India’s poverty reduction challenge lies beyond numbers games

India's poverty reduction efforts fall short.
Decentralisation, improved data management, and a focus on quality education and healthcare are crucial for sustainable poverty reduction.

India’s poverty reduction programmes: Whenever the government releases new poverty statistics, it becomes the topic of heated debates. The latest figures from NITI Aayog show a 15% decrease in poverty, representing 248 million individuals currently living below the poverty line. About 60% of India’s 1.3 billion people living on less than $3.10 a day, the World Bank’s median poverty line, and 21%, and more than 250 million people survive on less than $2 a day. The current poverty line is set at Rs 1,059.42 (approximately $62 PPP) per month in rural areas and Rs 1,286 ($75 PPP) per month in urban areas. There is a need to review the poverty reduction plan without getting stuck in the contentious debate over statistics.

On the eve of independence, India was seen as a potential economic powerhouse. However, 75 years later, the reality is starkly different. When compared with the People’s Republic of China and the economies of east and southeast Asia, India’s socio-economic development appears modest. This disparity highlights the missed opportunities and underperformance that have characterised India’s journey. This comparison serves as a sobering reminder of the effectiveness of policy implementation which, in India’s case, has often been hampered by bureaucratic inertia and misaligned priorities.

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Poverty reduction programmes

Since the Garibi Hatao slogan raised by Indira Gandhi, various programmes have been introduced, from the PDS system distributing subsidised food grain, now providing 5kg to 80 crore individuals, to the rights agenda guaranteeing 100 days of wages under MGNREGA. These efforts target poverty alleviation directly. However, even with Antyodaya programmes designed to reach the most vulnerable, the debate over the exact number of people below the poverty line persists. It is essential to corroborate these figures with employment rates, nutrition levels, the hunger index, and other human development indices.

poverty reduction numbers

multidimensional poverty

The unemployment rate in India rose to 8% in February 2024 from 6.8% in January 2024, according to CMIE’s Consumer Pyramids Household Survey. While the unemployment rate eased in urban areas, it rose substantially in rural India. The downturn in the FMCG index in 2024, following a strong 2023, can be attributed to several factors including banks’ fears of accruing more non-performing assets and a fall in family savings, with net household financial savings declining sharply to 5.1% in FY23 from 7.1% in previous years. Reasons include stress on income and the burden of paying EMIs, alongside macroeconomic shifts affecting consumer spending and inflation impacting operational costs.

Deep-rooted social and cultural divisions exacerbate the challenges of poverty in India. The enduring hierarchies of caste and the diversity of religious beliefs create significant barriers to social unity and economic development. These divisions not only affect social interactions but also influence political policies and economic opportunities, perpetuating a cycle of inequality and hindering effective poverty alleviation strategies.

Economic reforms, growth, and investment

The structural challenges within India’s economic framework remain significant barriers to attracting private investment and global businesses. An overemphasis on self-reliance and persistent defects in the policymaking processes have led to economic stagnation. Unlike China, which opened its doors to massive foreign investment, India’s cautious approach has sometimes been counterproductive, missing critical waves of global economic trends. To truly harness its potential, India must undertake radical policy changes, particularly in areas of labour regulation, land acquisition, and financial markets to create a more favorable environment for business and investment.

Since the 10th plan, each district has received tied funds, which have grown over the years from nearly Rs 800 crore to Rs 2000 crore for districts with a population of 1.5 million. These funds, which do not cover employee salaries, are allocated for infrastructure works in rural and urban areas, agriculture, and related sectors like horticulture, pisciculture, and floriculture, as well as social security measures, education, healthcare, housing, and sanitation—covering nearly every aspect of life to improve living standards. There are numerous schemes, some overlapping, leading to the introduction of the concept of convergence in the 10th plan, which has since become systematic.

Decentralisation for effective governance

The mechanisms of reaching out through direct benefit transfers (DBTs), field workers, and digital databases are well-established. There are dedicated schemes for housing, food, education, both preventive and curative healthcare, infrastructure, and social security. However, the problems often lie in duplicating benefits or failing to reach some beneficiaries, and more importantly, in citizens not demanding these services as their right, content instead to tolerate poor infrastructure and low-quality education and healthcare.

Each panchayat with a population of 1,500 receives a crore of rupees annually for infrastructure; urban areas receive similar funds for wards. It is now essential to not only ensure timely fund disbursal but also to allow for funds to be untied so they can be planned and used in a decentralised manner. There is also a case for allowing districts and states some untied funds with defined outcomes to ensure local healthcare.

The problem also lies in the lack of systematic information availability, despite digitisation. There is a need to monitor every 25 crore households for their socio-economic status and to ensure quality infrastructure is provided to them. This is the essence of governance. The key lies in providing quality education and healthcare through government primary and high schools and primary health centers, and then skilling individuals with industry attachments, especially in MSMEs, for better employability.

Despite the procedural robustness of its democratic system, India has struggled to achieve the substantive goals of liberalism, such as equality before the law and the protection of individual rights. This gap between the ideals of a liberal democracy and the everyday practice has undermined the state’s ability to provide effective governance and to address economic challenges. Bridging this gap requires not only policy reforms but also a cultural shift toward greater civic participation and a commitment to upholding the democratic ethos in more than just name.

A centralised approach has not proved very effective. Well-performing states and others differ on the issue of this decentralised approach that ensures better management and inclusive growth that adds up to national better performances. The need now is for citizens to demand the best infrastructure and the reach of entitlements through a decentralised approach and common household-wise data management and monitoring.

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Dr Aruna Sharma is a New Delhi-based development economist. She is a 1982-batch Indian Administrative Service officer. She retired as steel secretary in 2018.