The impact of Public Distribution System on poverty in India

• Published date: 01 February 2021
• Author: Sweety Thomas,Krishna Reddy Chittedi
• Date: 01 February 2021
• DOI: http://doi.org/10.1002/pa.2048

ACADEMIC PAPER

The impact of Public Distribution System on poverty in India

Sweety Thomas

1

| Krishna Reddy Chittedi

2

1

Department of Economics, Central University

of Tamil Nadu, Tiruvarur, Tamil Nadu, India

2

School of Economics, University of

Hyderabad, Hyderabad, Telangana, India

Correspondence

Krishna Reddy Chittedi, School of Economics,

University of Hyderabad, Professor CR Rao

Road, SBI Officers Quarters, Gachibowli,

Hyderabad, Telangana 500046, India.

Email: krc@uohyd.ac.in

Assessing the poverty reduction in terms of food subsidies through Public Distribu-

tion System (PDS) is an important means by which the income transfer between poor

and rich expenditure classes can be analyzed. The study intends to analyze the

impact of PDS on poverty on rural and urban regions. It also makes a comparative

assessment between the subsidy transfers among the poor and rich expenditure clas-

ses of households. The data for this objective are adopted from 68th round of

National Sample Survey Organisation (NSSO) report on PDS and other sources of

household consumption (2011–2012). The impact of PDS on poverty is measured

monthly per capita consumption expenditure (MPCE) decile wise by using income

transfer method for major 17 states in the NSSO report. The impact of PDS on pov-

erty is estimated through subsidy or implicit income transfer. The results of the study

for all India across the rural and urban areas showed that the impact in terms of per-

centage increase in real MPCE is more for the poorest expenditure class in topmost

MPCE deciles for all the states.

1|INTRODUCTION

The improved efficiency in Public Distribution System (PDS) has

made a crucial impact on the reduction in poverty and improvement

in nutrition across the states in India. The change in PDS focus

towards targeted poverty reduction in 1997 could not succeed up to

the expected level as it is evident from the poverty reduction during

1993 to 2005, which was less than 2%. However, the consequent

developments increased the PDS impact as 3.2% based on head-

count ratio and 0.53 for squared poverty ratio. The impact on PDS

resulted in a more significant contribution to overall poverty reduc-

tion from 2004 to 2010, and this brought more substantial benefits

to the poor although the benefit extended to urban areas became

less (Himanshu and Sen 2013). The impact of consumer subsidies on

poverty was very moderate in India, and these subsidies reduced

poverty in terms of headcount ratio to 1.66% in rural areas and

17.1% in urban areas (Radhakrishna and Subbarao, 1997). The

impact of subsidies varied among the persons, whereas income

transfers through PDS have saved 12.1 million persons from poverty,

the impact of cereal on poverty was very low, and not more than

4.6 million was rescued out of poverty. To obtain a general picture

of the progress of the country, a suitable measure of poverty is use-

ful. Poverty is not the same as the hunger during 1986–1987

(Radhakrishna and Subbarao, 1997). The food subsidy provision in

India is a reflection of the government's program for providing nutri-

tional support for the targeted population and maintaining price

stability. PDS also acts as an essential means to carry out the

government of India's economic policy to serve the poor and vulner-

able (Thomas.S, 2017).

The impact of PDS plays a significant role in decreasing poverty

gap index that shows similar trends with headcount ratio, which

implies that the PDS has achieved greater heights not only in reducing

the number of poor people but also in the extent to which they are

poor (Kumar, Shinoj, Bantilan, & Joshi, 2014). The average impact on

poverty gap during 2004–2005 was estimated to be 5.96 percentage

points for Antyodaya beneficiaries and 2.27 percentage points to

below poverty line (BPL; Kumar et al., 2014).

In recent years, cash transfer programs have become more

popular in many developing countries of the world. By analyzing the

positive impacts of the conditional cash transfer programs of

Progressa in Mexico (renamed Opportunidades in 2001) and Bolsa

Escola in Brazil (which merged with other programs to become Bolsa

Familia in 2003), the policymakers in India have become interested in

the feasibility and desirability of conditional cash transfers for reduc-

ing the poverty, improving health, and increasing school enrolments

(Gangopadhyay, Lensink, and Yadav).

Received: 8 September 2019 Revised: 18 October 2019 Accepted: 26 October 2019

DOI: 10.1002/pa.2048

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