Free Food Scheme Moderated Income Inequality In Several States: SBI Report

Free distribution of food grains across states lowered the income inequality in India during 2019-21, said the State Bank of India (SBI) in a report on Monday. These states were Assam, Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha, Uttar Pradesh, Uttarakhand and West Bengal.

The research report on how procurement of cereals is lowering inequality stated, "Higher procurement, is benefitting the poorest of the poor in terms of subsequent free distribution of food grains. The procurement may have also put money into the hands of smaller and marginal farmers, with distributional impact."

The food is provided free under National Food Security Act, (NFSA)  and the cost actually paid by the households for the quantity obtained from the PDS will be zero. This lower demand for 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 report further said that in the Indian context, it is an incorrect conjecture to assume that inequality has worsened during the pandemic. 

With a progressive growth in output across states as proxied by gross state domestic product (GSDP), it is clear that the fruits of such growth have clearly reverberated and dovetailed into inclusive growth. India has thus done quite well during the pandemic in terms of navigating income shocks across deciles of the population.