For the first time in the financial year 2023-24, rural poverty in India fell below 5%, according to an analysis by SBI Research. The rural poverty rate dropped to 4.86% from 7.2% in the previous year and 25.7% in 2011-12, marking a significant improvement. In urban areas, poverty also decreased, but at a slower pace, falling to 4.09% from 4.6% in the same period.
The report by SBI Research noted that these figures could undergo slight revisions once the 2021 Census is completed, which will provide updated data on rural and urban population shares. The research suggests that urban poverty may decline further, and India’s overall poverty rate could now range between 4% and 4.5%, with minimal extreme poverty.
Key Factors Driving the Decline in Rural Poverty
The decline in rural poverty was attributed to several factors. One of the key reasons was the improvement in infrastructure, which enhanced urban mobility and helped reduce the income disparity between rural and urban areas. Additionally, government support initiatives, especially Direct Benefit Transfer (DBT) schemes, played a crucial role in narrowing the rural-urban consumption gap.
The rural-urban consumption gap decreased to 69.7% in FY24, down from 71.2% the previous year and 83.9% a decade ago, reflecting the positive impact of these government measures.
Government Initiatives and Rural Ecosystem Development
The report highlighted that around 30% of rural consumption is driven by factors within the rural ecosystem itself, such as government initiatives. These include DBT transfers, rural infrastructure development, and efforts to increase farmers’ income, all of which have significantly improved rural livelihoods.
Impact of Inflation on Consumption Patterns
However, the report also pointed out that inflation had an impact on consumption patterns, particularly in rural areas. With inflation remaining above 5% in November 2024, consumption levels decreased, especially in low-income rural areas. In contrast, middle-income states played a larger role in sustaining overall consumption demand.
