India’s poverty is changing shape. Fewer people are poor by the numbers, but poverty now sits more in cities, in informal work and in missing health, schooling and housing. Two famous economists, Amartya Sen and Jagdish Bhagwati, disagree on how to fight it.
Contents
Urban Poverty
Urban poverty is a growing worry. People move from villages to cities faster than cities create formal jobs and affordable homes.
Rural poverty is linked to land and farming. Urban poverty is linked to informal work, which is work with no contract, no fixed pay and no social security.
Take a street vendor or construction worker. Their daily income may beat a small farmer’s. Yet they may live in a rented room or a settlement with no legal tenure, which means they can be evicted at any time.
This is why income alone can mislead. A household above the income line can still lack a safe home, clean water or a toilet. The World Bank also lists high labour-market informality as a major challenge for India.
Sources: World Bank, India overview.
Globalization and Poverty
Globalization means more trade and investment across borders. India’s share of the global economy doubled from 1.6% in 2000 to 3.4% in 2023, says the World Bank. Growth did not reach every group in the same way.
- Gain: new jobs in export manufacturing, IT and services.
- Loss: old livelihoods that could not match cheaper imports.
- Result: different groups felt very different effects.
A weaver who loses to a cheap imported cloth may lose her income. Her nephew may find an IT support job in the same city. Both are real effects of the same change.
This mixed effect is why economists argue about globalization’s net impact on poverty. The Sen-Bhagwati debate below grows out of the same disagreement.
Sources: World Bank, India overview (growth and informality).
The Welfare State and the Sen-Bhagwati Debate
A welfare state treats the government as a provider of last resort. It steps in with direct support where markets leave basic needs unmet, such as food, health care and schooling.
Some see this role as essential to fighting poverty. Others call it costly. They fear it can crowd out private investment and works only as a partial fix.
This tension sits behind the debate between Amartya Sen and Jagdish Bhagwati. Both want less poverty. They differ on what government should do first.
The core question is simple. Should India aim for growth first, or put money into health and education alongside growth? The next two cards show each answer.
Sources: NobelPrize.org, Amartya Sen; Hachette, Why Growth Matters.
Amartya Sen’s View
Amartya Sen won the 1998 Nobel Memorial Prize in Economic Sciences. The Nobel committee cited his work on welfare economics. It includes how welfare and poverty can be measured.
Sen asks a different question. He does not ask only how much people earn. He asks what people can actually do and be, such as being healthy, being literate and living long.
His answer for policy is to invest directly in health, education and welfare alongside growth. Income helps, but it does not buy a school that does not exist.
Sen also studied famines. His work helped explain the economic reasons behind famine and poverty, not only the shortage of food.
The Human Development Index (HDI) shares this wider view. It combines three things: a long and healthy life, knowledge, and a decent standard of living. UNDP’s first report in 1990 described development as enlarging people’s choices.
Sources: NobelPrize.org, Amartya Sen; UNDP, Human Development Index; UNDP, Human Development Report 1990.
Bhagwati’s Growth-First View
Jagdish Bhagwati is a leading trade economist. With Arvind Panagariya he wrote Why Growth Matters in 2013. The book is subtitled How Economic Growth in India Reduced Poverty.
Their core claim is that growth is the best weapon against poverty. Growth creates the money and jobs that later pay for welfare. Without growth, there is little to redistribute.
Think of a pie. Slicing a small pie more fairly still leaves each person a small slice. A bigger pie gives everyone more, even before the slices change.
The authors also back open markets and trade. Bhagwati does not reject welfare spending. His real disagreement with Sen is about sequencing: growth first, or direct spending alongside growth.
Sources: Hachette, Why Growth Matters; Publishers Weekly, Why Growth Matters.
International Comparison and SHG Microfinance
The World Bank counts extreme poverty using an international line. The former line was US$2.15 a day at 2017 prices (PPP). In June 2025 the Bank moved to US$3.00 a day at 2021 prices. The figures below use the former line. A common line lets us compare countries on the same scale.
No single number tells the whole story. The Global Hunger Index (GHI) looks at hunger instead. In 2026 India scored 24.1, which falls in the serious band of 20.0 to 34.9. Child stunting fell from 50.0% to 29.3% since 2000.
