new Delhi: According to a new working paper published by the International Monetary Fund (IMF), India has almost eliminated extreme poverty through state-provided food items and brought consumption inequality to its lowest level in 40 years. The paper titled Epidemics, Poverty and Inequality: Evidence from India observed that “the post-food subsidy inequality 0.294 is now very close to its lowest level of 0.284 seen in 1993/94.” It has been written by economists Surjit Bhalla, Karan Bhasin and Arvind Virmani.
The paper found that India has extreme poverty, which means earning less than $1.9 (144.19 INR) on a purchasing power parity (PPP) basis. This increased to 4.1 per cent during 2020-21 as compared to 2.2 per cent in the previous year. Food transfer is not taken into account by the government. For the unversed, the dollar’s PPP value is different from the market price. The value of one dollar is currently Rs 20.65 as against Rs 15.55 in 2011.
“Extreme poverty was as low as 0.8 percent in the pre-pandemic year 2019, and food transfers were instrumental in ensuring that this pandemic remains at that low level in 2020,” it said.
The study comes at a time when several recent global reports have pointed to a widening gap between rich and poor in Asia’s third-largest economy, while studies on the economic shocks of the COVID-19 pandemic differ in their findings.
India kept extreme poverty below 1%: Explained
In India, the number of people living in extreme poverty – defined by the World Bank as living on purchasing power parity (PPP) terms of US$1.9 or less – was 0.8% of the population in the pre-pandemic year 2019, the IMF said. Paper, published on April 5, 2022.
This paper presents estimates of poverty and consumption inequality in India for each year from 2004-05 to 2020-21. “These estimates include, for the first time, the impact of a first-of-its-kind food subsidy on poverty and inequality.”
With an all India average of 84.6%, 89.1% of rural eligible households and 77.3% of urban households received food transfer through the Public Distribution System during this pandemic.
Such an effective targeting of food seems to be the most appropriate policy response to pandemic-induced poverty. According to the 2011-12 Consumption Expenditure Survey, the share of food in the average Indian consumption basket is 46 per cent. However, according to the paper, for the poor, it is above 60%.
“The expansion of India’s food subsidy program, rather than an increase in cash transfers, enabled the government to provide free food per average monthly requirement to all those who were entitled to purchase it from the PDS system. The Food Security Act (2013) and increased use of Aadhaar accelerated the declining proportion of leakage(s) in the programme.
The supply of free food grains as part of the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKY) scheme was initially introduced for the April-June period of FY 2011; This was later extended till November-end, 2020. In the wake of the second wave of the pandemic, it was reintroduced in May 2021 and then extended till FY22-end. Recently it has been extended till September 2022.
Under this scheme, more than 81.35 crore people are eligible for 5 kg free wheat/rice per person per month as well as 1 kg free whole gram per month to each family. The latest extension will cost the government `80,000 crore.