India eradicates ‘extreme poverty’ via PMGKY: IMF paper

A new (International Monetary Fund) IMF document published Tuesday, titled ‘Pandemic, Poverty, and Inequality: Evidence from India’ reveals that ‘extreme poverty remained below 1% in 2020 due to Pradhan Mantri Garib Kalyan Ann Yojana (PMGKY).

A new (International Monetary Fund) IMF document published Tuesday, titled ‘Pandemic, Poverty, and Inequality: Evidence from India’ reveals that ‘extreme poverty remained below 1% in 2020 due to Pradhan Mantri Garib Kalyan Ann Yojana (PMGKY).

The 52 page paperr, written by Surjit S Bhalla, Karan Bhasin and Arvind Virmani, also reveals that the expansion of India’s food subsidy program has absorbed much of the pandemic shock. According to the paper, extreme poverty was only 1% in 2019 – a significant drop in poverty rates from 2011 levels.

The article states that including the data on food subsidies has helped move the ‘official poverty line’ from (population lives <$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 refutes another Pew research paper that pushed 75 million Indians into poverty, claiming the data was calculated without an “official” consumer spending survey (2017-18). It further states 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 show?

  • Average consumption of real rural income decreased by 8.8% between 2011-12 and 2017-18 and real urban consumption increased by 2%

  • Rural inequality has been reduced by ‘levelling’ – reducing everyone’s income, but proportionally more for the richer than the poorer populations.

  • Biggest decline in real consumption inequality since 1982

  • Extreme poverty has increased from the NSS estimate for 2011-2012 from 12.2% in 2011-2012 to about 17% in 2017-2018. Again, never before in the history of Indian data, from 1951 to the present, has the absolute poverty of the CES increased.

  • The inferred nominal average consumption in the 2017-18 data was Rs. 1,892 per capita per month (PCPM) in rural India and Rs. 3,739 per capita per month in urban India – lowest in Indian history

Poverty rate (excluding food transfers)

Poverty rate (excluding food transfers) | Photo credits: Surjit Bhalla; Karan Bhasin; Arvind Virmanic

How does this paper refute that data?

  • Dismissing the NSS 2017-18 Consumer Spending Survey as ‘fatal’, this paper claims: Food subsidies have reduced poverty on a consistent basis since the enactment of the Food Security Act (FSA) in 2013.

  • By labeling the “Uniform Recall Method” (URP) – used to calculate consumption data based on 30-day recalls – as “obsolete”, this article refutes the Pew research paper that claimed 75 million Indians in 2020- 21 were pushed into poverty .

  • According to the Modified mixed Recall method (MMRP) – used to calculate consumption data based on 7-day recalls – this document claims that extreme poverty will increase in both 2019 (0.76 %) and 2020 (0.86%) has remained around 0.8%). Without taking into account food subsidies, poverty remains 2.5% according to MMRP.

  • Increasing the efficiency of food subsidy distribution through the use of AADHAR

  • This document also claims that real urban consumption growth between 2011-12 and 2014-15 will be 3.3% and rural growth 8.6% due to NSS consumer surveys (health and education), non-food consumption data, real wage growth to concluding that ‘the 2017-18 survey cannot be considered credible’

Poverty rate (taking food transfers into account)

Poverty rate (taking into account food transfers) | Photo credits: Surjit Bhalla; Karan Bhasin; Arvind Virmanic

Other key findings from the IMF paper:

  1. The pandemic shock is largely a “temporary income shock.” The use of temporary budgetary policy interventions, namely expanding food distribution, cushioned much of the shock.

  2. Consumption inequality (including food transfers) has fallen to its lowest level – equivalent to the level observed in 1993-94.

  3. Consumption growth was found to be higher in 2014-19 than in 2004-11

  4. Extreme poverty has been eradicated in India

India’s food distribution during COVID pandemic

Under the PMGKY, the distribution of free rations was initially announced from April to June 2020 and was later extended to November 2021. PM Modi’s announcement during the first full shutdown, offered 5 kg of free food grains to all beneficiaries in addition to the normal quota under the National Food Security Act. In addition to wheat and rice, each family member also received 1 kg of Chana Dal per month for free.

The scheme was also part of Centre’s ‘One Nation One Ration card’ (ONORC) campaign to enable all beneficiaries of the National Food Security Act (NFSA) to obtain sufficient food grains at any fair-price retailer, anywhere in the country by using their existing ration card with biometric authentication. Center 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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