Why claims of India reducing poverty are just a clever selection of data

Going by the official claims in the past few years – from the Indian government to the World Bank to the IMF – India has achieved remarkable success in reducing poverty to virtually nil.

The latest one is from the World Bank report of April 26, 2025, which said: “Extreme poverty (living on less than $2.15 per day, 2017 Purchasing Power Parity, or PPP) fell from 16.2 per cent in 2011-12 to 2.3 per cent in 2022-23, lifting 171 million people above this line”.

The Indian government called it “India’s Triumph in Combating Poverty”.

Claims of prosperity

This coincides with multiple other claims about India’s growing prosperity and economic growth. Finance Minister Nirmala Sitharaman showcased a 12.6 per cent rise in GST collections in April 2025 to an all-time high of ₹2.37 lakh-crore as a reflection of India moving rapidly towards its Viksit Bharat goal.

RBI Governor Sanjay Malhotra boasted in Washington that Indians banks were poised to meet the investment needs of society and industry.

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However, such claims neither inspire confidence nor do they match ground realities. The bitter truth is revealed in bank credit outflow data, which shows far more about the financial health of households and the economy than what is obvious at first glance.

Distress mortgaging of gold

Late last month, the RBI released its latest set of data on bank credit outflows for the three fiscals of FY23, FY24 and FY25.

Growth in overall bank credit outflows to the non-food sector sharply fell from 20 per cent in FY24 to 11 per cent in FY25. Growth in credit outflows to all sub-sectors fell too – agriculture from 20 per cent to 10.4 per cent; industry from 8.5 per cent to 7.8 per cent; services from 23.5 per cent to 12.4 per cent and personal loans from 27.5 per cent to 11.6 per cent.

In sharp contrast, growth in gold loans, part of personal loans, went up from 14.8 per cent to 103.5 per cent. Its share in personal loans rose from 1.9 per cent in FY24 to 3.5 per cent in FY25.

Here lies the rub.

Gold loans are secured by mortgaging gold by households and small businesses – a sign of distress in their finances, indicating impoverishment, rather than prosperity. The graph below, with RBI data, captures this.

This is not an aberration. In the past six fiscals of FY20-FY25, RBI data shows gold-mortgaged loans grew at an average of 50 per cent, while non-food credit grew by an average of 11 per cent.

For the uninitiated, personal loans are driving bank credit outflows. Here is another graph, this time non-food credit in absolute numbers (RBI data).

This graph shows personal loans for consumption (half of it is for housing) overtaking loans to services in FY20 and to industry in FY21 and continues to do so in subsequent years till FY25.

In other words, bank credit outflows – as proxy for growth – show a debt-driven consumption economy, rather than one driven by production of goods and services. The GDP data also showed that growth fell from 9.2 per cent in FY24 to 6.5 per cent in FY25.

There are many other indicators too.

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Impoverished masses

Here are multiple examples (official data) to drive home the growing impoverishment of masses:

1. “Free” ration to 813.5 million individuals (over 60 per cent population) since April 2020, which will continue till December 31, 2028.

2. Subsidised 'Bharat Atta' at ₹30/kg and 'Bharat Rice' ₹34/kg, first launched in 2023 (Phase-I), was extended with its Phase-II launch in November 2024 for which the Centre has initially allocated 3.69 lakh tonne wheat and 2.91 lakh tonne rice.

3. Subsidised LPG cylinders at ₹200 for up to 12 refills a year to 103.3 million women (March 1, 2025).

4. Cash handouts of ₹6,000 per year to 113.4 million farmer families (December-March 2024-2025 data).

5. Menial jobs under the guaranteed job scheme of MGNREGS given to average of 66 million households and 94 million individuals during FY21 to FY25.

6. Workers continue to migrate to low-paying agriculture jobs – rising from 44.1 per cent in 2017-18 to 46.1 per cent in 2023-24 (sectoral distribution) and vulnerable “self-employed” (status in employment) rising from 52.2 per cent to 58.4 per cent during the same period (PLFS reports).

7. Fourteen states were giving cash handouts to women (₹1,500-2,500) covering 34 per cent of women in those states (Axis Bank). The NCT of Delhi was added to the list (₹2,500) in March 2025.

Direct, indirect taxes

As for the all-time-high GST collection in April 2025, it must be pointed out that it being an indirect tax, the tax burden is more on poor masses rather than those with better ability to pay. Direct taxes (based on ability to pay) continue to fall behind indirect taxes – unlike what is seen in developed economies.

