HKUST IEMS Working Papers No. 2015-16
Critics argue that India’s mismanaged Public Distribution System (PDS), which sells subsidized cereals to poor families, should be replaced by cash transfers. Others fear cash may be misused. Using National Sample Survey data, this paper demonstrates that families treat additional PDS subsidies wholly as a source of cash - exactly like a cash transfer. More worryingly, cereal consumption has not increased, despite higher real subsidies. Moreover, neither the PDS nor cash transfers are likely to raise total food expenditure in poor families. Finally, therefore, the paper explores how higher food consumption and other objectives of PDS subsidies may be achieved.
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