Rural poverty in India falls below 5% for first time
What's the story
Rural poverty in India has witnessed a sharp decline, dropping below 5% for the first time in FY 2023-24. The finding comes from a recent SBI Research study.
According to the report, the rural poverty ratio fell to 4.86% in FY24, a significant drop from last year's 7.2%.
The improvement is largely due to a rise in rural spending and government measures like Direct Benefit Transfer (DBT).
Urban improvement
Urban poverty also sees a decline
The SBI Research study also noted a decline in urban poverty, albeit at a slower rate than its rural counterpart.
The urban poverty ratio stood at 4.09% in FY24, down from 4.6% last year.
The report indicated that these numbers could be slightly adjusted after the 2021 census is completed and new Rural Urban population share data is released.
Contributing factors
Infrastructure development and government schemes aid poverty reduction
The report highlighted improved physical infrastructure as a major contributor to bridging the rural-urban divide and reducing rural income inequality.
Government scheme transfers such as DBT also contributed significantly.
The study observed that "around 30% of the Rural MPCE is explained by factors that are endogenous to the rural ecosystem," mainly due to government efforts to improve rural infrastructures and increase farmer's income.
Consumption disparity
Consumption gap between rural and urban areas narrows
The SBI Research report also observed a decline in the consumption gap between rural and urban areas.
The gap reduced to 69.7% in FY24 from 71.2% last year, and much lower than 83.9% a decade ago.
Changes in food items, despite their lower share in spending, were found to have a major impact on consumption patterns with higher inflation resulting in lower consumption across all sectors.