Dr Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI has opined that the higher procurement by the Narendra Modi-led government may have also put money into the hands of smaller and marginal farmers, with a distributional impact.
This also shows that the procurement of cereals by the government over time may have become more efficient across states, the report showed. The research also finds that several transfer payments by the Centre for the poor are adding Rs 75,000 to a household per annum.
The SBI study analyzed the impact of the share of rice procurement on a Gini Coefficient for 20 states and the impact of the share of wheat procurement on the Gini Coefficient for nine States.
“Our results show that relatively laggard states in terms of inequal distribution of wealth across different population quintiles, Rice procurement and Wheat procurement in such states had a significant impact on reducing inequality through reduction in Gini coefficient,” it said.
These states were Assam, Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha, Uttar Pradesh, Uttarakhand and West Bengal, he said.
The report states that the impact of rice and wheat procurement on the percentage of the population for the lowest and second quantiles of wealth revealed a sharp decline in the percentage population in such quantiles of the population.
The Centre, from January 1 onwards, will provide foodgrains free of cost to 81.35 crore beneficiaries under the National Food Security Act (NFSA) for one year.
The food ministry on Saturday notified ‘zero price’ of foodgrains to be distributed to all NFSA beneficiaries from January 1 to December 31, 2023.
With this, the report argues that the cost actually paid by the households for the quantity obtained from the PDS will be zero. This is set to lower the demand for cereals at market prices will concomitantly lower the mandi prices of cereals and have a sobering impact on the CPI food inflation.
Pandemic and inequality
Multiple reports post the breaking out of Covid-19 have stated their arguments on how the pandemic affected the income levels in countries across the world.
According to Global Wealth Report 2022, global wealth inequality has fallen this century due to faster growth achieved in emerging markets.
As per the World Inequality Report 2022, while the top 1% has largely benefited from economic reforms, growth among low and middle-income groups has been relatively slow and poverty persists. The report also argues that over the past three years, the quality of inequality data released by the government has seriously deteriorated, making it particularly difficult to assess recent inequality changes.
However, one NBER working paper in 2021 argued that in fact, inequality in India declined during the pandemic.
The NBER study concludes that there was a decline in the income of the rich attributable to the high sensitivity of business income to aggregate fluctuations.
One IMF working paper in 2022 concluded that pandemic support measures by the Central government of India were critical in preventing extreme poverty in India and thereby prevented a rise in inequality, with food transfers.
