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Poverty Falls, Inequality Persists, The Reality Beyond Development Figures
India’s poverty reduction success masks persistent income and wealth inequality, threatening its demographic dividend.
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When we discuss India’s development over the past two decades, one number keeps coming up: the hundreds of millions of people who have escaped poverty. That figure is not false, and its importance cannot be understated. Yet no single figure tells the whole truth. A decline in poverty and a narrowing of the economic gap within society are two different things. A country’s population below the poverty line can shrink while the incomes and wealth of those at the top grow even faster. The World Bank’s October 2026 Poverty and Equity report highlights this duality, prompting us to consider whether we should celebrate or worry.
According to the World Bank’s October 2026 report, about 496 million Indians moved out of poverty between 2011 and 2023. The share of people living in extreme poverty fell from 27.1 percent to 2.6 percent. This is measured against the international line of 3 dollars a day (in 2021 Purchasing power parity terms). At the 4.20-dollar line for lower-middle-income countries, the share fell from 57.7 percent in 2011 to 16.1 percent in 2023. The report describes this as one of the fastest poverty reductions in the world.
A technical point requires clarification here. In June 2025, the World Bank revised its international poverty lines, raising the extreme poverty line from 2.15 dollars a day to 3 dollars. For this reason, the 2.3 percent figure seen in the April 2025 report and the present figure of 2.6 percent are not directly comparable, because their base years, lines, and methodologies differ. Purchasing power parity means a comparison that accounts for the cost of living in different countries, so these lines cannot be converted into rupees at market exchange rates. The picture of multidimensional poverty is also encouraging. According to the index of the Oxford Poverty and Human Development Initiative, the share fell from 53.8 percent in 2005-06 to 16.4 percent in 2019-21. By the World Bank’s own measurement, it stood at 15.5 percent in 2022-23. This means improvement has come not only in income but also in facilities such as education, health, electricity, sanitation and drinking water. Schemes such as piped water, household electricity, cooking gas and subsidised grain have contributed to it.
In the World Bank’s view, the main drivers of this decline are rising consumption, rising employment (especially among women), and social transfers including food grain subsidies. Between 2017 and 2023, the number of employed people in the country grew by about 134 million, and rural women’s participation in paid work also increased. This gave many families a second source of income.
Even so, the report itself sounds a note of caution. Because these estimates rest on consumption surveys, the Bank says some recent improvements may reflect changes in measurement methods as well as real gains in welfare. The number and format of questions changed between the 2011-12 and 2022-23 surveys. We therefore need a degree of humility in using these figures.
The most debated part of the report concerns inequality. The World Bank has recorded India’s Gini indexGini IndexA measure of statistical dispersion intended to represent the income or wealth distribution of a nation’s residents, and is the most commonly used measurement of inequality. A Gini coefficient of 0 expresses perfect equality, while a Gini coefficient of 100 (or 1) expresses maximal inequality. for 2023 at 23.0. The Gini index runs from zero to one hundred, where zero means perfect equality and one hundred means perfect inequality. A figure of 23 therefore places India among the most “equal” countries in the world, and at the government level and in political reactions the number has been presented with pride.
But here lies the real catch. This index is based on consumption expenditure, not on income or wealth. Rich households put a large share of their earnings into savings and investments, so their consumption looks smaller than their real economic power. Moreover, household surveys rarely capture the super-rich. The World Bank itself has acknowledged that because surveys do not adequately record the consumption of wealthy households, inequality can appear lower than it actually is. Comparing India’s Gini index with those of China or the United States, which use income-based indices, is therefore misleading.
The picture for income and wealth is quite different. According to an analysis using tax return data, India’s income Gini rose from 51 in 2004 to 61 in 2023. According to the World Inequality Report 2026, the richest 10 percent hold about 65 percent of the wealth, and the top 1 percent about 40 percent. The top 1 percent’s share of national income is 22.6 percent, while the bottom 50 percent’s share is only 14.6 percent. The same report says the income gap between the top 10 percent and the bottom 50 percent did not narrow between 2014 and 2024 but remained static. In short, the gap seems to be narrowing at the level of consumption, but at the level of income and wealth it persists or is widening.
The World Bank report shows the same side. In 2023, the median income of the top 10 percent of workers was about 13 times that of the bottom 10 percent. Put simply, if a worker in the bottom tenth earns a thousand rupees a month, a worker in the top tenth earns thirteen thousand on average. The figures show employment rising, but we must examine its nature. According to the World Bank report, much of the employment growth occurred in agriculture and low-productivity sectors. Because the growth came in low-productivity work, improvement in real wages has been limited. In other words, more people are working, but the real purchasing power reaching their pockets has not grown much. Self-employment has become a means of livelihood for many rural women, but it does not necessarily bring regular wages, social security or assured income.
