A recent research report by the State Bank of India (SBI) reveals a significant decline in poverty rates across both rural and urban regions of India. This remarkable reduction is attributed to targeted government interventions, improvements in rural infrastructure, and better consumption patterns among lower-income groups.
Key Findings of the SBI Report
Decline in Poverty Rates
- Rural Poverty: The poverty rate in rural areas has decreased substantially, from 25.7% in FY12 to just 4.86% in FY24.
- Urban Poverty: In urban areas, poverty has fallen from 13.7% in FY12 to an estimated 4.09% in FY24.
Impact of Government Interventions
The report credits several government initiatives for this positive trend, including:
- Direct Benefit Transfers (DBT): Ensuring that financial support directly reaches the beneficiaries, improving their livelihoods.
- Infrastructure Development: Strengthening rural infrastructure, which has played a crucial role in reducing consumption inequality.
- Farmer-Centric Initiatives: Programs focused on supporting farmers have also contributed to rural welfare.
These initiatives have not only improved rural livelihoods but have also helped narrow the income gap between different groups, especially benefiting the lower income deciles.
Improved Consumption in Rural Areas
Rural consumption has grown at a remarkable rate, rapidly catching up with urban consumption patterns. The Monthly Per Capita Consumption Expenditure (MPCE) gap between rural and urban areas has narrowed significantly:
- In FY24, the rural MPCE was 69.7% of the urban MPCE, down from 88.2% in FY05.
- Data from the Household Consumption Expenditure Survey (2023-24) indicates that the rural-urban MPCE gap has reduced from 84% in FY12 to 70% in FY24.
Poverty Line Definition
The report defines the poverty line for FY24 as:
- Rural Areas: Rs 1,632
- Urban Areas: Rs 1,944 This marks a significant increase from the 2011-12 poverty threshold set by the Tendulkar Committee, which was Rs 816 for rural areas and Rs 1,000 for urban areas, adjusted for inflation and other imputation factors.
State-wise Savings Rates
State-wise savings rates were estimated by factoring in MPCE and Per Capita Income, considering rural-urban population distribution. States with higher incomes show savings rates above the national average of 31%, indicating stronger financial stability. Conversely, low-income states like Uttar Pradesh and Bihar report lower savings rates, with Bihar notably exhibiting a negative savings rate of -6%. There's a marked disparity, with Goa showing a high savings rate of 49% and Bihar at the bottom.
Impact of Inflation on Consumption
The report also examines the impact of inflation on consumption:
- Elasticity of Consumption Demand: Consumption demand is highly elastic (|e| > 1), meaning that food price increases significantly affect overall spending, particularly in low-income regions.
- Food Inflation: Rising food prices negatively affect MPCE, with rural areas in low-income states being more vulnerable to price hikes.
- Reduced Food Inflation: Conversely, lower food inflation boosts MPCE in middle-income states, where decreased food prices enhance consumption.
Regional Disparities
The rural-urban gap in consumption is more pronounced in high-income states compared to low-income states, where rural populations tend to be more cautious about taking risks.
Government Initiatives to Alleviate Poverty
Several government initiatives have played a pivotal role in alleviating poverty:
- Prime Minister Street Vendor’s AtmaNirbhar Nidhi (PM SVanidhi)
- Pradhan Mantri Shram Yogi Maan-Dhan (PM-SYM)
- National Nutrition Mission (NNM)
- Pradhan Mantri Garib Kalyan Yojana (PMGKY)
- Pradhan Mantri Suraksha Bima Yojana
These programs aim to enhance the financial security and livelihood of the underprivileged, ensuring their steady inclusion in India’s development narrative.