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Paper on India's Poverty: World Bank- UPSC Current Affairs

Apr 23, 2022

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Why in the News?

Probable Question

Key Highlights of the Report



Why in the News?

Recently, the World Bank has released a paper titled, ‘Poverty in India Has Declined Over The Last Decade But Not As Much As Previously Thought’.


Image Source: Business Insider

Probable Question

Discuss the underlying issues that contribute to the prevalence of poverty in India and provide strategies for accelerating poverty elimination in a sustainable way.

Key Highlights of the Report

  • Source: The paper relied on the Consumer Pyramid Household Survey (CPHS) of the Centre for Monitoring Indian Economy (CMIE), which is conducted continuously at four-month intervals since its inception in 2014.
  • Extreme Poverty: Extreme poverty in India declined by 12.3 percentage points between 2011 and 2019 but at a rate that is significantly lower than observed over the 2004-2011 period.
    • The paper showed that rural extreme poverty dropped by 14.7 percentage points during this period, while urban deep poverty fell by 7.9 percentage points.
    • Extreme poverty is measured in the terms of the number of people living on less than $1.90 or Rs 145 a day.
  • Poverty Reduction Rate: Poverty reduction rates in rural areas were higher than in urban areas.
    • The rate of poverty reduction between 2004 and 2011 is estimated at approximately 2.5 per cent points per year.
    • Since 2011 poverty reduction has slowed down. By an estimate, poverty has declined by an average of 1.3 per cent points per year between 2011 and 2018.
  • Poverty Headcount: The policy research team also said the poverty headcount in the country has dropped from 22.5% in 2011 to 10.2% in 2019 with rural areas showing better results.
  • Rising Poverty: The research paper also highlighted that poverty marginally increased for a brief period at least twice in the last decade. The two incidences of rising poverty is:
    • Urban poverty rose by 2 percentage points in 2016 during the demonetization event and fell sharply thereafter, and 
    • Rural poverty rose by 10 basis points in 2019 likely due to a growth slowdown.
  • Farmers with small landholdings: The study noted that farmers with small landholdings have seen higher growth.
    • Real incomes for farmers with the smallest landholdings have grown by 10 per cent in annualized terms between the two survey rounds (2013 and 2019) compared to a 2% growth for farmers with the largest landholding.
  • Consumption Inequality: The paper observed that consumption inequality in the country has eased after 2011, with barely any change between 2015 and 2019.

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The World Bank paper is a significant indicator of India’s poverty levels as the country itself has no recent official estimation.

  • The last expenditure survey on India’s poverty and inequality was in 2011 by the National Sample Survey Organization.
Additional Information: 

IMF Working Paper:

A recent International Monetary Fund paper had also suggested that extreme poverty in India was as low as 0.8% in 2019. 

The paper noted the country had kept up the level in the pandemic year 2020 by transferring food through the Pradhan Mantri Garib Kalyan Yojana.

India has almost eradicated extreme poverty and has brought down its consumption inequality to its lowest level in the last four decades. These consumption inequalities were dealt with state-provided food handouts.

The IMF report highlighted that less than 1% of the Indian population is living under extreme poverty.

Food Ration Schemes were “instrumental” in ensuring that extreme poverty did not rise during the pandemic and remind steady, the study found.

Differences between both the papers

The IMF paper is based on the data from the 2011-12 consumption expenditure survey of the National Sample Survey Organisation (NSSO). 

The World Bank paper relied on the data from the Consumer Pyramid Household Survey (CPHS) of the Centre for Monitoring Indian Economy (CMIE). 

Also, the IMF estimated poverty reduction after the COVID-19 pandemic, while the latter focused on the scenario of the country before the COVID-19 pandemic.

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