Poverty was at its lowest in India in 2020: IMF report

IMF report said that pandemic support measures instituted by the government were critical in preventing any increase in the prevalence of extreme poverty

Pradhan Mantri Garib Kalyan Yojana (PMGKAY), which provides free foodgrains to poor people, played a key role in keeping extreme poverty in India at the lowest level of 0.8 per cent during the pandemic-hit 2020, according to a working paper of the International Monetary Fund (IMF).

The working paper titled 'Pandemic, Poverty, and Inequality: Evidence from India' presents estimates of poverty and consumption inequality in India for each of the years 2004-5 through the pandemic year 2020-21.

"Extreme poverty was as low as 0.8 per cent in the pre-pandemic year 2019, and food transfers were instrumental in ensuring that it remained at that low level in the pandemic year 2020," it said.

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Under PMGKAY, which was launched in March 2020, the central government provides 5 kilograms of foodgrains per month for free. The additional free grain is over and above the normal quota provided under the National Food Security Act (NFSA) at a highly subsidised rate of Rs 2-3 per kilogram.

PMGKAY has been extended till September 2022.

The working paper, prepared by Surjit S Bhalla, Karan Bhasin and Arvind Virmani, said that in the pandemic year 2020-21, extreme poverty was at its lowest level ever at 0.8 per cent of the population.

"Further, as early as 2016-17, extreme poverty had reached a low 2 per cent level. According to the more appropriate but 68 per cent higher Low Middle Income (LMI) poverty line of PPP (purchasing power parity) $3.2 a day, poverty in India registered 14.8 per cent in the pre-pandemic year 2019-20.

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"This achievement is put in perspective by noting that in 2011-12, the official poverty level for the lower PPP $1.9 line was 12.2 per cent," it noted.

The working paper also said that for the first time in several decades, extreme poverty -- those falling below the $1.9 per person per day in terms of purchasing power parity -- in the world increased in the pandemic year 2020.

As per the working paper, the pandemic support measures instituted by the government were critical in preventing any increase in the prevalence of extreme poverty and that food subsidies have reduced poverty on a consistent basis since the enactment of the FSA in 2013 and the co-incidental increase in the efficiency of targeting via Aadhaar.

Further, it said the effect of the subsidy adjustments on poverty is striking.

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"Real inequality, as measured by the Gini coefficient, has declined to near its lowest level reached in the last forty years - it was 0.284 in 1993-94 and in 2020-21 it reached 0.292.

"Possibly the more surprising result from the incorporation of food subsidies into the calculation of poverty is that extreme poverty has stayed below (or equal to) 1 per cent for the last three years," it said.

Post-food subsidy inequality at 0.294 is now very close to its lowest level of 0.284 observed in 1993-94, the working paper said, adding that in 2020, for the first time since the inception of the PDS system, the government was supplying, in full, the basic food ration needed to the bottom two-thirds of the population.

The food support (rations) was increased during the pandemic - the food grain ration was doubled for each recipient from 5 kg of wheat (or rice) per month to 10 kilograms in 2020, it added.

The author of the paper noted that an important implication of their results is that extreme poverty has been virtually eliminated, and both the government of India and the World Bank should formally switch to the LMI country poverty line of $3.2 PPP.

They also observed that the social safety net provided by the expansion of India's food subsidy programme absorbed a major part of the pandemic shock.

(With agency inputs)

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