India’s rural poverty ratio has registered a dramatic decline to 4.86 per cent in the financial year 2023-24 from 25.7 per cent in 2011-12 while urban poverty has fallen to 4.09 per cent from 4.6 per cent during this period, according to an SBI Research report released on Friday.
“At an aggregate level, we believe poverty rates in India could now be in the range of 4 per cent-4.5 per cent with almost minimal existence of extreme poverty,” the report said. “The sharp decline in the rural poverty ratio is on account of higher consumption growth in the 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 significant impact on not just food expenditures, but overall expenditure in general,” the report states. Based on 2023-24 fractile distribution, the sample proportion for poverty in rural areas is 4.86 per cent and 4.09 per cent in urban areas in FY24.
This is also significantly lower than FY23 estimates of rural poverty at 7.2 per cent and urban poverty at 4.6 per cent, according to the report. “It is possible that these numbers could undergo minor revisions once the 2021 census is completed and the new Rural-Urban population share is published. We believe Urban poverty could decline even further,” the report said. One of the reasons for the increasingly shrinking horizontal income gap between rural and urban and the vertical income gap within rural income classes is the enhanced physical infrastructure is scripting a new story in rural mobility, according to the report.
“The difference between rural and urban monthly per capita consumption expenditure (MPCE) is now at 69.7 per cent, a rapid decline from 88.2 per cent in 2009-10. This is mostly due to the initiatives the Government has taken in terms of Direct Benefit Transfers, building rural infrastructure, augmenting farmers’ income and improving rural livelihood significantly,” the SBI report pointed out. It said 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. The report also estimated that November 24 inflation because of the new weights would be 5.0 per cent against 5.5 per cent. It pointed out that most of the high-income states delineate a savings rate greater than the national average (31 per cent) while Uttar Pradesh and Bihar show low savings rates possibly due to higher outward migration.
Poverty ratio estimates for the year 2023-24 have been arrived based on the new estimated poverty line of Rs 1,632 in rural areas and Rs 1944 in urban areas in 2023-24. Starting with the 2011-12 (Based on MRP Consumption) poverty line estimate of Rs 816 in rural areas and Rs 1000 in urban areas, the new poverty line was adjusted for decadal inflation and imputation factor derived from the NSSO report.
Rural consumption is fast catching up with urban consumption with the gap declining from 88.2 per cent in 2004-05 to 69.7 per cent in 2023-24., according to the report. It states that the Rural Average consumption has increased due to Government Initiatives and support to the bottom of the pyramid Around 30 per cent of the Rural MPCE is due mainly to the initiatives that the Government has taken in terms of direct benefit transfers (DBT) transfers, building rural infrastructures, augmenting farmers’ income and improving the rural livelihood significantly.
The difference between rural and urban monthly per capita consumption expenditure/MPCE is declining for all states across income categories. However, an interesting point highlighted by the report is states that were once considered laggards such as Bihar and Rajasthan are showing the maximum improvement in narrowing the rural-urban gap. Consumption behaviour has also shifted from food to non-food items reflecting a higher standard of living as more manufactured goods such as toiletries and clothes are being bought. The change in consumer preference has occurred in both rural and urban areas during the last 12 years.
The infrastructure projects that have ushered in prosperity include mostly 4/8 Lane National Highways stretching across a length of 1,50,000 kms. Improved ‘Loops of connectivity’ facilitating real-time two-way access. The Pradhan Mantri Gram Sadak Yojana (PMGSY) has boosted rural connectivity with 700,000 plus kms of roads built in rural areas. Seamless connectivity with improved transportation means has upended consumption, altering buying & selling patterns deeply, the report highlights, the report highlighted
