India’s decline in poverty over the past decade is a major development achievement. Between 2011-12 and 2023-24, real GDP grew at about 6% a year, while the share of Indians living below the World Bank’s extreme-poverty line of $3 per person per day, measured in 2021 purchasing power parity (PPP) terms, fell from 27.1% to 2.6%. Growth accompanied by falling poverty is, in many ways, what development is supposed to look like.
People also experience economic progress through what their work earns them. For most, work is the foundation on which economic security is built. A household may sustain consumption through the combined earnings of several members, government transfers, savings, borrowing, or informal support. These can all improve living standards, and their role matters. Earnings from work answer a different and more basic question. Is the economic value of a person’s labour rising?
On that measure, India’s recent record is less straightforward. Between 2018 and 2025, India’s output per worker increased by about 2.3% a year in constant 2021 PPP terms, while real GDP expanded by roughly 5.21% annually. Roughly, these figures broadly imply employment growth of close to 2.9% a year. The economy therefore grew by employing more people as well as by producing more per worker. Yet among workers reporting positive labour income, median real earnings increased by only 1.47% CAGR, as seen through India’s labour data set, the Periodic Labour Force Survey (PLFS). The earnings of the typical worker grew more slowly than both the economy and output per worker.
Aggregate growth is experienced in ordinary life through the income people can take home, what they can spend today, what they can save for tomorrow, and how much room they have to deal with an illness, a job loss, or an unexpected expense. A growing economy can create more jobs and produce more output while the purchasing power generated by ordinary work fails to keep pace.
PLFS also shows that in constant 2021 PPP terms, the median worker earned about $16.76 a day in 2025, compared with $15.13 in 2017-18. In rural India, median earnings rose from $12.80 to $14.45 a day; in urban India, from $20.26 to $22.49. The urban median remained around 56% higher than the rural median in 2025, only slightly narrower than the 58% gap eight years earlier.
The median, however, tells us only what happened to the worker in the middle. It does not tell us whether those at the bottom gained or whether their earnings were sufficient to cross even modest standards of purchasing power.
This is where international poverty lines can be useful in a different way. The World Bank’s $3 and $4.20 lines are designed to measure household consumption poverty, not individual labour earnings. Applying them to PLFS earnings therefore does not produce another estimate of poverty. But they can serve as benchmarks of income adequacy: a way of asking how many workers earn less than the purchasing-power equivalent of standards associated with extreme poverty and different levels of country income. In that sense, they put an otherwise abstract earnings distribution on a more human scale.
The bottom of the distribution tells a different story.
Among rural workers reporting positive labour income, the share earning less than the equivalent of $3 a day rose from 3.83% in 2017-18 to 4.63% in 2025. In urban India, it increased only marginally, from 1.48% to 1.56%. By 2025, the incidence was therefore almost three times as high among rural workers as among urban workers.
At the $4.20-a-day benchmark, the international poverty standard associated with lower-middle-income countries, which India is, the unevenness is sharper. Nationally, the share of workers earning below the benchmark increased from 5.62% to 6.83%. In rural India, it rose from 6.58% to 8.62%. In urban India, it declined from 3.53% to 2.33%.
The significance of this rural deterioration is difficult to dismiss as a small corner of the labour market. Nearly 68% of India’s workforce was rural in 2025. For a very large majority of workers, therefore, economic progress is still being experienced through a labour market in which earnings remain considerably lower than in urban India and where the poorest-paid workers have seen little improvement.
This contextualises India’s progress in reducing consumption poverty measures. Consumption and labour income measure different things. A household generally pools resources. It might receive subsidised food or other transfers that protect basic consumption, and savings or borrowing can smooth difficult periods. As a result, poverty can fall even when the earnings remain weak.
That said, even the poverty story is not so simple. India has not simply crossed one poverty threshold and finished the development journey. In 2023-24, 16.1% of the population, around 232 million people, still lived below the World Bank’s $4.20-a-day lower-middle-income-country poverty line. Rural poverty at this benchmark was 19.34%, compared with 8.6% in urban India.
So, while India has made extraordinary progress in moving people away from extreme deprivation, crossing a minimum threshold is not the same as building economic security. For that, people also need work where purchasing power rises steadily over time.
This is why labour income deserves a place alongside GDP growth and poverty reduction when we think about development. Poverty tells us whether people have crossed a minimum. In contrast, labour earnings tell us whether work is carrying them further above it.
India’s poverty reduction is real and worth celebrating. The next challenge is ensuring that ordinary work itself becomes steadily more rewarding, especially for the rural workers who still make up most of the country’s workforce. Development is not only about how much an economy produces, or even how much households consume. It is also about whether work leaves people meaningfully better off over time.
Co-authored with Mukul Anand, researcher, Institute for Competitiveness
Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.