India has almost wiped out extreme poverty: IMF

New Delhi: India has almost eradicated extreme poverty and brought down consumption inequality to its lowest levels in 40 years through state-provided food handouts, according to a new working paper published by the International Monetary Fund (IMF).

The IMF working paper — 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 study comes at a time when several recent global reports have pointed to the widening gap between the rich and poor in Asia’s third-largest economy, while studies on the economic shocks of the Covid-19 pandemic vary in their conclusions.

In India, the number of people living in extreme poverty — defined by the World Bank as living on US$1.9 or less in purchasing power parity (PPP) terms — was 0.8% of the population in the pre-pandemic year 2019, stated the IMF paper, published on April 5, 2022.

Food rations were “instrumental” in ensuring that extreme poverty did not increase and “remained at that low level” in the pandemic year 2020, the study found. PPP is a metric that equalizes the buying power of different currencies to make comparisons easy.

During the first Covid-19 lockdown in 2020, the Modi government launched the Pradhan Mantri Garib Kalyan Ann Yojana (PMGKAY), a program to distribute a fixed quantity of free foodgrain (5 kg per head) to the poor beyond their usual entitlement of 25kg a month of subsidized grains. Over 800 million beneficiaries under the National Food Security Act are covered by the program.

Bhalla, one of the authors of the IMF paper, said, “given that extreme poverty has been eradicated, India should move from $1.9 PPP poverty line to $3.2 poverty line”. This essentially means setting the poverty line high and is significant because it raises the income threshold for determining those below the poverty line, and such a move would allow more people to qualify for subsidies.

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