India lifts nearly 500 million out of poverty, but inequality deepens

Bengaluru, India — India lifted nearly 500 million people out of poverty between 2011 and 2023, with the extreme poverty rate falling from 27.1% to 2.6% in the world's most populous country, according to a new World Bank report.

On a comparable scale, only China has achieved a similar poverty reduction feat, lifting more than 800 million people out of extreme poverty — but that process took 40 years.

Even as India's poverty rate — in a country of 1.4 billion people — has fallen sharply, income and wealth gaps have widened considerably since the country opened up its economy in the early 1990s.

According to the World Inequality Report 2026, India remains among the most unequal countries in the world.

What does the World Bank data show?

Using the $3-a-day extreme poverty line, the World Bank says India's extreme poverty rate fell from 27.1% to 2.6% over 2011-2023. Extreme poverty is defined as the minimum amount of money needed to cover basic needs such as food, clean water, housing and clothing.

Estimating poverty indicators from three official household surveys, the World Bank also said about 496 million people escaped poverty as the share of the population living below the lower-middle-income poverty line of $4.20 a day fell from 57.7% to 16.1%.

The report's authors, led by Ayago Wambile, the World Bank's poverty economist for South Asia, said India's poverty rate is "expected to continue declining, though more slowly", with the $4.20-a-day poverty rate forecast to fall from 14.2% in 2026 to 12.1% in 2028.

"This progress is mainly due to strong consumption growth, rising employment, especially among women, and expanded social transfers, including food subsidies," the authors wrote.

How significant is India's poverty reduction?

India lifting nearly 500 million people out of poverty in 12 years is described by the World Bank as "remarkable progress" and "one of the fastest reductions in poverty in the world".

To determine India's poverty rate, the World Bank uses the Household Consumption Expenditure Surveys (HCES) conducted by the National Sample Survey Office (NSSO), a Indian government agency.

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

Last month, the World Bank also raised its forecast for India's economic growth to 7.1%. In an Instagram post on Sunday, Indian Prime Minister Narendra Modi praised the country's progress in poverty alleviation: "Historic decline in poverty. Rising opportunities for an entire generation."

Last November, the southern state of Kerala — led since independence by either the centrist Congress party or coalitions of communist parties — became the first state in the country to officially declare an end to extreme poverty. Kerala has the best education and health indicators among India's large states.

Santosh Mehrotra, a development economist who formerly worked at India's planning commission and is now a visiting professor at the Higher School of Economics in Moscow, noted that India is the only lower-middle-income country in the G20, while the other members are upper-middle-income or high-income.

"The number of absolute poor in our country is still the highest in the world simply because of the size of the population. So if we really reduce the poverty rate and, more importantly, the number of absolute poor, that would make a very big difference globally," he told Al Jazeera.

Surjit Bhalla, an economist and former executive director at the International Monetary Fund (IMF), said the World Bank's analysis of India's poverty reduction success is highly credible. He called the World Bank data the "gold standard", noting that the institution conducts poverty analysis for every country based on globally standardized per capita consumption measured in purchasing power parity.

How did India reduce poverty so sharply?

There is no simple answer. Economists nevertheless point to a range of factors and programmes that may have helped India lift record numbers of people out of poverty.

Broadly, India's poverty rate has fallen steadily since the country opened up its economy in the early 1990s, when the Congress party was in power, setting the stage for more than three decades of rapid economic growth. Successive governments launched, maintained or adjusted a series of social welfare programmes that economists say have helped combat poverty.

For instance, Modi's predecessor, Manmohan Singh, launched a rural employment guarantee programme providing at least 100 days of work a year.

Since coming to power in 2014, Modi has rolled out many other welfare programmes, including direct cash transfers, free food rations and housing, aimed at tackling poverty. Although the Modi government has significantly scaled back the rural employment guarantee scheme launched by Singh, the current administration provides free grain to about 800 million Indians.

Under Modi, the government has also dramatically expanded toilet construction, especially in rural areas, where open defecation was once common in many villages. According to government figures, the share of rural households with access to piped drinking water rose from 17% in August 2019 to more than 80%.

"Reduced illness from access to clean water may have helped families earn more income," economists Surjit Bhalla and Karan Bhasin wrote in a research paper on India's poverty reduction efforts for the Brookings Institution in March 2024.

Ahead of the latest World Bank report, Bhalla — a former IMF executive director — and Bhasin used Indian consumption data in early 2025 to reach a similar conclusion that the country was making major progress in ending extreme poverty.

Why are some economists concerned?

Despite the falling poverty rate, Bhalla and Bhasin pointed out in their 2025 research paper that the free grain provided by the Indian government to 800 million people meets only calorie needs. "More balanced and better-targeted food subsidies would improve nutrition outcomes and be a better approach to food insecurity," they wrote.

It remains unclear whether continuing to provide free food indefinitely to more than half the population is sustainable for the government, and whether the programme reflects deep economic hardship that is merely eased by state support.

