How India pulled 500 million people out of poverty, as inequality deepens | Poverty and Development News

Bengaluru, India — India lifted nearly 500 million out of poverty between 2011 and 2023, with extreme poverty dropping from 27.1 percent to 2.6 percent in the world’s most populous nation during the same period, according to a new report by the World Bank.

The only other parallel in poverty reduction on this scale is China, which lifted more than 800 million people out of extreme poverty — though that was over a period of 40 years.

Yet despite the substantial fall in poverty in India — home to 1.4 billion people — the income and wealth inequality gap has widened significantly since it opened up its economy in the early 1990s.

According to the 2026 World Inequality Report, inequality in India remains among the highest in the world.

We take a look at how India managed to almost eradicate extreme poverty, and at the contrast between that accomplishment and the deep economic inequality that remains in the world’s most populous nation:

What does the World Bank data say?

Based on an extreme poverty threshold of $3 a day, the World Bank said extreme poverty in India declined from 27.1 percent to 2.6 percent between 2011 and 2023.

Extreme poverty is defined as the minimum amount of money needed to afford basic essentials such as food, water, shelter and clothing.

Estimating poverty metrics based on three official household surveys, the Bank also said that an estimated 496 million people have been lifted out of poverty as the share of India’s population living below the lower middle-income poverty threshold of $4.20 a day fell from 57.7 percent to 16.1 percent.

The authors of the report, led by World Bank’s South Asia poverty economist Ayago Wambile, wrote that poverty in India is “projected to continue declining, albeit more gradually with the poverty rate at the $4.20/day line expected to fall from 14.2 percent in 2026 to 12.1 percent by 2028.”

“This progress was mainly driven by strong consumption growth, rising employment, especially among women, and expanded social transfers, including food subsidies,” they added.

How significant is India’s poverty reduction?

India lifting nearly 500 million out of poverty in 12 years has been lauded as “remarkable progress” by the World Bank. It added that the downward trend represents “one of the fastest poverty declines in the world.”

To determine India’s poverty rates, the World Bank used Household Consumption Expenditure Surveys (HCES) which were conducted by the National Sample Survey Organisation (NSSO), an Indian government body.

A 2022 report, jointly produced by the World Bank and the Chinese Finance Ministry, said that China had lifted 800 million people out of poverty, but it took 40 years to achieve.

Last month, the World Bank also raised its economic growth forecast for India to 7.1 percent.

In a post on Instagram on Sunday, India’s Prime Minister Narendra Modi lauded the country’s progress in tackling poverty. “A historic fall in poverty. A generational rise in opportunity,” he said.

Last November, the southern state of Kerala, which has been ruled either by the centrist Congress party or a coalition of communist parties since independence, became the first in the country to officially declare itself free from extreme poverty. Kerala has the best education and health statistics of major Indian states.

Santosh Mehrotra, a development economist formerly in India’s planning commission, and currently a visiting professor at the Higher School of Economics in Moscow, noted that India is the only low-middle-income country among G20 nations, which are otherwise upper-middle- or high-income nations.

“The absolute number of the poor in our country is still the highest in the world for sheer size of population. So therefore, if we are going to genuinely reduce the incidence of poverty and more importantly, the absolute number of the poor, then it makes a huge difference globally,” he told Al Jazeera.

Coming from the World Bank, the credibility of the analysis that has concluded India’s success in reducing poverty so majorly is also above question, said Surjit Bhalla, economist an a former executive director at the International Monetary Fund. Any data that comes from the World Bank, he said, is the “gold standard”.

He said the institution carries out a poverty analysis for every country using a per capita consumption level that is normalised globally by invoking purchasing power parity.

How did India dramatically cut poverty?

There are no easy answers.

But economists point to a series of factors and programmes that might have contributed to India’s success in pulling record numbers of people out of poverty.

Overall, poverty in India has, however, been declining since the country opened its economy in the early 1990s, when the Congress party was in power, setting the stage for more than three decades of fast economic growth. Successive governments have launched, continued or reworked a series of social welfare schemes that economists say have helped combat poverty.

Prime Minister Modi’s predecessor Manmohan Singh, for example, launched an employment scheme that guaranteed rural jobs for a minimum of 100 days per year.

Since coming to power in 2014, Modi has launched several other welfare schemes, including direct cash transfers, free rations and housing, to tackle poverty. While the Modi government has significantly diluted the rural job guarantee scheme that Singh had launched, the current administration now provides free food grains to about 800 million Indians.

Under Modi, the government has also significantly expanded the construction of toilets, especially in rural India, where open defecation has historically been common in many villages. Access to piped drinking water has risen from 17 percent of rural homes in August 2019 to more than 80 percent, according to government statistics.

“The reduced sickness from accessing safe water may have helped families earn more income,” economists Surjit Bhalla and Karan Bhasin wrote in a research paper on India’s poverty alleviation efforts for the Brookings Institution in March 2024.

Before the latest World Bank report, Bhalla — a former executive director at the International Monetary Fund (IMF) — and Bhasin had used Indian consumption data in early 2025 to also conclude that the country was making major gains in ending extreme poverty.

Why some economists are concerned

Despite the decline in poverty, Bhalla and Bhasin pointed in their 2025 paper that free food grains supplied by the Indian government to 800 million people only fulfilled their calorific needs. “More balanced food subsidies that are better targeted to the genuine poor will improve nutritional outcomes and would represent a better approach to food insecurity,” they wrote.

