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17th April 2023 (7 Topics)

India has almost wiped out extreme poverty: IMF


An International Monetary Fund (IMF) working paper by Bhalla, Bhasin and Virmani (henceforth called BBV) has come out with a series of poverty projections based on different assumptions, the most optimistic of which shows extreme poverty virtually disappearing at just 0.86% of the population (12 million people).


Purchasing power parity (PPP) is a metric that equalises the buying power of different currencies to make comparisons easy.

  • 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 Gini coefficient ranges from 0 to 1, with 0 representing perfect equality and 1 representing perfect inequality.

  • 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.
  • Real (inflation-adjusted) inequality, as measured by the Gini coefficient, which stands at 0.294, is now very close to its lowest level of 0.284 observed in 1993-94, the paper stated.

What is Extreme Poverty?

  • Extreme poverty is defined by the UN as living on less than $1.90 a day.

India’s poverty line

  • In India, the official consumption-based poverty line is still the Tendulkar Line, which is close to the World Bank's $1.9 a day line.
  • The Tendulkar Expert Group chaired by economist Suresh Tendulkar in 2009 was formed to review the methodology for poverty estimation.
  • The committee finalised the per person per day consumption figure of Rs 32 a day for urban areas and Rs 26 a day for rural areas.
  • The national poverty line for 2011-’12 was estimated at Rs 816 per capita per month for rural areas and Rs 1,000 per capita per month for urban areas.

Rangarajan Committee

  • In 2012, due to the widespread criticism of the Tendulkar Committee’s approach, the Rangarajan Committee was formed. This panel’s report, submitted in 2014, raised the daily per capita expenditure to Rs 47 per day for urban areas and Rs 32 for rural areas.
  • They recommended a monthly per capita consumption expenditure of Rs 972 in rural areas and Rs 1,407 in urban areas as the all-India poverty line.
  • However, the government did not adopt this report and has continued using the Tendulkar Line.

NSO’s poverty figure

  • India will finally have its official poverty figure in the second half of this year.
  • The National Statistical Office (NSO) is currently rolling out the consumption expenditure sample survey, which is used to measure poverty level.
  • The survey will continue through July 2023 and preliminary results are expected by the end of the year.

Poverty Alleviation Scheme

  • Schemes to increase monthly income: The four schemes, Pradhan Mantri Kisan Samman Nidhi (PM Kisan), Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), Pradhan Mantri Ujjwala Yojana (PMUY) and saving from PMGKAY, together increased a person’s monthly income by Rs. 2,111. 
  • Pradhan Mantri Garib Kalyan Ann Yojana (PMGKAY): It is a programme to distribute a fixed quantity of free foodgrain (5kg per head) to the poor beyond their usual entitlement of 25kg a month of subsidised grains.
  • Public Distribution System(PDS) aims to manage food scarcity and distributing essential food commodities at affordable prices.
  • National Rural Livelihood Mission (NRLM) was launched in 2011 by the Ministry of Rural Development and aided by the World Bank.
  • Pradhan Mantri Awaas Yojana-Gramin (PMAY-G): Due to the gaps in the earlier scheme for rural housing, titled Indira Awaas Yojana (IAY) — it was restructured in 2016to PMAY-G. Through this scheme, the government commits to realizing housing for all.

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