For quite some time, poverty in developing nations was measured in terms of the proportion of people who couldn’t spend even one dollar in a day. The value of one US$ in India in terms of ‘purchasing power parity (PPP)’ was Rs. 22.88 in 2022-23. A basket of goods that a person in the US bought with one dollar that year could be purchased in India with Rs. 22.88. Results of the survey on household consumption expenditure, recently released by National Sample Survey Office (NSSO) revealed that the bottom 5 per cent of the population (ranked by monthly per capita expenditure) in rural India spends Rs. 1,373/- a month. Thus, consumption of the bottom 5 per cent of the population was around $2 per day in 2022-23, in terms of the value of the goods and services in the domestic Indian market.

The percentage of population below poverty line (BPL) was 21.92 per cent in 2012. The result of the recent survey must be satisfying to the policy makers in the government. The results of a similar study in 2017-18 which was included in the draft report of the 75th round of household consumption expenditure, was not accepted by the government and the findings were never released allegedly because of adverse findings. The NSSO report further indicated that India’s growth story is inclusive as the gap between consumption in rural areas and urban areas have narrowed down over the last two decades.

Average per capita monthly expenditure in rural areas is Rs. 3,773 and 46 per cent of that is spent on food items. Monthly per capita consumption expenditure in urban areas is Rs. 6,459 and 39 per cent of that is spent on food. Consumption in the urban areas is thus 71.2 per cent higher as compared to the rural areas. The gap was 90.8 per cent in 2004-05 and 83.9 per cent 2011-12. The Survey also reveals that the rural rich (top 5 per cent) of the rural population in terms of monthly consumption expenditure) consume 7.65 times of the rural poor (bottom 5 per cent) whereas the urban rich consume 10.14 times of the urban poor. These figures may not be very palatable to policy makers, though there are some silver linings in the composition of expenditure of the poor. The component of expenditure on ‘cereals’ reduced from 22 per cent in 1999-2000 to 10.7 per cent in 2011-12 and to less than 5 per cent in 2022-23.

A reduced proportion of expenditure on cereals indicates that the poor today is better placed to spend on items other than the basic meals. Proportionate expenditure on conveyance (4.20 to 7.55 per cent) and durable goods (4.85 to 6.89 per cent) increased well as compared to 2011-12. By and large the survey results on monthly consumption expenditure contradict the narrative that India’s growth in recent decades was not inclusive. According to a recent Discussion Paper released by NITI Ayog, ‘multidimensional poverty’ in India declined from 29.17 per cent in 2013- 14 to 11.28 per cent in 2022-23. Multidimensional poverty is a relatively new concept which according to the Ayog is more comprehensive in assessing one’s deprivation. The welfare of a household depends “not only on its own spendings but also on state expenditures on people’s wellbeing” viz. free education and health, shelter and sanitation, nutritional support to children and pregnant women etc.

Though in terms of specific numbers the estimate of poverty as assessed from the NSSO survey and one assessed by NITI Ayog differ, that is understandable because the two studies are based on two different premises: whereas NSSO aims to capture household expenditure, multidimensional poverty attempts to estimate the degree of deprivation. However, both studies converge to a point that abject poverty has reduced substantially in the last two decades. What policy of the government might have contributed most to reducing poverty? The decade of the 2010s will be remembered in the Indian economy for the big push in various welfare schemes directly aimed at the vulnerable sections of society. Such a push was initially engineered by various State governments and was subsequently adopted by the Central government. Welfare grants, pensions, and subsidies to vulnerable sections of the society played a catalytic role in raising the consumption expenditure of the poor and in reducing the gap between rural and urban India.

The economists and Human Development Reports of UNDP as early as in 1990s emphasized that developing countries should go for direct transfer of benefits in the accounts of the targeted beneficiaries, instead of providing subsidies which are often indirect and infringe logical functioning of the market forces. However, the direct transfer of benefits could not be implemented on a large scale in India as the poor hardly had bank or post office accounts and the institutions did not have the digital infrastructure to transfer money seamlessly from the nodal agency to the beneficiary accounts. There was a paradigm shift in the development of the IT network of financial institutions in the first decade of this millennium. Subsequently, the drive to bring all eligible citizens under the formal banking network facilitated seamless transfer of money from the nodal agencies to the Aadhaar-seeded accounts of the targeted beneficiaries and that was catalytic in reducing abject poverty in the country in the last ten years.

However, the latest results of the NSSO survey also revealed certain disturbing trends. Whereas in rural Kerala, the average per capita monthly consumption is Rs. 5,924, that in Chhattisgarh (Rs.2,466) is less than 42 per cent of that. The difference of per capita consumption in urban areas is 54 per cent amongst the top (Delhi) and bottom (Chhattisgarh) states. The extent of regional imbalances is so alarming that perhaps the policy makers need to define the norm of poverty separately for each state and need to have state-specific policy prescriptions in future.

(The writer, a former civil servant, is now an independent commentator on socioeconomic issues and public policies.)