India has almost eradicated extreme poverty and brought down consumption inequality to its lowest levels in 40 years through state-provided food handouts, according to a new working paper published by the International Monetary Fund (IMF). The working paper - authored by economists Surjit Bhalla, Arvind Virmani and Karan Bhasin - said that the proportion of people living in extreme poverty, at less than 1%, remained steady even during the pandemic on the back of “in-kind” subsidies, especially food rations.
A study praised Prime Minister Narendra Modi's Pradhan Mantri Garib Kalyan Anna Yojana for keeping extreme poverty levels in check during the pandemic. The study comes at a time when several recent global reports have pointed to the widening gap between the rich and poor in Asia’s third-largest economy, while studies on the economic shocks of the Covid-19 pandemic vary in their conclusions.
In India, the number of people living in extreme poverty - defined by the World Bank as living on US$1.9 or less in purchasing power parity (PPP) terms - was 0.8% of the population in the pre-pandemic year 2019, stated the IMF paper. Food rations were “instrumental” in ensuring that extreme poverty did not increase and “remained at that low level” in the pandemic year 2020, the study found.
Most previous studies and measures of poverty and inequality did not account for the role of food handouts, the paper’s authors noted. “These (new) estimates include, for the first time, the effect of in-kind food subsides on poverty and inequality,” the paper stated.
During the first Covid-19 lockdown in 2020, the Modi government launched the Pradhan Mantri Garib Kalyan Ann Yojana (PMGKAY), a programme to distribute a fixed quantity of free foodgrain (5kg per head) to the poor beyond their usual entitlement of 25kg a month of subsidised grains.
Over 800 million beneficiaries under the National Food Security Act are covered by the programme. Last week, the government said it would extend the PMGKAY till September 2022.
