According to the International Monetary Fund (IMF), 0.8% of the population in India lived in extreme poverty as defined by the World Bank as living on less than US$1.9 per day in purchasing power parity (PPP) terms in the pre-pandemic year 2019. The IMF reports that India has virtually eliminated extreme poverty and reduced consumption inequality to its lowest levels in 40 years as a result of state-provided food handouts.
The IMF working paper co-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. The new study by IMF has praised Indian Prime Minister, Narendra Modi’s Pradhan Mantri Garib Kalyan Anna Yojana for keeping extreme poverty levels in check during the pandemic.
The results of the IMF study demonstrate the social safety net provided by the expansion of India’s food subsidy program which absorbed a major part of the pandemic shock, the authors stated. Such back-to-back low poverty rates suggest India has eliminated extreme poverty, they concluded. Their study is unique in that it examines how subsidy adjustments affect poverty. According to the working paper, the results are striking. The food handouts acted like cash transfers.
IMF states that its working papers describe research in progress, and are published to elicit comments. The food subsidy in India is 5kg per person. In terms of a household, that would be about 25 kg a month. Now if you convert that into prices, that would come to about ₹750. This is not an insignificant amount for really poor households according to Pronab Sen, former chief statistician of India.
The Modi government launched the Pradhan Mantri Garib Kalyan Ann Yojana (PMGKAY), a programme to distribute free food-grain to the poor above their usual entitlement of 25kg a month of subsidized grains during the COVID-19 lockdown in 2020. Over 800 million people are covered by the National Food Security Act. The government announced it would extend the PMGKAY until September 2022.
As India’s economy fell into the worst recession in history with a decline of 6.6% in 2020-21, India’s farm sector recorded a growth rate of 3.3%, according to revised official estimates, despite opposition parties indulging in petty politics and funding bogus protests with hired goons pretending to be farmers.