News Brief
Rural-Urban Gap Narrows As India’s Poverty Rates Fall Sharply: Rural Ratio At 4.86 Per Cent, Urban At 4.09 Per Cent, Says SBI Report
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India's rural poverty ratio has declined to 4.86 per cent in FY 2023-24, a significant reduction from 25.7 per cent in 2011-12, according an SBI Research report released on Friday (3 January).
Meanwhile, the Urban poverty ratio in India has also reduced, reaching 4.09 per cent from 4.6 per cent during the same timeframe.
"At an aggregate level, we believe poverty rates in India could now be in the range of 4 per cent-4.5 per cent with almost minimal existence of extreme poverty," the report said.
"The sharp decline in the rural poverty ratio is on account of higher consumption growth in the lowest 0-5 per cent decile with significant Government support and such support is important as we also find that change in food prices has significant impact on not just food expenditures, but overall expenditure in general," the report said.
Based on 2023-24 fractile distribution, the sample proportion for poverty in rural areas is 4.86 per cent and 4.09 per cent in urban areas in FY24.
This is also significantly lower than FY23 estimates of rural poverty at 7.2 per cent and urban poverty at 4.6 per cent, according to the report.
The report noted that one of the reasons for the increasingly shrinking horizontal income gap between rural and urban and the vertical income gap within rural income classes is the enhanced physical infrastructure is scripting a new story in rural mobility.
"The difference between rural and urban monthly per capita consumption expenditure (MPCE) is now at 69.7 per cent, a rapid decline from 88.2 per cent in 2009-10. This is mostly due to the initiatives the Government has taken in terms of Direct Benefit Transfers, building rural infrastructure, augmenting farmers' income and improving rural livelihood significantly," the SBI report said.
It estimated that the food inflation dampens 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
The report also estimated that November 2024 inflation "because of the new weights" would be 5.0 per cent against 5.5 per cent.
According to the report, most of the high-income states delineate a savings rate greater than the national average (31 per cent) while Uttar Pradesh and Bihar show low savings rates possibly due to higher outward migration.
