Context: 

According to a research study by the State Bank of India (SBI), rural poverty has fallen below 5% in the financial year 2023-24 mainly driven by government support programmes. 

Key Highlights of the Report

New Poverty Line Estimates: The poverty line, originally defined in 2011-12 and adjusted for inflation, now stands at ₹1,632 for rural areas and ₹1,944 for urban areas. Using this benchmark, poverty rates were calculated at 4.86% for rural areas and 4.09% for urban areas in FY24. 

• SBI’s findings, supported by data from the government’s Consumption Expenditure Survey, show that rural poverty dropped to 4.86% in FY 2023-24, a sharp decline from 7.2% in FY 2022-23 and 25.7% in FY 2011-12.  
• Urban poverty also saw a reduction, falling to 4.09% in FY 2023-24, down from 4.6% in FY 2022-23 and 13.7% in FY 2011-12.

The report estimates that national poverty rates are now between 4-4.5%, with extreme poverty nearly eradicated, thus marking a significant improvement in living conditions across the country. 

The sharp decline in rural poverty is attributed to higher consumption growth in the lowest income group of “0-5%” and significant government support programs.

The research emphasizes the importance of government initiatives in alleviating poverty, especially during periods of rising food prices, which impact overall expenditure.

• Around 30 per cent of the Rural MPCE is due to the Govt initiatives like – Direct benefit transfers (DBT) transfers, building rural infrastructures, augmenting farmers' income and improving rural livelihood significantly.

Rural consumption is fast catching up with urban consumption: The SBI Research, using the latest Household Consumption Expenditure Survey, highlights that the Monthly Per Capita Consumption Expenditure (MPCE) gap between rural and urban areas is on a declining trend. 

• It has declined from 88.2% in 2004-05 to 69.7% in 2023-24. 

The research estimates that food inflation reduces 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.

• High-income states show greater savings rates than the national average (31 per cent) while Uttar Pradesh and Bihar show low savings rates possibly due to higher outward migration.