According to the SBI Ecowrap report, free distribution of cereals during the pandemic reduced income inequality across laggard States and those at the bottom of the pyramid.
Key points
- Taking a cue from the the International Monetary Fund (IMF) Working Paper which indicated that the Pradhan Mantri Garib Kalyan Yojana (PMGKAY), which provided free foodgrain to the poor, played a key role in keeping extreme poverty in India at the lowest level of 0.8 per cent during the pandemic hit 2020.
- The SBI study analysed the impact of share of rice procurement on Gini Coefficient (a measure of unequal wealth distribution) in 20 States and the impact of share of wheat procurement on Gini Coefficient for nine States; As- sam, Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha, Uttar Pradesh, Uttarakhand and West Bengal .
- The results show that relatively laggard States in terms of unequal distribution of wealth across different population quintiles, rice and wheat procurement had a significant impact on reducing inequality through reduction in the Gini coefficient.
- With food being provided free under NFSA, the cost actually paid by the households for the quantity obtained from the PDS will be zero.
- This lower demand of cereals at market prices will concomitantly lower the mandi prices of cereals and this will have a sobering impact on the CPI food inflation.
- The several government transfer payments for the poor are adding Rs. 75,000 to a household per annum.
- With a progressive growth in output across States as proxied by GSDP, it is clear that the fruits of such a growth have clearly reverberated and dovetailed into an inclusive growth.
