Sreelatha Menon: PDS as a leveller

Ration cards have helped reduce the rural poverty gap index by 22 per cent, finds a study

At a time when the prices of food items are going through the roof, any transfer of funds, in cash or kind, would certainly provide relief to the poor.

With all its shortcomings, the public distribution system (PDS) is a benefits transfer scheme available to anyone who has a ration card. While securing a ration card is tricky and involves issues of denial and inaccessibility, the scheme, according to a paper by economists Jean Dreze (honorary professor, Delhi School of Economics) and Reetika Khera (Indian Institute of Technology, Delhi) has contributed to reducing rural poverty substantially.

However, it has been limited to states where PDS has been undergoing reforms. Therefore, in states such as Bihar, Jharkhand, Uttar Pradesh and West Bengal, where PDS reforms are overdue, no impact on rural poverty is seen, the study says. Using National Sample Survey Organisation (NSSO) data for 2009-10 and official poverty lines, the economist duo estimated at an all-India level, PDS had reduced the rural poverty gap index 18-22 per cent. The figures are much higher for states with a well-functioning PDS, 61-83 per cent in Tamil Nadu and 39-57 per cent in Chhattisgarh.

The study, for the Centre for Development Economics, Delhi School of Economics, chose to estimate the poverty gap - the gap between the poverty line and a below-poverty-line person's income - rather than count the number of those who had come out of the poverty line.

The study, which depends on NSSO data, is likely to be affected by anomalies in the data. Rajasthan is a case in point. In that state, the poverty impact of PDS is shown as below the all-India average. The study says the state initiated significant PDS reforms in 2010, with positive results.

In fact, a visit to any village in the state would show the residents, especially the aged, enjoy the benefits of the expanded PDS the state has rolled out in the past few years. Of late, Rajasthan has also started schemes targeting certain tribal communities - these are being provided food grains free of cost. But the fall in poverty in the state does not tally with the field reports of an effective PDS scheme, says Khera.

The state with the least evidence of the impact of PDS on rural poverty is Bihar. The study says this isn't surprising, adding Bihar seems to have the worst PDS structure in India. "The impact of the PDS on rural poverty is also small in Uttar Pradesh and West Bengal, two other poor (and large) states where PDS reforms have barely begun," the study says.

Khera says the estimate of poverty reduction has been influenced by the fact that the poverty line is too low; if it was higher, the impact of ration subsidy on the poor would have been reflected as lower, she says.

The study offers an explanation: "Since most of the literature on poverty in India is based on this (official) poverty line, we have followed the same convention, for purposes of comparability. With a higher poverty line, however, the percentage reduction in the headcount or poverty-gap index associated with the PDS would be smaller."