Why reforming the system of free food is necessary? 

News: Recently, the World Bank and the IMF released the working papers which has led to a renewed debate on poverty in India. The former used the Consumer Pyramid Household Surveys (CPHS) and the latter used the NSO Consumer Expenditure Survey for the poverty related assessment. 

What are the findings related to India’s poverty level in the last few years?  

Both the WB and IMF papers claim that extreme poverty based on the international definition of $1.90 per capita per day (in purchasing power parity (PPP) has declined in India. As per the WB it was 10.2% of the country’s population in 2019. As per the IMF it was 0.77% in 2019 and 0.86% in 2020. 

In case of the poverty line scaled up to $3.2 PPP: (1) the IMF claimed that the poverty would be at 14.2% of the country’s population in 2019 in India, and (2). As per the WB, it would be 44.9%.  

In addition, as per the multi-dimensional poverty index (MPI), Indian poverty was at 25% in 2015. It was calculated using twelve key components from areas such as health and nutrition, education and standard of living.  

By 2019-20, it is expected that MPI would have further declined as the access to health, education and other basic facilities has significantly improved amongst the poor, especially after 2015.

What were the factors behind decline in India’s poverty levels?
The government has been providing massive food grain subsidy under the National Food Security Act (NFSA, 2013) and PM Garib Kalyan Anna Yojana (PMGKAY). These measures had direct effect including during the pandemic period.  

What are the issues with distribution of free food to millions of people in the name of food security?  

This is a vote bank politics game.

It involves freebies rather than a prudent policy.

– For example, the pandemic has ebbed and the economy has bounced back. But the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) launched as a special relief scheme during Covid-Pandemic has still been extended without a proper rational.  

The freebies strain reduces public investments, strain the fiscal situation and will also hamper potential job creation.  

India’s public grain management system is crying out for reforms. The FCI’s wheat and rice stocks extend way beyond the buffer stock norm. 

Is free food a sustainable path towards poverty alleviation?  

It is better to teach a person how to catch a fish than to give him/her a free fish every day. It cannot inspire a society to grow.  

There are issues of massive leakages in the PDS. For example, The High-Level Committee on restructuring FCI pointed out that it amounts to more than 40% leakage. 

Way Forward 

There is a need for reforming this system of free food. The former PM Atal Bihari Vajpayee’s approach can be adopted. The Antyodaya Anna Yojana (AAY)for poorest of poor should be focused (more rations at a higher subsidy). For the remaining below poverty line (BPL) families, the 50% of the procurement price can be charged. The above poverty line families (APL) can be charged 90% of the procurement price. 

Technology can help identify the poor. This will make PDS more targeted and lead to cost savings.  

The targeted beneficiaries should be given the option of receiving cash instead of providing grains.  

The reform can lead to generation of savings. The government can use that saving for investments in Agri-R&D, rural infrastructure (irrigation, roads, markets) and innovations. It will create more jobs and reduce poverty on a sustainable basis

Source: The post is based on an article “Why reforming the system of free food is necessary?” published in the Indian Express on 25th April 2022.