SBI reckons poverty levels between 4%-5%; inflation to ease if core inflation is declining vis-a-vis food price rise

India’s rural poverty level had declined to 7.2% in 2022-23 from 25.7% in 2011-12, while urban poverty slipped to 4.6% from 13.7% over the same period, State Bank of India’s economic research team said in a report on the Household Consumption Expenditure Survey (HCES).

India’s rural poverty level had declined to 7.2% in 2022-23 from 25.7% in 2011-12, while urban poverty slipped to 4.6% from 13.7% over the same period, State Bank of India’s economic research team said in a report on the Household Consumption Expenditure Survey (HCES).

At a national level, the report reckoned that the poverty rate in India could now be in the range of 4% to 5%, with a caveat that these numbers could undergo minor revisions once the Census to count the population that was due in 2021, is completed and the rural-urban population share is published. “We believe urban poverty could decline even further,” it said.

The bank also simulated the impact on retail inflation trends if the lower spends on food items reflected in the HCES are used to reduce the weightage of food in the Consumer Price Index. “The weights of major food items has revised from 47.8% in 2011-12 to 42.8% in 2022-23 at all India level, with share of food declining more in rural areas,” the report noted.

“We estimate that April 2022 inflation could have been higher at 8% against existing 7.8%, while January 2024 inflation would be 4.8% against 5.1%,” it said. The overall impact on headline inflation would be a combination of whether food inflation outstrips the core inflation [excluding food and energy items] or vice versa. “If core [inflation] is declining, this will have a sobering impact on headline inflation,” the report summed up.