Food Subsidy, Income Transfer and the Poor: A Comparative Analysis of the Public Distribution System in India’s States

ASARC Working Paper No. 2011/16

37 Pages Posted: 12 Jun 2012

See all articles by Raghbendra Jha

Raghbendra Jha

Australian National University (ANU) - Australia South Asia Research Centre (ASARC); Crawford School of Public Policy

Raghav Gaiha

University of Delhi - Department of Economics; Australian National University (ANU)

Manoj K. Pandey

Australian National University (ANU)

Nidhi Kaicker

University of Delhi - Faculty of Management Studies

Date Written: October 12, 2011

Abstract

The Targeted Public Distribution System (TPDS) — the largest food subsidy programme in India — has been a dismal failure in targeting the poor. The present paper examines its performance in three Indian states — Andhra Pradesh, Maharashtra and Rajasthan, based on primary data collected for this study. As real income transfers through food price subsidies are a tiny fraction of expenditure per person under this scheme, a contribution of the present study is to model determinants of real income transfers through subsidised wheat, rice and sugar. The analysis throws new light on how income transfers vary with economic status of a household, inequality in the distribution of land in a village, amount of food price subsidy, transaction costs of buying from ‘fair price shops’ (FPS), and supply shortages. The policy implications of these results are profound. Desperate measures such as a universal food subsidy enshrined in a proposed National Food Security Act are rejected on the grounds that the enormous leakages and wastage under the present TPDS would only get worse. Assertions that a universal food subsidy is the only option consistent with the right to food are rejected as mistaken, as the latter could be interpreted as a right to a right, or, more specifically, as a right to sensible livelihood expansion and price stabilisation policies.

Keywords: Targeted Public Distribution System, Food subsidy, Targeting Errors

JEL Classification: D12, D63, H24, H42

Suggested Citation

Jha, Raghbendra and Gaiha, Raghav and Pandey, Manoj Kumar and Kaicker, Nidhi, Food Subsidy, Income Transfer and the Poor: A Comparative Analysis of the Public Distribution System in India’s States (October 12, 2011). ASARC Working Paper No. 2011/16. Available at SSRN: https://ssrn.com/abstract=2083377 or http://dx.doi.org/10.2139/ssrn.2083377

Raghbendra Jha (Contact Author)

Australian National University (ANU) - Australia South Asia Research Centre (ASARC) ( email )

Canberra, Australian Capital Territory 0200
Australia
+61 2 6125 2683 (Phone)
+61 2 6125 0443 (Fax)

HOME PAGE: http://crawford.anu.edu.au/crawford_people/content/staff/acde/rjha.php

Crawford School of Public Policy

ANU College of Asia and the Pacific
J.G. Crawford Building, #132, Lennox Crossing
Canberra, Australian Capital Territory 0200
Australia

Raghav Gaiha

University of Delhi - Department of Economics ( email )

Delhi-110007
India

Australian National University (ANU) ( email )

Canberra, Australian Capital Territory 2601
Australia

Manoj Kumar Pandey

Australian National University (ANU) ( email )

Development Policy Centre
Crawford School of Public Policy
Canberra, Australian Capital Territory 2601
Australia

Nidhi Kaicker

University of Delhi - Faculty of Management Studies ( email )

Faculty of Management Studies
Maurice Nagar
New Delhi, ND 110007
India

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