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The World Bank’s latest poverty reduction estimate is the continuation of a trend that started in April 2022. Its 2022 report had said extreme poverty (at $1.9 per capita per day expenses, 2017 PPP) declined from 22.5 per cent in 2011 to 10.2 per cent in 2019.

But it didn’t explain why. It used two disparate surveys – the government-run National Sample Survey Office's (NSSO) 2011-12 Household Consumption Expenditure Survey (HCES) and private sector Centre for Monitoring Indian Economy's (CMIE) Consumer Pyramids Household Survey (CPHS) of 2019. It dismissed the NSSO’s HCES of 2017-18 data – which the Centre had junked for showing poverty was growing.

The same month came an IMF estimate showing extreme poverty (at $1.9, 2017 PPP) had reduced from 10.8 per cent in 2011 to 1.4 per cent in 2020. This estimate was based on the HCES of 2011-12 and PFCE growth.

'Income' parameter

Both the World Bank and IMF estimates monetised the value of assisted living – subsidised/free ration – as if these were a reflection of household ‘incomes’ (the relevance of it will be clear soon), not something that can be withdrawn, driving millions of Indians back into extreme poverty.

Common to both were the lead authors – two Indian economists deputed by the Indian government to these multinational institutions – Sutirtha Sinha Roy for the World Bank and Surjit Bhalla for the IMF.

The World Bank’s latest estimate (2025) uses the HCES of 2022-23 to claim extreme poverty reduced to 2.3 per cent in 2022-23 (no mention of the authors of this report this time).

Smell test

Economist Ashoka Mody (India’s Poor Will Not Be Wished Away) had dismissed this HCES 2022-23 after comparing its finding with multiple other economic indicators to conclude that it failed “smell test” and the data “appear to have been chosen to align with the government’s preferred narrative” while “in reality, poverty remains deeply entrenched in India and appears to have increased significantly”.

He used the poverty estimates of C Rangarajan (2014, which was not officially recognised by the Modi government) and S Subramanian (private estimate of 2012) to declare then: “30-40 per cent of all Indians are poor.”

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Leading Delhi-based think tank National Council of Applied Economic Research (NCAER) published a study in 2024 saying that poverty declined from 21.2 per cent in 2011-12 to 8.5 per cent in 2022-24 using the Suresh Tendulkar Committee’s poverty estimates of 2004-05. But it also highlighted the fragile nature of poverty reduction in India.

It said: “During an era of economic growth, when opportunities increase, the long-term determinants of poverty may decline in significance while accidents of life associated with natural disasters, illness and death, and changes in occupation-specific opportunities may become more important. Accidents of birth are more likely to affect long-term chronic poverty, accidents of life may have a transitory effect on moving in and out of poverty.”

One crisis away

The fragile nature of poverty reduction is best reflected in the “free” ration to over 60 per cent of the Indian population (813.5 million), cash handouts and other assistance to millions of those very households (listed earlier). Withdraw these and the mass poverty would be back.

Another factor to add as “accidents” that may happen is catastrophic healthcare expenditure that the Ayushman Bharat (PM-JAY) prevents. This scheme, launched in 2018, says it aims to address “catastrophic expenditure on medical treatment which pushes nearly 6 crore Indians into poverty each year”.

That is, in normal times, catastrophic healthcare expenditure pushes 60 million into poverty every year. Imagine another Covid-19 like pandemic or any other health emergency and its impact on poverty.

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What constitutes poverty?

Did you know India has not revised the poverty line estimate after Tendulkar’s 2004-05 estimate to actually measure poverty? Did you know the Indian government has not set it despite a decade-old assurance to the Parliament?

Yet, the NITI Aayog claimed, on January 12, 2024, that 24.8 crore people had escaped multi-dimensional poverty (MPI poverty) – which is different from poverty estimates and based on deprivations on terms of living standards (income), health and education – during 2013-14 and 2022-23.

But it did so without using the HCES of 2022-23 data; it entirely relied on health survey data (of NFHS-4 and NFHS-5) as a proxy for the other two parameters – education and living standards (income). All three parameters carry equal weight in MPI calculation.

The Prime Minister endorsed this NITI Aayog claim, promising, on January 12, 2025, to make India “poverty-free soon”. The (interim) Budget 2024 used the Aayog’s claim to declare “25 crore” Indians had escaped MPI poverty.