Welfare programs signal a shift from an empowering growth-based model to a more palliative, subsidy-dependent one.....

 The rate of poverty reduction was significantly faster and arguably more inclusive in the 2004–2014 period than from 2014 to 2025, despite both decades experiencing periods of high inflation and pressures on real wages. While poverty has continued to decline in the more recent decade, the pace has slowed, and the causes for the reduction have shifted from broad-based economic growth to government-led welfare programs.

Comparison of poverty reduction in India      

Pace of Poverty Decline Faster.        

2004–2014 period

The annual rate of rural poverty reduction was 2.32 percentage points between 2004–05 and 2011–12, which was three times the rate of the preceding decade.      

2014–2025 period

After 2015, the pace of poverty reduction slowed significantly compared to the previous decade.

Economic Drivers      

2004–2014 period

Rapid, broad-based growth. The economy grew at around 8% annually, driven by rising savings and investment rates. This rapid growth created high-quality, non-agricultural jobs.   

2014–2025 period

Slower economic growth. The GDP growth rate was lower than in the preceding decade, and macroeconomic policies did not drive investment at the same pace.

Real Wages and Income

2004–2014 period

Real wages increased. Despite periods of high inflation, non-farm job creation led to tightening in the rural labor market and raised real wages. Increases in minimum support prices and the MGNREGA program also supported rural wages.           

2014–2025 period

Real wages faced pressure. Real wage growth was much slower, and some evidence suggests that real wages for a large portion of the workforce barely grew or declined. A high percentage of the workforce continues to work in the informal economy with low wages.

Job Creation and Employment          

2004–2014 period

Strong job creation. About 7.5 million non-agricultural jobs were created annually, allowing millions to move out of agriculture. Urban and youth unemployment were low.      

2014–2025 period

Weak job creation. The pace of non-agricultural job creation declined. There is also evidence of a reversal, with some youth returning to agriculture, and youth unemployment has more than doubled.

Inflation Impact         

2004–2014 period

Inflation impact was offset by wage growth. While inflation was a factor, its impact was largely offset for many by increases in real wages and employment.  

2014–2025 period

Intensified vulnerability. High and persistent inflation, particularly in food prices, severely impacted low- and middle-income families and threatened poverty gains, as growth in real wages did not keep pace.

Key Intervention        

2004–2014 period

Economic growth. The primary driver was robust economic growth creating jobs and increasing income. Government programs like MGNREGA supplemented these effects.      

2014–2025 period

Welfare programs. A significant portion of the recent poverty reduction, particularly in the multidimensional index, is attributed to large-scale government welfare schemes that provide food, housing, and other basic services.

Poverty Measurement

2004–2014 period

The Tendulkar line estimates a sharp decline between 2004–05 and 2011–12, with the number of poor falling by 137 million.   

2014–2025 period

Multidimensional poverty has also declined significantly between 2014 and 2023, with NITI Aayog reporting 24.82 crore people exiting poverty. However, some observers question whether the multidimensional index fully captures the impact of low real wages.

Conclusion

The data suggests that the 2004–2014 period saw a more effective and economically broad-based model of poverty reduction. A combination of rapid, investment-driven economic growth and rising real wages, supported by targeted programs, pulled large numbers of people out of poverty. In contrast, poverty reduction in the 2014–2025 period was driven less by market-led job creation and real income growth and more by state-led welfare transfers. While these welfare programs were critical in preventing a reversal of poverty gains amid higher inflation and stagnant real wages, they signal a shift from an empowering growth-based model to a more palliative, subsidy-dependent one. As a result, the pace of poverty reduction slowed, and a large segment of the population remains vulnerable to economic shocks.