Extreme poverty below 1% in India despite pandemic, says IMF paper

As per a working paper by the International Monetary Fund (IMF), India had managed to keep extreme poverty as low as 0.8% in 2019 and continued to maintain that in 2020 during the Covid-19 pandemic. This was done by making food transfers through the Pradhan Mantri Garib Kalyan Yojana (PMGKY).

The paper suggested that the post-food subsidy inequality at 0.294 is at its lowest level compared to 0.284 observed in 1993/94. The paper is authored by economists Surjit Bhalla, Karan Bhasin and Arvind Virmani and is titled 'Pandemic, Poverty & Inequality: Evidence from India'.

Also Read | Despite inflation, geopolitical uncertainty, India's IT spending set to reach $110.6 billion

While making a comparison between the poverty and consumption inequality in India between the years - 2004-05 through 2020-21, the paper suggests, "These estimates include, for the first time, the effect of in-kind food subsidies on poverty and inequality."

The effective scheme of food transfers was apparently the most appropriate thing to do in pandemic-induced poverty like situations. The paper suggests that 89.1% of rural eligible households and 77.3% of urban households received food transfers through the public distribution system.

The paper explained, "The expansion of India’s food subsidy program rather than increasing cash transfers enabled the government to provide free food as per the average monthly requirement to all those who were entitled to purchase the same from the PDS system. The Food Security Act (2013) and the increased use of Aadhar accelerated the declining proportion of leakage(s) in the programme."

The free food transfer scheme was launched under the PMGKY in the April-June period of FY21 that was later extended to November 2020 to help the people of the country battle the pandemic. 

This scheme was re-introduced during the second wave in May 2021 and again got extended till FY22-end. After the BJP won the Uttar Pradesh assembly elections in 2022, the scheme was extended by six months till September 2022. 

The scheme provides for more than 81.35 crore people with 5 kg free wheat/rice per person per month and 1 kg free whole chana per family. As per reports, this extension till September will cost the Central government a massive Rs 80,000 crore.