Societal Poverty in a High-Growth Economy : Estimates from India During 1993-2012

We estimate relative poverty in India between 1993 and 2012, a period of high economic growth, using the World Bank’s Societal Poverty Line (SPL). Our estimates show that India’s societal poverty headcount ratio declined during the two decades by 21 percent, which is less than half of the rate of reduction seen using India’s official absolute poverty lines. Moreover, there is an increase in the headcount of the societal poor by about 39 million, with the rise being largely concentrated in the urban sector. The rate of reduction in societal poverty is spatially uneven with the poverty ratio increasing in urban (rural) areas of seven (two) out of India’s twenty major states. We find that rural India has experienced unconditional poverty divergence (both absolute and societal): states that started out with higher initial poverty ratio (absolute or societal) in 1993-94, experienced proportionately slower reduction over the next two decades. Urban areas, in contrast, have witnessed poverty convergence. Using a decomposition method in the literature, we calibrate the elasticity of poverty convergence at the state-sector level and find it to be positive, implying divergence. The decomposition exercise suggests that poverty divergence is primarily driven by spatial divergence in mean household per capita consumption expenditures