‘One of the fastest in the world’: India's extreme poverty falls from 27.1% to 2.6%, but wage gap remains wide, says World Bank

India's extreme poverty rate declined sharply to 2.6% in 2023 from 27.1% in 2011 while the share of the population living below the lower-middle-income poverty line fell from 57.7% to 16.1%, lifting an estimated 496 million people above the poverty threshold over the period, according to the World Bank. 

Despite this progress, income disparities remain pronounced, with median earnings among the top 10% of workers about 13 times those of the bottom 10% in 2023. The findings highlight the challenges India faces in ensuring that the benefits of economic growth translate into higher incomes and better employment opportunities for the wider population. 

According to the report, India's poverty reduction over the past decade has been among the fastest in the world, with improvements across both monetary and non-monetary indicators. Extreme poverty, measured against the $3-a-day threshold in 2021 purchasing power parity (PPP) terms, fell to 2.6% in 2023 from 27.1% in 2011. Poverty measured against the lower-middle-income country threshold of $4.20 a day declined to 16.1% from 57.7% over the same period. 

The World Bank expects poverty to decline further, although at a slower pace. Its indicative projections suggest that the poverty rate at the $4.20-a-day threshold could fall from 14.2% in 2026 to 12.1% by 2028. These estimates are based on microsimulations and may be revised as new labour market and macroeconomic data become available. 

India has also recorded substantial improvements in non-monetary measures of poverty. According to the Oxford Poverty and Human Development Initiative's Multidimensional Poverty Index (MPI), poverty declined from 53.8% in 2005–06 to 16.4% in 2019–21. The World Bank's MPI measure put the rate at 15.5% in 2022–23. 

The report attributed these gains primarily to strong consumption growth, rising employment, particularly among women, and expanded social transfers, including food subsidies. 

Rural-urban poverty gap narrows, but regional disparities persist 

India's poverty reduction has been accompanied by improvements in living standards across rural and urban areas, with faster progress in rural India significantly narrowing the gap between the two. 

However, poverty remains concentrated in rural areas, where productivity is lower and access to better-paying, higher-quality non-farm jobs is more limited. Households that continue to experience poverty increasingly tend to have lower educational attainment, fewer assets, limited access to stable employment and higher dependency ratios. 

Geographically, poverty is also concentrated in a belt of states stretching from Uttar Pradesh to West Bengal. These states account for about 57% of India's poor population, according to the report. 

The World Bank said further reductions in national poverty would increasingly depend on expanding productive employment opportunities in these states, alongside improvements in household earning capacity, and access to better jobs. 

Employment rises, but wage growth remains weak 

India added about 134 million people to its workforce between 2017 and 2023, nearly twice the increase in the working-age population, according to the report. Much of the employment growth was driven by rural women entering paid work, increasing the number of earners within households. 

Labour market conditions have remained broadly resilient, with labour force participation and employment rates stable between the first quarters of FY26 and FY27. However, the report flagged emerging concerns over youth unemployment, which rose from 14.6% to 15.9% between the two quarters, particularly among rural young women. 

Real earnings have also remained broadly unchanged, reflecting the concentration of employment growth in relatively low-productivity activities. The persistence of these trends suggests that while more people are finding work, the quality of employment and the ability to secure higher wages remain important challenges. 

The disparity in earnings between the highest- and lowest-paid workers further underscores this concern. In 2023, median earnings among the top 10% of workers were about 13 times those of the bottom 10%, highlighting the gap between India's progress in reducing poverty and the broader challenge of improving income distribution.