India eradicates ‘extreme poverty’ via PMGKY: IMF paper

A new IMF paper details the impact of the PMGKY scheme on extreme poverty in India

April 09, 2022 03:41 am | Updated April 10, 2022 10:26 am IST

A view of people at a ration shop in K Sathanur in Tiruchi

A view of people at a ration shop in K Sathanur in Tiruchi | Photo Credit: SRINATH M

A new (International monetary fund) IMF paper released on Tuesday, titled ‘Pandemic, Poverty, and Inequality: Evidence from India’ says that ‘extreme poverty was maintained below 1% in 2020 due to Pradhan Mantri Garib Kalyan Ann Yojana (PMGKY). The 52-page paper authored by Surjit S Bhalla, Karan Bhasin and Arvind Virmani, also says that the expansion of India’s food subsidy program absorbed a major part of the pandemic shock. As per the paper, extreme poverty was as low as 1% in 2019 — a substantial reduction in poverty rates from 2011 levels.

The paper argues that incorporation of the food subsidy data has helped it conclude that the 'official poverty line' must be moved from (Population living on <$1) PPP $1.9 to $3.2. In terms of rupees, moving from Rs. 865 per person per month to Rs 2250 per person per month.

The paper also counters another Pew research paper that 75 million Indians were pushed into poverty, claiming that data was calculated in the absence of an 'official' Consumption Expenditure Survey (2017-18). Furthermore it claims that 'extreme poverty' has been eradicated in India.

The authors are Surjit Bhalla (Executive Director IMF India), Arvind Ramani (Founding Chairman, EGROW) and US-based researcher Karan Bhasin.

What did the 2017-18 consumer survey reveal?

  • Average real rural incomes consumption declined by 8.8 % and real urban consumption increased by 2 % between 2011-12 and 2017-18
  • Inequality in rural areas has been reduced by 'leveling down' - reducing everybody’s income but proportionately more for the richer than the poorer sections of the population.
  • Largest decline in real consumption inequality since 1982
  • Extreme poverty increased from the NSS 2011-12 estimate of 12.2 % in 2011-12 to around 17 % in 2017-18. Again, never before in the history of Indian data, 1951 to present, has CES absolute poverty increased.
  • Inferred nominal average consumption in 2017-18 data was Rs. 1892 per capita per month (PCPM) in rural India and Rs. 3739 per capita per month in urban India - lowest in Indian history
Poverty rate ( without considering food transfers)

Poverty rate ( without considering food transfers) | Photo Credit: Surjit Bhalla ; Karan Bhasin ; Arvind Virmani

How does this paper counter that data?

  • Dismissing the NSS 2017-18 consumer expenditure survey as 'ill-fated', this paper claims food subsidies have reduced poverty on a consistent basis since the enactment of the Food Security Act (FSA) in 2013.
  • Terming the 'Uniform recall method' (URP) used to calculate consumption data on a recall basis of 30 days as 'outdated', this paper counters the Pew research paper which claimed that 75 million Indians were pushed into poverty in 2020-21.
  • According to the the 'Modified mixed Recall method' (MMRP) used to calculate consumption data on a recall basis of 7 days, this paper claims that extreme poverty has remained around 0.8 % in both 2019 (0.76 %) and 2020 (0.86 %). Without considering food subsidies, poverty remains 2.5% as per MMRP.
  • Increase in efficiency of food subsidies' distribution via use of AADHAR
  • This paper also claims that real urban consumption growth between 2011-12 and 2014-15 to be 3.3 % and rural growth to be 8.6 % by incorporating NSS consumer surveys (health and education), Non-food consumption data, real wage growth to conclude that 'the 2017-18 survey cannot be considered credible'
Poverty rate (considering food transfers)

Poverty rate (considering food transfers) | Photo Credit: Surjit Bhalla ; Karan Bhasin ; Arvind Virmani

Other key findings of the IMF paper:

  1. The pandemic shock is largely a 'temporary income shock'. By using temporary fiscal policy interventions i.e expanding food distribution, a large part of the shock was absorbed.
  2. Consumption inequality (with the incorporation of food transfers) has dropped to the lowest level — equal to that observed in 1993-94.
  3. Consumption growth was found to be higher in 2014-19 as compared to 2004-11
  4. Extreme poverty has been eradicated in India

India’s food distribution during COVID pandemic

Under the PMGKY, free ration distribution was initially announced from April to June 2020 and was later extended till November 2021. The announcement, made by PM Narendra Modi during the initial full lockdown, offered 5 kg free food grains to all beneficiaries over and above the normal quota under National Food Security Act. Apart from wheat and rice, each family member was also given 1 kg of Chana Dal monthly for free.

The scheme also included in Centre's 'One Nation One Ration card' (ONORC) drive to allow all National Food Security Act (NFSA) migrant beneficiaries avail sufficient food grains from any fair price shop, anywhere in the country by using their existing ration card with biometric authentication. Centre claims that 69 crore NFSA beneficiaries, i.e. 86% NFSA population have been brought under the ONORC plan by December 2020.

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