SBI Estimates Poverty Levels at 4%-5%; Predicts Eased Inflation with Declining Core Inflation against Food Price Rise
The report mentioned that there might be slight adjustments to the numbers after the Census is finalized and the rural-urban population distribution is released.
According to a report by the State Bank of India’s economic research team on the Household Consumption Expenditure Survey (HCES), India witnessed a reduction in rural poverty levels from 25.7% in 2011-12 to 7.2% in 2022-23. Similarly, urban poverty also decreased from 13.7% to 4.6% during the same period.
The report estimated that India’s national poverty rate may currently stand between 4% to 5%, with a note that these figures might see slight adjustments following the completion of the Census, originally scheduled for 2021, and the subsequent publication of rural-urban population distribution data. “We anticipate a further decline in urban poverty,” the report added.
The bank also conducted a simulation to assess the effect on retail inflation patterns by adjusting the weightage of food items in the Consumer Price Index based on the reduced spending reflected in the HCES. “The allocation of major food items has been revised from 47.8% in 2011-12 to 42.8% in 2022-23 at the national level, with a greater decline observed in rural regions,” the report observed.
“We project that inflation in April 2022 could have been slightly higher at 8% compared to the current 7.8%, while inflation in January 2024 would stand at 4.8% instead of 5.1%,” it stated. The overall effect on headline inflation will depend on whether food inflation surpasses core inflation [excluding food and energy items] or vice versa. “If core inflation is on a downward trend, this will moderate headline inflation,” the report concluded.
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