Poverty Reduction in India: Factors Responsible & Challenges

Table of contents

India has long grappled with poverty as a multifaceted challenge, particularly among the historically marginalised religious and social groups such as Muslims, Scheduled Castes (SCs), Scheduled Tribes (STs), and Other Backward Classes (OBCs).
However, recent estimates suggest that the poverty rate, based on the World Bank’s PPP $ 2.15-a-day metric, has significantly declined from 30.4 percent in 2011-12 to a mere 3.9 percent in 2023-24. This declining trend spans across communities, with convergence observed in poverty levels among Hindus, Muslims, and other religious groups.

Poverty Reduction: Key Statistics

According to the recently released Household Consumption Expenditure Survey (HCES) 2024-25, the following figures emerge:

Muslims: In 2011-12, in rural areas, the poverty rate among Muslims was 31.7 per cent, which has fallen to 2.4 per cent in 2023-24. In urban areas, the same was 39.4 per cent back in 2011-12, which has come down to 5.7 per cent in 2023-24.
Hindus: Among Hindus, the rate of poverty in rural areas was marginally lower at 30.9 per cent back in 2011-12, and the same fell to 4 per cent in 2023-24. In urban areas, in 2011-12, the poverty rate for Hindus was 24.4 per cent, and in 2023-24, it is 3.7 per cent.
Scheduled Tribes (STs): In rural areas, the poverty rate was the highest among the ST group at 49.5 per cent in 2011-12, which has reduced to 12.2 per cent. Overall, the ST population, too, saw a major decline in poverty rate from 38.2 per cent to 9.9 per cent in the last 12 years.
Scheduled Castes: In urban areas, the highest poverty rate in 2011-12 was among the SC population at 39.6 per cent. In 2023–24, the poverty rate for the SC category has reduced to 6.6 per cent.
OBC Category: For the OBC category, the poverty rate fell from 30.4 per cent to a significantly lower 3.6 per cent during the same period.

Factors Contributing to the Decline in Poverty

Economic Growth and Structural Transformation

Rapid GDP Growth: India has witnessed sustained economic growth over the last decade, averaging 6-7% annually, despite temporary setbacks like demonetisation (2016) and the COVID-19 pandemic. Growth has had a direct poverty-reducing effect through job creation, income expansion and multiplier effect on the creation of economic linkages.
Shift from Agriculture to Non-farm Sectors: Rural diversification into construction, manufacturing, and services has generated alternative livelihoods. The construction boom, especially under PMAY (housing for all) and infrastructure expansion, absorbed large numbers of low-skilled workers.
Rise in Real Wages and Consumption: According to PLFS and NSSO data, rural wages (particularly for manual labour) rose in real terms in the pre-pandemic years. Household consumption surveys indicate improvements in food and non-food expenditure patterns, reflecting increased purchasing power.

Government interventions in the last decade and more have focused on last-mile delivery, inclusion, and direct benefit transfers (DBTs), contributing immensely to poverty alleviation. The various well-known initiatives in the direction are:

PM Garib Kalyan Anna Yojana (PMGKAY): Launched during the pandemic, the scheme provided free ration to over 800 million people, shielding them from food insecurity. It has been extended until December 2028, significantly impacting calorie intake and nutritional security among the poor and marginalised.
MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act): Although predating 2011, MGNREGA continued, and still does, to serve as a lifeline during the pandemic and economic downturns, offering 100 days of wage employment and stabilising rural incomes.
Jan Dhan-Aadhaar-Mobile (JAM) Trinity and DBT: The JAM framework enabled the government to transfer subsidies (LPG, pensions, PM-KISAN) directly into beneficiaries’ accounts, reducing leakages and ensuring that welfare reached the intended.
Ayushman Bharat – PMJAY: The health assurance scheme provided financial protection to vulnerable populations from catastrophic health expenditures, which push many a family into poverty and debt..
Ujjwala Yojana, Swachh Bharat Mission, and PM Awas Yojana: The schemes improved living standards through access to clean cooking fuel, sanitation, & pucca housing, thereby impacting multidimensional poverty.

Demographic Dividend and Labour Market Changes

Youthful Workforce: India’s demographic advantage has contributed to an ever-expanding labour pool. Though challenges remain in terms of quality employment, access to education and skill development has improved, especially through programs like Skill India and PM Kaushal Vikas Yojana.
Female Labour Force Participation (FLFP): While overall FLFP rates remain low, many women have entered informal sectors, self-help groups, and microenterprises due to initiatives like NRLM (National Rural Livelihoods Mission), contributing to household income stability.

