Illusion of World Bank’s poverty decline: Fact, fiction or flawed method?

By Hemantkumar Shah* 

The World Bank’s recent claim that poverty has drastically reduced in India should ordinarily be cause for celebration. However, a closer look at the statistics and methodology behind this claim reveals a different, more disturbing picture. According to the Bank, if a person’s daily income was less than $3.00 or $4.20 in 2021 (measured in purchasing power parity or PPP terms), they would be considered poor. But this calculation method, based on an outdated exchange model and an abstract measure of purchasing capacity, severely misrepresents lived realities on the ground.

PPP calculations can be deceptive. While the market exchange rate for one dollar in 2021 was around ₹75.57, the PPP value was considered ₹21.62. This means that the same dollar's worth of goods in the U.S. is assumed to be available in India for just ₹21.62—an assumption that clearly does not reflect actual market conditions. The World Bank's framework thereby downplays the severity of poverty by adjusting incomes to appear more adequate than they are.

Based on the $3/day threshold, World Bank data suggests that poverty fell from 59.7% in 1977 to 5.3% in 2021. Similarly, using the $4.20/day threshold, it claims a drop from 82.9% to 23.9% in the same period. These numbers suggest a staggering improvement in just a decade, with poverty dropping by 21.8 and 33.8 percentage points respectively. But such dramatic declines demand rigorous scrutiny.

To understand what $3 a day really means: at ₹64.86/day (2021 PPP), an individual earns ₹20,301 annually. For a household of 4.76 (the national average), this totals about ₹96,676 a year or ₹8,056 a month. By any stretch, this remains a subsistence-level income, hardly a marker of economic dignity or stability. It is deeply misleading to count those marginally above this level as having escaped poverty.

Further, official estimations fail to capture multidimensional poverty, which includes education, health, and access to basic amenities. The NITI Aayog recently claimed that multidimensional poverty dropped from 29.17% in 2013–14 to 11.28% in 2022–23, lifting 24.82 crore people out of poverty. However, even then, at least 16.13 crore Indians remained poor in 2022–23—hardly a minor figure.

On-ground realities paint a more sobering picture. Over 12 crore rural individuals registered for MGNREGA employment last year. Assuming one worker per household, and 4.76 persons per household, over 57.5 crore rural Indians—more than one-third of the population—depend on this minimal support mechanism, reflecting deep economic vulnerability. This does not account for urban poor, who are excluded from the scheme.

Further, only 10.4 crore Indians filed income tax returns in 2023–24, which indicates that at least 94 crore people earn too little to pay taxes. Even if not all non-filers are poor, many are at best hovering just above survival thresholds. Add to that the 81.35 crore people receiving free grain under the National Food Security Act—an indicator of state-recognized food insecurity—and it becomes clear that India's poverty problem is far from resolved.

The World Bank’s measurements, while technically sophisticated, fail to grapple with this grim reality. They rely on income-based definitions, whereas real poverty is lived in terms of hunger, illness, lack of shelter, and educational exclusion. When millions require free food and still perform strenuous labour for minimum wages under government employment schemes, claims of poverty eradication ring hollow.

Rather than celebrating numerical improvements, the focus should be on real, tangible progress: secure jobs, living wages, universal healthcare, quality education, and dignified housing. A society must not measure its development by statistical acrobatics, but by the well-being of its most vulnerable citizens. Until that standard is met, India's poverty crisis remains unresolved—no matter what the spreadsheets say.

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*Senior economist based in Ahmedabad