It is also unclear whether continuing to provide free food supplies indefinitely to more than half of the country’s population is sustainable for the government — and whether that programme points to deep economic distress mitigated only by state assistance.

Some economists, like Mehrotra, question why the Indian government no longer determines its own poverty level and its own estimates of the numbers of those below it.

Mehrotra said that since 2014 — when Modi came to power — the Indian government has stopped calculating its own poverty levels, instead relying entirely on World Bank estimates.

“We are a strange country in having adopted an international organisation’s poverty line as our own,” he said.

For a country as large, diverse and complex as India, he argued, a standard set by an international agency alone is not enough to capture shifting economic and consumer patterns. “For example, 10 years back everyone didn’t have phones; today even in rural areas people do. So consumption baskets [used to determine price indices and poverty levels] change over time and hence India should have done its own poverty line,” Mehrotra said.

But Bhalla pushed back against criticism of India’s use of World Bank data.

“The methodology that the World Bank uses and the estimates it comes up with are vetted by every country before the final data is published,” he told Al Jazeera. “So in this case India’s poverty analysis has been gone through by Indian scholars and the government of India. So there is no ideological basis for questioning this data.”

Jayati Ghosh, an economist and professor at the University of Massachusetts Amherst, however said that India’s healthcare and nutrition indices also remained major causes for concern. The country spends just over 1 percent of its gross domestic product (GDP) on public healthcare, ranking far behind global peers in per capita health investment and leaving public hospitals chronically underfunded and overburdened. Citizens also end up bearing the brunt of total health expenditures, a financial burden that pushes millions of Indians into poverty or debt every year.

Ghosh pointed out that real wages have stagnated in India. According to the World Bank report, while poverty has declined in India, wage disparities remain. “Median earnings among the top 10 percent of workers were about 13 times those of the bottom 10 percent in 2023,” the report said.

“These are not signs of a dynamic economy with falling poverty,” Ghosh said.

Nitin Kumar Bharti, a lecturer at the University of Western Australia, said that the World Bank’s report is encouraging. But he added that the drop in extreme poverty should not be seen as a mission accomplished, as “233 million people still live below” the $4.20 per day poverty line.

Bharti, who co-authored a study by the World Inequality Lab (WIL) on India’s income and wealth disparities published in 2024, also pointed to uneven growth within the country as a major challenge.

“Even if extreme poverty has declined, the extent of improvement in people’s overall wellbeing remains an important question,” he said.

Why is income inequality growing in India?

Bharti said that inequality is growing because gains from economic growth are distributed unevenly, with those at the top capturing a growing share of national income.

According to the 2026 World Inequality Report, India is among the world’s most unequal countries, with the top 10 percent of earners capturing about 58 percent of national income, while the bottom 50 percent receives only 15 percent.

“This is reinforced by longstanding structural inequalities — the historical caste system, unequal ownership of assets, and decades of inadequate attention to primary education have limited opportunities for disadvantaged groups,” he said.

“Insufficient public investment in quality education and healthcare — both important equalisers — means that family resources continue to shape access to skills, good jobs and economic security.”

Growing income inequality and a lack of job opportunities have triggered discontent among India’s youth, who have staged a series of nationwide protests in recent months.

According to government data released earlier this year, youth unemployment in the country stood at 13.8 percent in April 2025 and rose to 15.2 percent in March 2026.

The State of Working India 2026 report, from the Bengaluru-based Azim Premji University, noted that nearly 40 percent of young graduates aged 15–25 and roughly 20 percent of those aged 25–29 are unemployed. Among those who have a diploma or postgraduate degrees, the unemployment rate has climbed to 29.4 percent.

Does inequality matter if poverty is falling?

Yes, say economists.

“One reason is that the distribution of growth influences how effectively growth improves ordinary households’ lives. For a given level of average income, a more equal distribution generally leaves fewer people below a poverty line,” Bharti said.

“A second concern is inequality of opportunity. With rising inequality, families differ enormously in their ability to pay for education, healthcare, housing, capital to start a business or searching for a better job,” he added.

“A third concern is the concentration of economic and political influence. Large concentrations of wealth can create opportunities for a small group to shape policies and institutions in their favour.”

How can India tackle poverty and income inequality at the same time?

Dipa Sinha, a development economist at Azim Premji University, said that in order to tackle poverty and widespread inequality, India would need to prioritise some redistribution of wealth.

“India talks about poverty eradication only. But government policies need to implement a more progressive taxation policy that actually tackles inequality head-on,” she said.

“The second thing I think is very important is that the government should begin investing in universal public services like health and education. This can reduce both poverty and inequality,” she added.

Bharti said that one strong lesson for India is that sustained poverty reduction requires several policies working together.

He said China offers important lessons in economic transformation and rural income growth, pointing to its success in improving agricultural productivity, accelerating industrialisation, facilitating rural-to-urban migration, and investing heavily in both physical and human capital.

“In contrast, India’s current policy focus is more heavily tilted towards physical infrastructure, often addressing the needs of the top 10 percent rather than the bottom 90 percent,” Bharti said.

“Roads, transport, and basic infrastructure matter because they connect people to economic opportunities. But equally important are good government schools and hospitals that enable people to benefit from these opportunities.”

Bharti suggested that India’s government should pursue poverty reduction and broader economic inclusion together.

“Progressive taxation can help finance these investments while ensuring that the costs are distributed according to the ability to pay,” he added.