New Delhi: An International Monetary Fund working paper has given a pat on the back to Prime Minister Modi’s Garib Kalyan Yojana.
The scheme, which has a laudable objective of providing free foodgrains to the poor, played a key role in keeping at bay extreme poverty during the pandemic.
The working paper gives the estimates of poverty and consumption inequality in India through the pandemic years. According to the paper titled ‘Pandemic, Poverty and Inequality: Evidence from India’, extreme poverty in the country was less than 1 per cent in the pre-pandemic year 2019, and food transfers were instrumental in ensuring that it remained at that low level in the pandemic year 2020.
The IMF further noted that the PMGKAY scheme was critical in preventing an increase in extreme poverty levels in the country during the pandemic years.
‘‘PMGKAY was critical in preventing any 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 IMF paper noted.
Furthermore, the report adds that the pandemic shock, that took a toll on the economy, was largely a temporary income shock. It said that the temporary fiscal policy interventions were the fiscally appropriate way to absorb a large part of the shock.
As against this, for the first time in several decades, extreme poverty -- those falling below the USD 1.9 per person per day in terms of purchasing power parity -- in the world increased in the pandemic year 2020.
Under PMGKAY, which was launched in March 2020, the central government provides free 5 kilograms of foodgrains per month.
The additional free grain is over and above the normal quota provided under the National Food Security Act (NFSA) at a highly subsidised rate of Rs 2-3 per kilogram.
PM Modi has recently extended the scheme till September 2022.
Further, the report says the effect of the subsidy adjustments on poverty was striking.
"Real inequality, as measured by the Gini coefficient, has declined to near its lowest level reached in the last forty years - it was 0.284 in 1993-94 and in 2020-21 it reached 0.292.
"Possibly the more surprising result from the incorporation of food subsidies into the calculation of poverty is that extreme poverty has stayed below (or equal to) 1 per cent for the last three years," it said.
In its conclusion, the IMF said that the results demonstrated the efficacy of the social safety net provided by the expansion of India’s food subsidy program. It claimed that the program absorbed a major part of the pandemic shock to the Indian economy by providing insurance to the poor and prevented an increase in the prevalence of extreme poverty. “This illustrates the robustness of India’s social safety architecture as it withstood one of the world’s biggest exogenous income shocks,” the paper noted in its ending remarks.
