The latest World Bank estimates suggest that India has achieved one of the most dramatic reductions in poverty in recent decades. Yet this encouraging narrative sits uneasily alongside evidence of weak real wage growth, stagnant household incomes, slowing labour productivity and increasing dependence on welfare support.

Measured at $3 a day in 2021 purchasing power parity terms, the poverty rate declined to 2.6% in 2023–24 from 27.1% in 2011–12. At $4.20 a day, it fell to 16.1% from 57.7%. Even at $8.30, poverty fell to around 80% from 92.5%.

The World Bank attributes this decline to strong consumption growth, rising employment and expanded social transfers, including food subsidies. But the broader poverty headcount below $8.30 a day has remained above 1.1 billion for two decades. Declining extreme poverty has not eliminated widespread economic vulnerability.

Median earnings among the top 10% of workers were about 13 times those of the bottom 10% in 2023. Actual inequality may be even starker, given that household surveys underrepresent the richest. The World Bank also notes that only 22% of Indian adults could sustain themselves for more than two months of expenses without income.

The pandemic exposed the vulnerability of millions of households to economic shocks. Free food support continues to reach more than 800 million people. The reduction in measured poverty appears increasingly dependent on welfare transfers that sustain subsistence consumption, unlike the decline during 2004–12, which was underpinned by stronger income growth.

The reported decline must also be read carefully because the methodology has changed. The Household Consumption Expenditure Survey resumed in 2022–23 after an eleven-year gap. Its expanded consumption basket, multiple questionnaires, repeated visits, digital data collection and revised sampling design affect comparability with earlier surveys.

The World Bank’s harmonisation exercise reconstructs welfare aggregates across survey rounds, including recalculating 2011–12 consumption estimates on a comparable recall basis. But it cannot fully eliminate differences in interview mode, questionnaire design, survey frequency and sampling. The two rounds remain imperfectly comparable in the absence of a bridge survey.

The sharp decline in poverty may therefore partly reflect methodological and statistical changes. Survey design changes can materially affect poverty estimates, raising the risk of overstating the decline.

Perhaps the strongest challenge to the poverty narrative emerges from labour income. Estimates derived from the RBI’s KLEMS database suggest that real income per worker grew by only 2% annually during 2012–24, substantially below the 5.3% recorded during 2009–12 and 7.1% during 2004–09.

The gap between real labour income growth of 2% and real per capita consumption expenditure growth of 3.2% during 2012–24 suggests that household consumption was increasingly supported by government transfers. Rising debt-financed consumption may also have contributed.

Employment gains require similar scrutiny. Much of the reported increase reflects self-employment, unpaid family labour and low-productivity agricultural work. Rising employment may not represent a proportional increase in labour productivity or household earnings. Rural wage growth has also decelerated, leaving real wages broadly stagnant.

Many households appear to have only marginally crossed lower poverty lines, leaving them vulnerable to slipping back if inflation remains elevated, global economic disruptions persist, or government support is scaled back.

The greater risk is not merely statistical error but policy complacency. Interpreting declining poverty estimates as evidence that India’s livelihood challenge has been resolved could divert attention from weak labour income growth, underemployment and low productivity.

Welfare programmes have been vital in protecting vulnerable households. Sustainable poverty reduction ultimately depends on rising real incomes, stronger productivity and quality employment. A durable strategy requires higher investment, stronger manufacturing and expanding household incomes. As fiscal constraints intensify, poverty gains built primarily on transfers may prove fragile.