Improvement in Human Capital

Education Expansion: Schemes like Sarva Shiksha Abhiyan, the Mid-Day Meal Scheme, etc., combined with rising aspirations, led to higher school enrollment, literacy, and educational outcomes, especially among SCs, STs, and Muslims.
Health Outcomes: India’s progress in reducing child mortality, improving maternal care, and expanding immunisation (Mission Indradhanush) has enhanced human capital, laying the foundation for productivity and income growth.

Digital and Financial Inclusion

Financial Penetration through Jan Dhan Accounts: Over 500 million accounts have been opened since 2014, integrating the poor into the formal banking system, facilitating savings, credit access, and direct transfers into their accounts.
Digital Public Infrastructure: India’s robust digital infrastructure (UPI, DigiLocker, etc.) has helped deliver services efficiently and transparently, ensuring that marginalised groups are not excluded.

Muslims

Muslims historically exhibited higher poverty rates due to educational deprivation, employment informality, and residential segregation. The sharp decline in poverty among Muslims between 2011-12 and 2023-24 can be attributed to:

Increased access to welfare schemes (post-JAM).
Participation in urban informal sectors (e.g., tailoring, construction, small trades).
Improved educational outcomes, especially among Muslim women.

Scheduled Castes (SCs) and Scheduled Tribes (STs)

These communities have long been at the bottom of socio-economic hierarchies. Recent improvements stem from:

Affirmative action in education and employment.
Targeted programmes like Stand-Up India, PM-JAY, scholarships, etc.
Electrification, road connectivity, and piped water through schemes like Saubhagya, Jal Jeevan Mission, etc., have helped bridge infrastructure deficits.

Other Backward Classes (OBCs)

OBCs, being diverse, have shown faster upward mobility due to:

Better access to education and public sector jobs.
Entrepreneurial activities in small-scale manufacturing and services.
Benefiting disproportionately from DBT-linked schemes.

Hindus (as a broader group)

The decline in Hindu poverty broadly mirrors the national average, given that Hindus comprise the majority. Within-group disparities and poverty gaps (e.g., between upper castes and SCs) persist but have narrowed significantly.

Critical Analysis: Challenges and Caveats

Data Limitations: The estimates cited are based on consumption extrapolations rather than robust nationwide surveys (e.g., NFHS or NABARD’S National Financial Inclusion Survey). Hence, actual poverty dynamics may differ.
Quality of Employment: Much of the employment created is in the informal or gig economy, lacking job security and social protection, especially for marginalised communities.
Regional Disparities: Poverty remains concentrated in backward regions like Bihar, Jharkhand, & parts of UP & Odisha.
Urban Poverty and Slum Vulnerability: Urbanization has reduced rural poverty but increased pressure on urban housing, sanitation, and health, with slum-dwellers facing persistent risks.
Gendered Poverty: Despite economic improvements, women-headed households generally remain vulnerable due to wage disparities, unpaid care work, and lower asset ownership.

Way Forward

Institutionalising Welfare Delivery: Programmes like PMGKAY, DBT, etc, need to be institutionalised beyond crisis response, with integration into long-term food and social security systems.
Skill-Linked Growth: Promote skilling tailored to market needs, especially for SC/ST youth and minorities, to convert the demographic dividend into a sustainable advantage.
Focus on Urban Poor: Design urban-specific poverty alleviation strategies like proper rental housing, microcredit, urban employment guarantee programs, etc.
Targeted Health and Education Spending: Invest, on a sustained basis, in nutrition (e.g., Poshan Abhiyan), quality secondary education, and public health to create long-term human capital among poor communities.
Bridging Social Inequities: Implement robust social audits, community participation, and inclusive caste-disaggregated policy monitoring to ensure inclusive development.

India has seen a dramatic reduction in poverty between 2011-12 and 2023-24, particularly among marginalised groups based on religion, tribe, and caste, signifying a major socio-economic transformation. Economic growth, digitisation, and targeted welfare programs have worked together to uplift millions. However, sustaining and deepening these gains requires a nuanced approach that addresses quality of life, regional and gender disparities, and long-term resilience. Looking ahead, equity and empowerment must remain central to India’s development agenda.

Reference: Indian Express

PMF IAS Pathfinder for Mains – Question 136

Approach

Introduction: Briefly define poverty and highlight the significant decline in poverty rates among various social and religious groups from 2011-12 to 2022-23.
Body: In the body, discuss the factors contributing to the decline in poverty and also discuss the challenges in poverty alleviation.
Conclusion: Emphasize the success of poverty reduction efforts and the need for sustained, inclusive, and equitable development.