Section-VI: ECONOMY
The share of India’s population living in extreme poverty (below $3.00 per day at 2021 Purchasing Power Parity) fell to 2.6% in 2023 from 5.3% in 2022-23, according to the Poverty & Equity Brief released by the World Bank.
- Long-term decline: Extreme poverty stood at 27.1% in 2011, more than 10 times the 2023 level.
- Lower Middle-Income Country (LMIC) poverty line ($4.20 per day): Poverty fell to 16.1% in 2023 from 57.7% in 2011 (23.9% in 2022-23), lifting an estimated 496 million people out of poverty.
- Rural poverty: 19.3%; Urban poverty: 8.6% (at $4.20 per day).
- Upper Middle-Income Country line ($8.30 per day): About 80% of the population was below it in 2023, against over 90% in 2011.
- Absolute numbers (2023): 7.5 crore below $3.00; 34 crore below $4.20; 115 crore below $8.30 per day.
- Inequality: The consumption Gini index fell to 23.0 in 2023 from 28.8 in 2011-12 and 25.5 in 2022-23.
- Concentration: About 57% of India’s poor live in a belt stretching from Uttar Pradesh to West Bengal.
- Employment rose by 13.4 crore between 2017 and 2023, driven largely by rural women entering paid work.
- Projection: Poverty at the $4.20 line is expected to fall to 14.2% in 2026 and 12.1% by 2028.
- Data basis: Household Consumption Expenditure Surveys (HCES) of 2011-12, 2022-23 and 2023-24.
Gini index:
The Gini index measures inequality in the distribution of income or consumption on a scale of 0 (perfect equality) to 100 (perfect inequality). A lower value indicates lower inequality.
Purchasing Power Parity (PPP):
PPP is a conversion rate that equalises the purchasing power of different currencies by removing differences in price levels between countries. The World Bank’s International Comparison Program (ICP) estimates PPPs.
Interconnected concept: World Bank Group (WBG)
The World Bank Group is a family of five international institutions that provide finance, advice and research to developing countries to end extreme poverty and promote shared prosperity.
Origin: Created at the Bretton Woods Conference (United Nations Monetary and Financial Conference), New Hampshire, USA, in July 1944, along with the International Monetary Fund (IMF). Together they are called the Bretton Woods twins.
Headquarters: Washington, D.C., USA.
President: Ajay Banga (since June 2023), the first Indian-born President of the World Bank. By convention the President is an American and the IMF Managing Director a European.
Membership: 189 member countries (IBRD).
India: A founding member of IBRD (1944/45) and IDA; India is not a member of ICSID.
Five institutions:
| Institution | Year | Role |
| International Bank for Reconstruction and Development (IBRD) | 1944 (operations 1946) | Loans to middle-income and creditworthy low-income countries |
| International Development Association (IDA) | 1960 | Interest-free or low-interest credits and grants to the poorest countries; called the “soft loan window” |
| International Finance Corporation (IFC) | 1956 | Lends to and invests in the private sector |
| Multilateral Investment Guarantee Agency (MIGA) | 1988 | Political risk insurance and credit guarantees to investors |
| International Centre for Settlement of Investment Disputes (ICSID) | 1966 | Arbitration and conciliation of investment disputes |
Note: IBRD and IDA together are called the “World Bank”.
Key reports: World Development Report, Global Economic Prospects, Poverty, Prosperity and Planet Report, Business Ready (B-READY, replaced the discontinued Doing Business report), Poverty & Equity Briefs.
International poverty line (World Bank):
| Year of revision | Line (per person per day) | PPP base |
| 1990 | $1.00 (“dollar a day”) | 1985 |
| 2008 | $1.25 | 2005 |
| 2015 | $1.90 | 2011 |
| 2022 | $2.15 | 2017 |
| June 2025 | $3.00 | 2021 |
Higher lines (June 2025): $4.20 for Lower Middle-Income countries (earlier $3.65) and $8.30 for Upper Middle-Income countries (earlier $6.85) per day at 2021 PPP.
The June 2025 update to 2021 PPP, with India’s HCES 2022-23 data, revised the global count of people below the LMIC line for 2022 down by 180 million, mainly due to India’s new survey.
Practice Questions (MCQs)
1. According to the World Bank’s Poverty & Equity Brief, the extreme poverty rate of India in 2023 was:
(a) 5.3%
(b) 2.6%
(c) 16.1%
(d) 27.1%
2. The World Bank’s current international poverty line for extreme poverty is:
(a) $1.90 per day at 2011 PPP
(b) $2.15 per day at 2017 PPP
(c) $3.00 per day at 2021 PPP
(d) $4.20 per day at 2021 PPP
3. Consider the following statements about the World Bank Group:
1. The International Development Association (IDA) is known as the soft loan window of the World Bank.
2. The Multilateral Investment Guarantee Agency (MIGA) was established in 1956.
3. India is a member of the International Centre for Settlement of Investment Disputes (ICSID).
Which of the statements given above is/are correct?
(a) 1 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) 1, 2 and 3
Answer key:
1. Ans: (b) 2.6%. Extreme poverty fell from 5.3% in 2022-23 to 2.6% in 2023; 27.1% was the 2011 level and 16.1% is the 2023 rate at the $4.20 line.
2. Ans: (c) $3.00 per day at 2021 PPP. Adopted in June 2025, it replaced $2.15 (2017 PPP), which had replaced $1.90 (2011 PPP); $4.20 is the Lower Middle-Income line.
3. Ans: (a) 1 only. MIGA was set up in 1988 (IFC is the one from 1956), and India has not joined ICSID.