The Gini coefficient adds another view. It measures how evenly income is spread, from 0 (perfectly equal) to 1 (one person has everything).
A different tool builds income at the household level. Self-help groups (SHGs) are small groups, mostly of women, that save together and borrow from banks. NABARD’s linkage programme began as a pilot with about 500 SHGs in 1992-93.
At 31 March 2024 it covered 17.75 crore households, says NABARD’s Status of Microfinance 2023-24. It is called the largest coordinated financial inclusion programme in the world. SHG microfinance builds earning capacity, not only a cash transfer.
Sources: World Bank, India overview; Global Hunger Index, India; NABARD, SHG-Bank Linkage.
Check your understanding
Choose an answer first. The short explanation appears after your choice.
1. Urban poverty is tied mainly to land and farming.
2. Sen argues for health and education spending alongside growth.
3. Bhagwati and Panagariya argue that growth must come before redistribution.
4. The Human Development Index uses income alone.
5. India’s National MPI fell from 29.17% to 11.28% between 2013-14 and 2022-23.
6. SHG-Bank Linkage is a scheme to build houses for the urban poor.
Answered 0 of 6 · Correct 0
A Recurring Policy Choice
The Sen-Bhagwati debate is not only theory. Indian governments have faced this choice again and again since independence. They have leaned one way at one time and the other way later.
In practice no government has followed one view alone. Growth-oriented reforms and direct welfare schemes usually run side by side. The debate is about the balance, not a strict either-or.
- Growth tools: trade reform, investment, jobs in manufacturing and services.
- Welfare tools: housing, food, health and school support.
- Bridge tools: SHG credit, skills training and cash transfers.
Why it matters: knowing both views lets you judge any poverty policy on its own terms. No single approach wins every time.
Sources: Hachette, Why Growth Matters; NobelPrize.org, Amartya Sen.
Urban vs Rural Poverty, and Globalization’s Mixed Effect
Rural and urban poverty have different causes. The same tool will not always fit both.
- Rural: linked to land, farming and seasonal income, and shaped by monsoon and irrigation.
- Urban: linked to informal work, rent and weak housing.
Land reform means little to a slum resident with no farmland. A housing scheme means little to a landless farm worker in a distant village. Each needs its own tools.
Globalization adds a second layer. It opens chances in export and service sectors. It also raises insecurity for workers in older industries. The effect is neither simply good nor simply bad.
Sources: World Bank, India overview (regional gaps); PIB, 7th CSMC meeting.
Poverty in India: Latest Numbers
Two recent official releases show how the debate plays out in practice.
Multidimensional Poverty in India
NITI Aayog’s National Multidimensional Poverty Index (MPI) tracks health, education and living standards together. It uses the Alkire-Foster method and 12 indicators, not income alone.
NITI Aayog’s discussion paper estimates that 24.82 crore people left multidimensional poverty in this period. All 12 indicators improved.
Which side does this support? It fits Sen’s wider view because the index counts health, schooling and living standards, not just income. Growth-first supporters can also claim it, since rising incomes helped. The data alone do not settle the debate.
Sources: PIB, NITI Aayog MPI paper.
Urban Poverty Focus
On 17 June 2026 the Central Sanctioning and Monitoring Committee approved over 2.13 lakh more houses under PMAY-Urban 2.0. The total sanctioned under the scheme passed 16.13 lakh.
Houses are being allotted to women in large numbers. Women received 97% of the sanctioned houses.
This links back to the Urban Poverty card. Poor households in cities lack secure homes. A housing scheme is a direct welfare tool, so it sits closer to Sen’s side of the debate.
Sources: PIB, 7th CSMC meeting.
Exam Point of View
- Prelims: expect questions on poverty measures (MPI, HDI, GHI, Gini), SHG-Bank Linkage and urban housing schemes.
- Mains (GS-II and GS-III): expect the growth-versus-welfare debate, urban poverty and the effects of globalization.
Tip: learn each index by what it measures and who publishes it. Then you can place any scheme or statistic on Sen’s or Bhagwati’s side of the debate.
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