Youth unemployment is a further cause for concern. According to the report, the youth unemployment rate rose from 14.6 percent in the first quarter of 2025-26 to 15.9 percent in the first quarter of 2026-27, with young rural women hit particularly hard. In a country whose greatest strength is its young population, if young people do not find work matching their qualifications, the “demographic dividend” can slowly turn into a “demographic burden.” If educated young people do not find suitable work, their frustration does not remain merely personal; it takes the form of social unrest.
The gap between rural and urban poverty has narrowed, but it has not disappeared. At the 4.20-dollar line in 2023, 19.3 percent of people in rural areas were poor, compared with 8.6 percent in urban areas. That means a villager is more than twice as likely to be poor as a city dweller. Regional inequality is also serious. According to the April 2025 report, the five most populous states, Uttar Pradesh, Maharashtra, Bihar, West Bengal and Madhya Pradesh, accounted for about two-thirds of the decline in poverty. Yet in 2022-23, 54 percent of the country’s extremely poor people still lived in these same states. This means that the places where the most progress was made are also where the most poor people remain. The benefits of development have not reached everywhere at the same speed. For tribal belts, remote hilly areas, migrant labour families and landless farm workers, average figures are often deceptive.
The poverty line is an artificial point. A person standing just above it can slip back below because of an illness, a failed crop or a lost job. The World Bank report highlights this. About 80 percent of India’s population in 2023 was below the upper-middle-income line of 8.3 dollars a day. This means the majority of Indians are still not in a very secure economic position. Even today, about 35 million people live in extreme poverty and 232 million live below the 4.20-dollar line.
Inflation, illness, climate change, erratic rainfall and unemployment hit this section hardest. It is true that transfers such as free or subsidised grain support these families today, but depending on them alone is not a long-term answer. Economists have warned that those who rely on these transfers can slide back into poverty once they stop. The pace of poverty reduction is also expected to slow. The share at the 4.20-dollar line could fall from 14.2 percent in 2026 to 12.1 percent by 2028. This means the easy stages are now behind us. The remaining journey will be harder, because the poverty that remains is of the most stubborn kind.
First, productive and secure employment must be prioritised. Increasing the number of jobs alone will not suffice; their quality, wages and stability must improve. Promoting agro-processing industries, small and medium enterprises, rural manufacturing and the services sector can create better jobs close to home. Separate, targeted policies are needed for backward belts such as Uttar Pradesh, Bihar, West Bengal and the Vidarbha-Chhattisgarh-Jharkhand region.
Second, investment in education and skill development must be increased. It is essential to narrow the gap between degrees and market needs, create special opportunities for rural young women, and build a system that assures work after education. Reducing health expenditure is equally important, because illness is a major reason that pushes many families back into poverty.
Third, our method of measuring inequality must be improved. Until the government publishes reliable, regular and open data on income and wealth, the true picture of inequality will remain blurred. Combining consumption surveys with tax data and other sources can give more realistic estimates. What is not measured is not improved.
Fourth, the tax and social security systems must be made fairer. There should be an open debate on taxes on the super-rich and on inheritance and wealth policies. At the same time, pensions, insurance and health protection must be strengthened for workers in the unorganised sector, landless labourers, migrants and tribal communities. If local communities’ rights over natural resources such as land, forests and water are strengthened, their livelihoods become more stable.
Fifth, the role of civil society, local institutions and the media is important. From the gram panchayat to the district level, society itself must follow up on whether the benefits of schemes truly reach people. Organisations and journalists working on the ground can bring forward the faces behind the statistics.
India’s success in reducing poverty is a matter of pride, and there is no reason to deny it. The lives of hundreds of millions have genuinely improved. But it would be wrong to use this success to claim that everything is fine. The equality visible in consumption is not visible in income and wealth. Employment has grown, but wages have not risen much. Youth unemployment is increasing. The gaps between villages and cities, and between one state and another, persist. Crores of families just above the line are still one shock away from falling back.
The true measure of development is what has changed on the plate, in the school, in the clinic and in the work available to the person standing in the last row of society. Even if the figures bring joy, looking beyond them to the reality on the ground is the real test of responsible policymakers and alert citizens. The eradication of poverty is only the first stage of the journey. Equality, dignity and a secure life are the second, and harder, stage that still lies ahead.
Disclaimer:The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the official policy or position of The Rift.
