Food subsidies prevented rise in extreme poverty during COVID-19 in India: IMF
The new paper ‘Pandemic poverty and Inequality: Evidence from India’, published in IMF, authored by Surjit Bhalla, Karan Bhasin and Arvind Virmani aimed to study the effect of in-kind food subsidies on poverty and inequality.
- Apr 6, 2022,
- Updated Apr 6, 2022 4:31 PM IST
India prevented exacerbating extreme poverty levels during the COVID-19 pandemic due to food transfers and subsidies, a new paper published by the International Monetary Fund (IMF) found.
The food subsidies given through the National Food Security Act 2012 and the Pradhan Mantri Garib Kalyan Yojana were critical in preventing an increase in extreme poverty levels in India and the doubling of food entitlements worked substantially in terms of absorbing the COVID-19 induced income shocks on the poor, the study said.
The new paper ‘Pandemic poverty and Inequality: Evidence from India’, published in IMF, authored by Surjit Bhalla, Karan Bhasin and Arvind Virmani aimed to study the effect of in-kind food subsidies on poverty and inequality.
“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 pandemic year 2020,” the paper said adding that “Extreme poverty (less than PPP$ 1.9 per person per day) in India is less than one per cent in 2019 and it remained at that level even during the pandemic year 2020”.
The authors stress that poverty that relies solely on “household consumption expenditure derived exclusively from survey will overestimate poverty rates, unless the estimation method incorporates the effects of subsidies and in-kind transfers”. The paper estimates poverty numbers considering in-kind subsidies that were rolled out during the pandemic.
Furthermore, the study found that subsidy adjustments on poverty is striking. The Gini Coefficient -- used to measure real inequality declined to near its lowest level reached in the last forty years. It was .284 in 1993/94 and in 2020-21 it reached .292. The paper attributed this to the incorporation of food subsidies into the calculation of poverty.
“Extreme poverty has stayed below (or equal to) 1 per cent for the last three years. In the pandemic year 2020-21 extreme poverty was at its lowest level ever – 0.8 per cent of the population,” the study said.
The study further stated that the pandemic shock is largely a temporary income shock and temporary fiscal policy interventions was the fiscally appropriate way to absorb a large part of the shock.
India prevented exacerbating extreme poverty levels during the COVID-19 pandemic due to food transfers and subsidies, a new paper published by the International Monetary Fund (IMF) found.
The food subsidies given through the National Food Security Act 2012 and the Pradhan Mantri Garib Kalyan Yojana were critical in preventing an increase in extreme poverty levels in India and the doubling of food entitlements worked substantially in terms of absorbing the COVID-19 induced income shocks on the poor, the study said.
The new paper ‘Pandemic poverty and Inequality: Evidence from India’, published in IMF, authored by Surjit Bhalla, Karan Bhasin and Arvind Virmani aimed to study the effect of in-kind food subsidies on poverty and inequality.
“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 pandemic year 2020,” the paper said adding that “Extreme poverty (less than PPP$ 1.9 per person per day) in India is less than one per cent in 2019 and it remained at that level even during the pandemic year 2020”.
The authors stress that poverty that relies solely on “household consumption expenditure derived exclusively from survey will overestimate poverty rates, unless the estimation method incorporates the effects of subsidies and in-kind transfers”. The paper estimates poverty numbers considering in-kind subsidies that were rolled out during the pandemic.
Furthermore, the study found that subsidy adjustments on poverty is striking. The Gini Coefficient -- used to measure real inequality declined to near its lowest level reached in the last forty years. It was .284 in 1993/94 and in 2020-21 it reached .292. The paper attributed this to the incorporation of food subsidies into the calculation of poverty.
“Extreme poverty has stayed below (or equal to) 1 per cent for the last three years. In the pandemic year 2020-21 extreme poverty was at its lowest level ever – 0.8 per cent of the population,” the study said.
The study further stated that the pandemic shock is largely a temporary income shock and temporary fiscal policy interventions was the fiscally appropriate way to absorb a large part of the shock.