Rural poverty in India saw a significant drop in 2023-24, with the poverty rate falling to 4.86% from 7.2% in the previous year and 25.7% in 2011-12, according to a report by SBI Research. This marks the first time rural poverty has dipped below 5%, driven by a sharp increase in rural spending.
In urban areas, the decline in poverty was less pronounced, dropping to 4.09% in 2023-24 from 4.6% in the previous year. SBI Research noted that these figures might undergo slight revisions once data from the 2021 census and updated rural-urban population ratios are released.
“At a national level, we estimate India’s overall poverty rate to be between 4% and 4.5%, with extreme poverty almost eliminated. Urban poverty could see further reductions,” the report stated.
Factors Driving Rural Poverty Reduction
The report highlighted several key factors contributing to the decline in rural poverty, including:
– Government Initiatives: Direct Benefit Transfers (DBT) and investments in rural infrastructure have significantly improved rural livelihoods.
– Increased Rural Spending: Enhanced income from agriculture and government schemes boosted monthly per-capita consumer expenditure (MPCE) in rural areas.
– Improved Connectivity: Better physical infrastructure and urban mobility have reduced the rural-urban gap, narrowing rural income inequality.
Currently, around 30% of rural MPCE is attributed to factors within the rural ecosystem, influenced by government efforts to enhance living standards.
Narrowing Rural-Urban Gap
The rural-urban consumption gap has decreased to 69.7% in 2023-24, compared to 71.2% in the previous year and 83.9% a decade ago. This shrinking gap reflects rising consumption levels in rural areas due to improved livelihoods.
However, higher inflation, particularly in low-income rural states, has impacted overall consumption. In contrast, middle-income states have played a key role in sustaining demand.
Inflation Remains a Concern
India’s inflation rate stayed above 5% in November 2023, leading the Reserve Bank of India’s Monetary Policy Committee (MPC) to maintain steady interest rates for the eleventh consecutive time in December. Even under the revised CPI basket, inflation would have been 5%, slightly lower than the 5.5% calculated under the old series.
The next MPC meeting is scheduled for February 2024, where further measures to address inflation will be considered.
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