The challenge is more productive, non-farm employment

Poverty in India is now concentrated in north India — 57 per cent of the poor are found in the ‘belt stretching from Uttar Pradesh to West Bengal’, according to the World Bank.

Employment has steadily expanded, instead, in the less productive, low-end services.

2 min readNov 3, 2026 06:15 AM IST First published on: Nov 3, 2026 at 06:15 AM IST

India has made remarkable progress in lifting millions out of abject poverty. Extreme poverty, as measured by a $3 per day poverty line, has fallen to 2.6 per cent in 2023, according to the World Bank’s latest estimate. At a higher threshold — the lower-middle income country line of $4.2 per day — the decline from 57.7 per cent in 2011 to 16.1 per cent in 2023 is equally impressive. This improvement in living standards can be observed across the rural-urban divide, in most states. Yet, the lack of more productive and better paying non-farm employment opportunities remains an obstacle in the path to mass prosperity.

India’s labour force participation rate has increased to around 59 per cent in 2025 (15 years and above), according to the periodic labour force surveys. Much of this is because more women are joining the labour force. But a significant number are either engaged in agriculture or self-employed. The less productive farm sector now employs around 43 per cent of the workforce. In comparison, in China, 21.68 per cent are engaged in agriculture, in Vietnam the figure is 25 per cent, according to the World Bank. In the non-farm sector in India, roughly three-fourths of workers are employed in informal enterprises — another segment characterised by low levels of productivity. Unlike in other Asian countries that have moved up the income ladder, manufacturing in India hasn’t been able to absorb the millions of low and unskilled workers. Employment has steadily expanded, instead, in the less productive, low-end services.

Poverty in India is now concentrated in north India — 57 per cent of the poor are found in the “belt stretching from Uttar Pradesh to West Bengal”, according to the World Bank. This region, where per capita incomes tend to be lower than the national average, offers fewer job opportunities, leaving migration to high-income regions as a channel for greater access to non-farm employment. For India to move up the income ladder — to the ranks of the upper-middle-income group and then to the high-income category — it needs to shift its workforce from low to high productivity jobs. That is one of the biggest development challenges.