From 2015 to 2023, the country experienced a sharp rise in extreme poverty, worsened by the covid pandemic, followed by an equally dramatic recovery.
Household income data from PRICE’s ICE 360 surveys (2016, 2021 and 2023) provide critical insights into these fluctuations and sheds light on how government interventions, economic resilience and social programmes shaped the fight against extreme poverty.
Our estimates of the Indian population in extreme poverty are derived from income data adjusted to 2011-12 prices, based on the international poverty line of $1.90 by purchasing power parity (i.e., ₹11,207 annual per capita income).
To account for inter-state and rural-urban differences in living costs, the annual cost-of-living index (CPI) was employed, with data taken from the National Statistical Office (NSO).
In rural India, extreme poverty was a persistent issue even before the pandemic. In 2015-16, 103.2 million people in rural areas were living in extreme poverty, accounting for 11.6% of the rural population. By covid-year 2020-21, however, this number had nearly doubled to 200.7 million, or 21.9% of the rural population.
The pandemic severely affected the rural economy, which is largely dependent on agriculture and informal labour. Lockdowns, movement restrictions and supply-chain disruptions hit rural livelihoods hard, pushing millions into extreme poverty.
Urban areas, while initially faring better, saw a similar pattern. In 2015-16, only 7.2 million urban residents were considered extremely poor, representing just 1.6% of the urban population.
However, by 2020-21, urban poverty had skyrocketed to 89.0 million people, or 17.9% of the urban population. The pandemic’s effect on urban areas was swift and severe, with sectors such as manufacturing, construction and services—where most urban poor are employed—grinding to a halt.
Migrant workers, daily-wage labourers and those in informal sectors were particularly vulnerable, as they lost their jobs overnight to the economic shutdown.
At the national level, the population in extreme poverty surged from 110.4 million in 2015-16 (8.3% of the population) to a staggering 289.7 million in 2020-21, equivalent to 20.5% of India’s population.
The pandemic dealt a devastating blow to the country’s poverty-reduction progress, pushing millions of people back into extreme deprivation. However, the story does not end there.
Following the initial devastation caused by the pandemic, India’s recovery from extreme poverty has been both swift and significant. By 2022-23, rural poverty had plummeted to 24.0 million, or just 2.5% of the rural population.
Similarly, urban poverty levels fell to 9.1 million (1.7% of the urban population), nearly returning to pre-covid levels. Nationally, the number of people living in extreme poverty dropped dramatically to 33.1 million, or 2.2% of the total population.
This represents an 88.6% reduction in poverty between 2020 and 2022, signalling a remarkable recovery after one of the most challenging periods in recent history.
The rapid decline in poverty levels after 2021 is a testament to the effectiveness of the government’s social protection programmes and resilience of the country’s informal workforce.
Several factors explain this sharp rebound. First and foremost, the Indian government’s interventions during and after the pandemic played a crucial role in alleviating poverty.
Programmes like the Pradhan Mantri Garib Kalyan Yojana, which provided cash transfers and free food distribution, helped millions of people survive the immediate economic fallout.
The expansion of the Mahatma Gandhi National Rural Employment Guarantee Act, which offers rural employment opportunities, was vital in supporting rural households, many of which had lost income during the pandemic.
Additionally, the Public Distribution System (PDS) ensured that food security was maintained for vulnerable families, preventing widespread hunger during the worst of the crisis.
India’s informal economy, which had borne the brunt of the pandemic’s impact, also showed resilience once the economy reopened. As lockdowns were lifted and businesses resumed operations, many informal workers were able to return to their previous jobs, contributing to the rapid reduction in poverty.
The swift recovery of sectors such as agriculture, construction and retail played a key role in pulling millions of people out of extreme poverty.
The fluctuations in extreme poverty between 2015 and 2023 hold important implications for India’s future economic and social policies. The rapid reduction in poverty after the pandemic suggests that India is back on track toward meeting its Sustainable Development Goals (SDGs), particularly in the realm of poverty eradication.
However, the pandemic also highlighted the vulnerability of large sections of India’s population, particularly those employed in the informal sector.
As the country moves forward, it is essential to focus on formalizing the labour market, expanding social security programmes and improving healthcare access to protect workers from future economic shocks.
Strengthening India’s social protection systems and building resilience within the economy will be key to ensuring that the country can weather future shocks without experiencing a repeat of the sharp rise in poverty seen during the pandemic.
As India continues its journey towards the eradication of poverty, we must not let any lessons be lost that can ensure the country is better prepared for whatever challenges lie ahead.