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Cash vs. in-kind transfers: the role of self-targeting in reforming the Indian food subsidy program

  • Marta KozickaEmail author
  • Regine Weber
  • Matthias Kalkuhl
Original Paper

Abstract

Historically, India has relied on subsidizing staple food as a major instrument in improving food security. Recently, however, cash transfers have entered the debate as an alternative, as they are associated with lower market distortions, leakages and fiscal costs. This study contributes to this debate by analyzing India’s Targeted Public Distribution System (TPDS). Our main objective was to explain the under-purchase, or low take-up, from the TPDS, which is typically attributed to ‘leakage’, i.e. the diversion of food grains from eligible consumers. We provide an alternative solution based on self-targeting; while poorer households increase their consumption from the TPDS, wealthier households restrain from consuming subsidized commodities. Using a large household dataset, we estimated that such a voluntary opt-out system, based on income, would save a minimum of 6.5% of grains released through the TPDS. Besides these demand-driven aspects, our analysis indicates that poor regions perform better at lowering the diversion of grains and that large targeting errors exist among female-led households. Finally, we find substantial regional price differences that would benefit the poor and rural population under a uniform cash-transfer system that does not correct for regional price levels.

Keywords

Food security Policies India Targeted public distribution system Self-targeting Cash transfers 

Notes

Compliance with ethical standards

Conflict of interest

The authors declare that they have no conflict of interest.

Supplementary material

12571_2019_942_MOESM1_ESM.docx (30 kb)
ESM 1 (DOCX 29 kb)

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Copyright information

© International Society for Plant Pathology and Springer Nature B.V. 2019

Authors and Affiliations

  1. 1.Bioversity InternationalRomeItaly
  2. 2.Center for Development Research (ZEF)University of BonnBonnGermany
  3. 3.Mercator Research Institute on Global Commons and Climate Change (MCC)BerlinGermany
  4. 4.Faculty of Economic and Social SciencesUniversity of PotsdamPotsdamGermany

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