Decline in Poverty in India: Real or an Artifact of a Low Poverty Line?

Abstract

Issue: Mar-Apr 2021

After the erstwhile Planning Commission released the poverty estimates for India for the year 2011-12 in July 2013, a debate ensued on whether the impressive poverty reduction was not due to an excessively low poverty line set by the commission. Utilizing unit-level data from NSS consumer expenditure surveys of years 1993-94, 2004-05 and 2011-12, this research presents empirical evidence that puts to rest any doubts that India’s poverty reduction is an artifact of a low poverty line. We show that even when the poverty line is set at expenditure levels higher than the Tendulkar poverty line by 25, 50, 75 and 100 percent, the broad trends in poverty reduction captured by the Tendulkar poverty line continue to be valid. Our estimates also show that the absolute number of individuals lifted out of poverty between 1993-94 and 2011-12 was in fact slightly larger when the poverty line is 25 percent above the Tendulkar line. Even though it is difficult to match this remarkable decline at progressively higher poverty lines, we show that the gains remain large even as we push the poverty line to a level twice the Tendulkar line and is reflective of a very broad-based growth during this period.