipt from non-farm business. Income from leasing out land has been exempted.

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