“It’s a relief….”, India kept extreme poverty below 1% amid the global pandemic: IMF study

According to a new working paper published by the International Monetary Fund (IMF), India has almost washed off the extreme poverty through food transfers provided by the state and brought consumption inequality to its lowest level in 40 years. In India, extreme poverty was as low as 0.8% in 2019 and the country managed to keep it at that level in 2020 despite the unprecedented Covid-19 outbreak, said IMF.

The importance of the free food transfer scheme which was launched under the PMGKY in the April-June period of FY21 was thus needs to be noted here. The scheme was later extended to November 2020 and again after the win of BJP in Up, the scheme got extended till September this year. 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.

It was in the paper by IMF- Pandemic, Poverty & Inequality: Evidence from India, studied the poverty level in India and its extremity over the last few years especially it was studied during the pandemic time. 

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The paper finds that extreme poverty in India, which means those earning less than $1.9 (144.19 INR) on the purchasing power parity (PPP) basis, rose to 4.1 percent during 2020-21 compared to 2.2 percent during the previous year “if food transfers by the government are not taken into account.” 

The paper presents the poverty and consumption inequality figures in India for each year from 2004-05 to 2020-21. These figures include, for the first time, the impact of food subsidies on poverty and inequality.

The paper, after being thoroughly examined by the IMF, suggested that 89.1% of rural eligible households and 77.3% of urban households received food transfers through the public distribution system. According to IMF,  the Food Security Act (2013) and the increased use of Aadhar accelerated the declining proportion of leakage(s) in the programme.”

The study comes at a time when recent global reports indicate that there was a gap between rich and poor in Asia’s third-largest economy is widening. At the same time, studies on the economic impact of the Covid-19 pandemic differ in their conclusions.