Are the poor in India truly becoming poorer, or is the decline in average poverty just an illusion? This question cuts to the heart of India’s ongoing economic debate. The reality of rising prices and stagnant or falling incomes for the poorest segments of society suggests that the narrative of declining poverty rates may not reflect the lived experience of millions.
Consider the impact of food inflation. According to the latest government survey, rural households spend nearly 46% of their total expenditure on food, while urban households spend about 39%. For the poorest families, this share is even higher. When food prices rise, as they have consistently over the past decade, these families are hit the hardest. Their already limited incomes are stretched further, leaving less for other essentials. The United Nations reported that in 2022, 224 million Indians suffered from undernutrition, only a slight improvement from 248 million in 2004-06. The slow pace of progress is partly due to rising food prices, which force the poor to buy and eat less. Undernutrition remains a key marker of poverty.
The illusion of average income further obscures the reality. The country’s average household income stands at ₹3.6 lakh, but this figure masks the gap between the wealthy and the poor. Research by PRICE found that the average annual income of the poor fell from ₹1.37 lakh in 2015-16 to ₹1.14 lakh in 2022-23—a drop of 13% over seven years. During this period, even a modest estimate of 5% annual inflation accumulates to 35%, compounding the hardship. If prices rise by 35% while incomes fall by 13%, it is clear that the poor are worse off. The same research found that the incomes of the poorest 20% of families dropped by 52% after the pandemic.
Food inflation has been relentless. Over the past year alone, vegetable prices rose by 27%, tomatoes by 54%, potatoes by 43%, and onions by 40%. Pulses and rice have also seen double-digit price hikes. These are not abstract numbers; they represent the daily struggle of families trying to put food on the table. The price of kerosene, essential for many low-income households, soared by 79%. Potatoes, the most widely consumed vegetable, have become more expensive for everyone.
Yet, incomes are not keeping pace. Out of 320 million families in India, about 200 million do not see their earnings rise in step with food prices. These are the families who receive five kilos of free grain from the government each month. To maintain the same diet as before, they must now spend more, as their real purchasing power has declined. By the simplest definition, those who spend the largest share of their income on food are the poor. By this measure, poverty is deepening.
The reasons behind food inflation are complex, but two stand out. First, while India’s oil import bill fell between 2014 and 2022, the government did not pass on the savings to consumers in the form of lower fuel prices. Diesel, which is essential for transporting goods, remained expensive, pushing up food prices. Even the urban poor, many of whom own two-wheelers, felt the pinch of rising petrol costs. Second, fertilizer subsidies, which rose dramatically under the previous government, have not kept pace in recent years. Fertilizer prices have risen by more than 50%, increasing the cost of agricultural production and, ultimately, food.
Official poverty statistics, whether from the government or the World Bank, often fail to capture this reality. The World Bank recently claimed that the proportion of people living in extreme poverty in India fell from 27.1% in 2011-12 to 5.3% in 2022-23, defining extreme poverty as living on less than $3 a day. That would mean 74 million people are extremely poor, down from 345 million a decade ago. If true, this would be cause for celebration. But does this dramatic reduction in poverty match what we see around us?
The latest Household Consumption Expenditure Survey reports that average monthly per capita expenditure is ₹4,247 in rural areas and ₹7,078 in urban areas, including the benefits from government welfare schemes. If we assume expenditure equals income, a rural family of five would have a monthly income of ₹21,235, and an urban family ₹36,590. But does the average family really earn this much? There are no clear data to confirm this.
Ultimately, the statistics and averages often cited in official reports do not reflect the daily struggles of India’s poor. When families have fewer choices in the market and must spend most of their income just to eat, their freedom and well-being are diminished. The claim that poverty has dramatically declined may be comforting, but it risks obscuring the worsening conditions faced by millions who are being left behind.
---
*Senior economist based in Ahmedabad
Comments