Why in News?

• The World Bank’s (WB) latest Poverty & Equity Brief indicates that India’s extreme poverty rate has declined significantly.
• However, persistent unemployment, stagnant real earnings and regional disparities raise concerns about the sustainability of poverty reduction.
• The central challenge is to translate economic growth into productive employment, higher incomes and improved living standards, particularly in India’s poorer states.

What’s in Today’s Article?

• Declining Poverty - WB Estimates
• The ‘Feeling’ of Growth - A Disconnect Between GDP and Incomes
• Regional Concentration of Poverty - A New BIMARU?
• Employment Challenges - A New Reckoning
• Way Forward
• Conclusion

Declining Poverty - WB Estimates:

• Significant reduction in poverty:
  • Extreme poverty, measured using the World Bank’s $3-per-day poverty line, declined from 5.3% in 2022 to 2.6% in 2023.
  • Using the Lower Middle-Income Country (LMIC) threshold of $4.20 per day, poverty declined from 23.9% to 16.1%.
  • The poverty rate under the $4.20 threshold is projected to decline further to 14.2% in 2026 and 12.1% by 2028.
• Employment remains the critical determinant:
  • The WB emphasises that future poverty reduction depends on the creation of productive jobs in India’s poorest states.
  • For example
    • Youth unemployment increased to 15.9% over the preceding year.
    • Real earnings have remained largely stagnant.
    • The sustainability of poverty reduction depends on employment quality, not merely employment numbers.

The ‘Feeling’ of Growth - A Disconnect Between GDP and Incomes:

• Economic growth without equitable gains:
  • India recorded GDP growth of 7.8% in the April–June quarter, exceeding most forecasts.
  • Yet, the benefits of growth are not uniformly reflected in household incomes and living standards.
  • The International Labour Organization (ILO) highlights a weakening relationship between productivity and wages.
  • For example
    • The global share of income accruing to labour declined from approximately 54% in 2004 to 52.6% in 2025.
    • Rising productivity does not necessarily translate into proportionately higher wages.
    • This weakens purchasing power and limits the ability of economic growth to reduce poverty.
  • Demographic dividend under pressure:
    • India’s demographic dividend cannot be taken for granted.
    • For instance,
      • Youth unemployment and inadequate skills threaten the productive absorption of the working-age population.
      • Excessive dependence on smartphones, social media and AI raises concerns about attention spans, cognitive skills and social well-being.
      • Unlike earlier ageing economies, India must manage demographic pressures alongside rapid technological transformation.

Regional Concentration of Poverty:

• A new BIMARU?
  • The World Bank estimates that 57% of India’s poor live in a contiguous belt extending from UP to West Bengal.
  • This recalls the term BIMARU, coined by demographer Ashish Bose to describe Bihar, Madhya Pradesh, Rajasthan and UP.
  • The emerging poverty belt suggests a shift in the geographical concentration of poverty, with West Bengal becoming an important part of the region.
• Poverty estimates based:
  • The earlier Rangarajan Committee estimated the monthly per capita poverty line at - Urban areas: ₹1,407 (approximately ₹47 per day); and Rural areas: ₹972 (approximately ₹32 per day).
  • It estimated India’s poverty rate at 29.5%.
• State-wise poverty rates (2022–23):
  • Chhattisgarh (25.1% rural poverty, 13.3% urban), Jharkhand (16.6% and 12.6%), MP (9.6% and 11.6%), WB (7.5% and 12.4%), Bihar (5.9% and 9.1%), and UP (5.7% and 9.9%).
  • Despite relatively high poverty levels, these states have achieved substantial reductions between 2011–12 and 2022–23.
  • Urban Bihar recorded the largest decline among states, from 50.8% to 9.1%.

Employment Challenges - A New Reckoning:

• The WB estimates that employment increased by 13.4 crore between 2017 and 2023, nearly twice the increase in the working-age population. However, there is a mismatch between employment quantity and quality.
• Emerging concerns:
  • Wage stagnation: Factory workers’ wages in Jharkhand declined by 5.2% in 2024–25, against an all-India increase of 5.3%.
  • NEET youth: In 2025, 81% of Bihar’s districts had more than one-fourth of their 15–29-year-olds neither employed nor in education or training (NEET).
  • Regional disparities: Poorer states face inadequate industrial diversification, low productivity and limited access to quality employment.
  • AI-driven disruption: Automation may intensify pressure on low-skilled workers and require large-scale reskilling.
• Nevertheless, progress is visible. UP recorded the largest increase in the number of factories in 2024–25, at 12.8%.

Way Forward:

• Labour-intensive manufacturing: Promote textiles, food processing, footwear and other employment-intensive sectors in poorer states.
• Human capital development: Strengthen foundational literacy, vocational education, healthcare and digital skills to improve labour productivity.
• Decentralised development: Improve infrastructure, logistics, urbanisation and investment conditions in lagging regions.
• Employment quality: Focus on formalisation, social security, minimum wages and productive self-employment.
• Evidence-based policy: Use updated consumption surveys, employment data and multidimensional poverty indicators to identify vulnerable groups.

Conclusion:

• India’s declining poverty is a significant development achievement, but sustaining it requires a transition from growth-led poverty reduction to employment-led inclusive development.
• Creating productive jobs, improving real wages and addressing regional inequalities will be essential to realise the demographic dividend and achieve the vision of Viksit Bharat by 2047.