In Kaushal and Muchomba (2013), we study the effect of an exogenous increase in rice and wheat price subsidies resulting from the introduction – in 1997 – and expansion – in 2002 – of TPDS. Our study of the effect of food price subsidies
The impact of a longer-term food price subsidy programme may differ from that of a short-term experiment where the recipients know that the benefit is temporary. One criticism of Jensen and Miller’s study, however, is that the participants in that study were aware that the subsidy would last only six months.
Their research is an improvement over previous studies that have been criticised for investigating variations in food prices that were not exogenous to demand. In one of the provinces, they found that the food price subsidy induced people to substitute away from the subsidised staple food towards foods that cost more per calorie. Jensen and Miller (2011) analysed data from a randomised programme of large price subsidies for the poor in two provinces in China and found no evidence that the subsidies improved nutrition. The answer, based on empirical evaluations of food subsidy programs in India and other developing countries, unfortunately, is no. Would India’s expanded subsidy programme, if there were no corruption, improve the nutrition of the poor?.Will the subsidy programme improve the poor’s nutrition? Khera (2011) documents that there are seven large states where TPDS has been functioning well, and another five states where it is improving. The quality of TPDS, however, is not equally bleak across the entire country. Administrative and handling costs are also high: for every rupee of subsidy transferred to the poor, the Indian government spent 3.65 rupees, according to the government’s own evaluation. The bill, projected to cost 3% of the nation’s GDP in the first year of its implementation, has faced criticism as it expands the Targeted Public Distribution System (TPDS) - India’s existing food subsidy programme that is well known for administrative inefficiencies, corruption, and wastage (Bhalla 2013, Shiva 2013).Īn evaluation report commissioned by the government documented that only 42% of the subsidised food grains released for the poor actually reach them due to corruption and errors in their identification (Planning Commission 2005). In September the Indian government passed a food security bill guaranteeing 75% of the country’s rural population and 50% of its urban population 5 kilograms of food grain per person per month at heavily subsidised prices (Parliament of India 2013).