Some economists, such as Mehrotra, question why the Indian government no longer determines its own poverty line and estimates the number of people below it. He said that since 2014 — when Modi came to power — the Indian government has stopped calculating its own poverty line, relying entirely on World Bank estimates instead.

"We are a strange country that takes an international organisation's poverty line as our own," he said.

According to him, for a country as large, diverse and complex as India, a benchmark set by an international body is not enough to reflect changes in economic and consumption patterns. "For example, 10 years ago not everyone had a phone; today even people in rural areas do. So the consumption basket [used to determine the price index and poverty line] changes over time, which means India should have its own poverty line," Mehrotra said.

Bhalla, however, rejected criticism that India uses World Bank data. "The methodology the World Bank uses and the estimates it produces are vetted by each country before the final data is published. So in this case, India's poverty analysis has been reviewed by Indian scholars and the Indian government. There is no ideological basis for questioning this data," he told Al Jazeera.

Meanwhile, Jayati Ghosh, an economist and professor at the University of Massachusetts Amherst, said India's health and nutrition indicators remain a major concern. The country spends just over 1% of GDP on public health, trailing many countries in per capita health investment, leaving public hospitals chronically underfunded and overcrowded. People also bear the bulk of total health spending, with the financial burden pushing millions of Indians into poverty or debt every year.

Ghosh pointed out that real wages in India have stagnated. According to the World Bank report, although the poverty rate has fallen, wage gaps persist: "The median income of the top 10% of workers was about 13 times that of the bottom 10% in 2023."

"This is not the sign of a dynamic economy with a falling poverty rate," Ghosh said.

Nitin Kumar Bharti, a lecturer at the University of Western Australia, said the World Bank report is an encouraging signal, but the reduction of extreme poverty cannot be considered mission accomplished when "233 million people still live below" the $4.20-a-day line.

Bharti, a co-author of a World Inequality Lab (WIL) study on India's income and wealth gaps published in 2024, also pointed to uneven growth within the country as a major challenge. "Even as extreme poverty falls, the extent to which people's overall welfare has improved remains an important question," he said.

Why is income inequality rising in India?

Bharti argues that inequality is rising because the benefits of economic growth are unevenly distributed, with the richest taking an ever-larger share of national income.

According to the World Inequality Report 2026, India is among the most unequal countries in the world, with the top 10% of earners taking about 58% of national income, while the bottom 50% receive just 15%.

"This is reinforced by long-standing structural inequalities — a historical caste system, unequal property ownership and decades of inadequate attention to primary education have limited opportunities for disadvantaged groups," he said.

"Public investment in quality education and health — two key equalisers — has been insufficient, so family resources still determine access to skills, good jobs and economic security."

Rising income inequality and a lack of job opportunities have fuelled discontent among India's youth, with numerous nationwide protests in recent months.

According to government data released earlier this year, India's youth unemployment rate stood at 13.8% in April 2025 and rose to 15.2% in March 2026.

The "State of Working India 2026" report by Azim Premji University in Bengaluru found that nearly 40% of graduates aged 15-25 and about 20% of those aged 25-29 are unemployed. Among those with a college or postgraduate degree, the unemployment rate has risen to 29.4%.

Does inequality matter when the poverty rate is falling?

Economists say it does.

"One reason is that how growth is distributed affects how much growth improves the lives of ordinary households. For the same average income, a more equal distribution typically leaves fewer people below the poverty line," Bharti said.

"The second concern is inequality of opportunity. When inequality rises, families differ greatly in their ability to pay for education, health, housing, startup capital or finding better jobs," he added.

"The third concern is the concentration of economic and political influence. Large concentrations of wealth can enable a small group to shape policy and institutions in ways that benefit them."

Can India tackle poverty and income inequality at the same time?

Dipa Sinha, a development economist at Azim Premji University, argues that to address poverty and widespread inequality, India needs to prioritise some degree of wealth redistribution.

"India only talks about poverty eradication. But government policy needs more progressive taxation to confront inequality directly," she said.

"The second thing I think is very important is that the government should start investing in universal public services such as health and education. This can reduce both poverty and inequality," she added.

Bharti argues that a major lesson for India is that sustainable poverty reduction requires a combination of policies. In his view, China offers an important lesson in economic transformation and raising rural incomes, thanks to its success in boosting agricultural productivity, accelerating industrialisation, facilitating rural-to-urban migration and investing heavily in both physical and human capital.

"By contrast, India's current policy focus leans more towards physical infrastructure, which often serves the needs of the richest 10% rather than the remaining 90%," Bharti said.

"Roads, transport and basic infrastructure matter because they connect people to economic opportunities. But good public schools and hospitals are equally important so that people can take advantage of those opportunities."

Bharti proposes that the Indian government pursue poverty reduction and broader economic inclusion simultaneously. "Progressive taxation can help finance these investments while ensuring the costs are shared according to ability to pay," he said.