SBI Researchers estimated the new poverty line or the basic level of consumption required was Rs 1,622 for rural areas and Rs 1,929 for urban areas.
“Rural Poverty has thus staged a significant 440-basis point decline since 2018-19 and Urban Poverty a 170-basis point decline post pandemic….This indicates that many
Government programmes currently for those at the bottom of the pyramid are having a significant salutary impact on rural livelihood,” it noted.
India’s poverty rate had declined to 11.6% for rural areas and 6.3% for urban areas, according to a World Bank paper.
The new formula is derived by using the recommendations of an expert group headed by Suresh Tendulkar, based on which a Rs 816 poverty line for rural and Rs 1000 for urban areas was determined for 2011-12. “Starting with 2011-12 poverty line estimate of Rs 816 in rural area and Rs 1000 in urban area, the new poverty line was adjusted for decadal inflation and imputation factor derived from NSSO report,” SBI researchers pointed out.India has not had a revision to poverty line calculations since 2014, when another expert group chaired by former RBI governor C Rangarajan had submitted its report.
The government released the household consumption expenditure survey for 2022-23 Saturday after over a decade, as the results of 2017-18 survey were junked citing data inconsistencies.
The new survey indicated the gap between rural and urban consumption narrowing and spending inequality among the poorest and richest households shrinking.
“Enhanced loops of physical infrastructure are scripting a new story in two-way rural-urban mobility, one of the prime vectors for the incrementally shrinking horizontal income gap between rural and urban landscape and the vertical income gap within rural Income classes,” they said.
The researchers also noted that India was becoming more aspirational given the impetus on discretionary spending.
The share of household spending on food declined below 50% for the first time for rural areas in 2022-23.
The share of food in urban consumption basket was below 40%, as per HCES data.
Lower inflation
SBI researchers also highlighted that the new weights are also likely to lead to lowering of inflation number in the current scenario, given that core is declining.
The researchers noted that inflation calculated as per new weights would likely be 60 bps lower for January in case of rural areas and 14 bps in case of urban areas.
SBI researchers estimated January inflation would likely have been 4.8% according to new weights compared with 5.1% based on present basket, whereas it would have been 20 bps higher in April 2022 as core inflation was high at the time.
“If the core is declining…. This will have a sobering impact on headline inflation,” they further added.
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