Growth vs Entitlements: Impact of PDS on Poverty Reduction

one of the most scholarly paper i ve come across so far on pds and growth vs entitlement issue. and unusually unbiased as well in terms of data and conclusions (despite the occasional rhetoric here and there which is unavoidable considering they are jnu profs… but at least the academic integrity has been maintained). authors are himanshu n abhijit sen (planning commission)… read from section 1 though may require some background, hence putting the gist below

The paper aims to decode how much of poverty reduction in recent years has been due to “growth” and how much due to “entitlements” (they have measured only PDS and mid day meal only and not included NREGA and others).

poverty reduction from 1999-00 to 2004-05 was ~0.85% points per annum. This jumped to ~1.3% points per annum between 2004-05 and 2009-10 and ~2.2% pts per annum between 2004-05 and 2011-12.

In the official poverty calculations, PDS grains which are provided at say 1 re (whereas the market price is say 10 rs) are valued at 1 re only. So say if a household consumed 5kg of PDS grain and 5kg of non pds, our records will show he consumed a total of 10 kg at Rs. 55 (5 * 1 + 5 * 10). Let our poverty line basket be 10 kg of grain only then in money terms too our poverty line would be Rs. 55.

What the authors do now is to value this PDS grain consumption at market prices both in poverty line calculation and household consumption. So new poverty line would be 10 * 10 = Rs. 100. Our poor household’s expenditure too would be now Rs. 100. Now the authors see how many of the households will have an expenditure < Rs. 100 if we assume they don't get any PDS grain i.e. people who would have been poor if there were no state assistance. The difference in the number of poor calculated using this approach and official number of poor would give us the number of poor who were lifted out of poverty because of PDS (and mid day meal). If we compare across time, we can get how many people were lifted out of poverty due to growth in incomes (non pds consumption) which we can assume comes entirely from growth (not entirely true as part of it would come from NREGA) and how many due to PDS.

The authors conclude that:

a) between 1993-94 to 2004-05, out of 0.85 %point poverty reduction p.a. 0.73%pt was due to income growth and rest PDS + MDM. between 2004-05 to 2009-10, out of 1.28 %point poverty reduction p.a., income component was 0.87 %point only while rest all came from PDS and MDM. This shows the importance of PDS and MDM extension in accelerating rate of poverty reduction.

b) however, 2009-10 was a severe drought year where incomes were highly depressed. If we look from 2004-05 to 2011-12 where poverty reduction was 2.2 %point p.a., 1.6% points came from income growth and remaining 0.6% points from PDS. This means nearly 30% of poverty reduction happened because of PDS and MDM (despite all the leakages). Poverty ratios would be ~4.8% points higher (i.e. close to 27% instead of 22%) if there were no PDS and MDM.

c) The impact of PDS and MDM on poverty reduction has become more important compared to earlier period. This is because of PDS reforms in many states, shift away from TPDS and near universalization of MDM in this period. Also the impact of PDS is increasing with moves to universalise PDS show that PDS is becoming less leaky with extension – contrary to the fear highlighted by food security critics.

d) Everyone knows the wonder story of Bihar in poverty reduction between 2004-05 to 2011-12. It was considered worst on PDS performance. The authors say the following about it,

“But the NSS 68th round reports that 43% of Bihar households accessed PDS cereals in 2011-12, up from only 14% in 2009-10 and less than 2% in 2004-05. This expansion, unnoticed so far, is remarkable because it went hand in hand with two other features: Bihar climbed to the top of the poverty reduction league in 2011-12 from being a laggard so far. Much more significantly, Bihar’s PDS grain leakages (i e, what NSS does not capture as PDS consumption out of official offtake figures) reduced to about 20% in 2011-12 from 65% in 2009-10 and 97% in 2004-05.”

Click Here to download the paper.