SBI Research Report on Poverty
Context:
The recent SBI Research report, supported by the Household Consumption Expenditure Survey (HCES) 2023-24, highlights significant strides in reducing the rural-urban economic divide and improving consumption patterns in India.
Key Findings
- Enhanced Rural Infrastructure and Narrowing Income Gaps: Development in rural infrastructure is transforming mobility and reducing the income gap between rural and urban areas.
- The horizontal income disparity between rural and urban regions has declined sharply, with the rural-urban Monthly Per Capita Consumption Expenditure (MPCE) gap reducing to 69.7% in 2023-24 from 88.2% in 2009-10.
- Vertical income disparities within rural income classes have also narrowed.
- Consumption Growth Momentum in Rural Areas: Rural MPCE increased by 10% to ₹14,247 in 2023-24, while urban MPCE rose by 8% to ₹17,078.
- The gap in rural and urban MPCE has dropped to 70% in 2023-24 from 84% in 2011-12, indicating sustained consumption growth in rural India.
- Between 2011-12 and 2022-23, household MPCE more than doubled, reflecting improved rural economic conditions.
- Shifting Consumption Patterns: The share of food in the consumption basket fell from 53% in 2011-12 to 47% in 2023-24.
- Cereals’ share in the rural consumption basket dropped from 10.7% to 6.9%.
- Sharp Decline in Poverty Rates: Rural poverty plummeted from 25.7% in 2011-12 to 4.86% in 2023-24, while urban poverty dropped to 4.09% in the same period.
- At an aggregate level, poverty rates in India are estimated at 4-4.5%, with minimal extreme poverty.
- The poverty line for 2023-24 is set at ₹1,632 MPCE for rural areas and ₹1,944 for urban areas, compared to ₹816 and ₹1,000, respectively, in 2011-12.
- Reduced Consumption Inequality: Consumption inequality, measured by the Gini coefficient, has decreased:
- Rural areas: 0.24 in 2023-24, down from 0.27 in 2022-23.
- Urban areas: 0.28 in 2023-24, down from 0.31 in 2022-23.
The Gini coefficient, also known as the Gini index or Gini ratio, is a widely used statistical measure of economic inequality within a population. Developed by Italian statistician Corrado Gini in 1912, it quantifies the distribution of income or wealth among individuals or households. The Gini coefficient ranges from 0 to 1 (or expressed as a percentage from 0% to 100%): 0 indicates perfect equality, where everyone has the same income and 1 (or 100%) signifies perfect inequality, where one individual holds all the income while others have none.
- Inflation and Real Wage Concerns: Revised CPI weights suggest lower retail inflation at 5% in November 2023 (compared to 5.5%) and an average of 4.6% in April-November 2023-24 (down from 4.9%).
- Despite these gains, negative growth in real rural wages remains a concern, contrasting with the optimistic economic metrics.
- Fractile Class Analysis: MPCE for the lowest 0-5% fractile class in rural areas rose by 22% to ₹1,677 in 2023-24 from ₹1,373 in 2022-23.
- In urban areas, MPCE for the same class increased by 18.7% to ₹2,376 from ₹2,001 in the same period.
- The findings highlight significant progress in rural economic development, driven by infrastructure growth, policy initiatives, and improved livelihoods. However, addressing rural wage stagnation and sustaining this momentum remains critical for achieving equitable economic growth across India.
