Rajiv Gandhi lessons on the food bill

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SummaryThe poor get just 13 per cent of the money spent in their name in schemes like PDS and NREGA — what Rajiv Gandhi said many years ago

The poor get just 13 per cent of the money spent in their name in schemes like PDS and NREGA — what Rajiv Gandhi said many years ago

According to data just released by the UPA government, 250 million people, or 22 per cent of the Indian population, was absolutely poor in 2011-12, a steep decline from the 38 per cent level recorded in 2004-5. This is great news for India, but given the reaction in the media and among opposition politicians, it is as if disaster had struck. Learned people lamented and argued that the Rs 30 per person per day poverty line, the basis of the above estimates, was set too low, that it was impossible for a person to survive on such low consumption.

This is very true. None of the politicians or learned experts can survive on Rs 30 per day. Theirs is an upper-class survival definition. Unfortunately, the whole point about wretchedly poor developing country poverty is that most

people do not earn enough to achieve “not-poor” middle-class survival status.

No matter what poverty line the “experts” choose, it is the case that poverty has declined significantly during the first seven years of UPA rule. And it is the same UPA that has significantly increased welfare programmes and expenditures for the poor. And it is the same UPA that is now stating that really two-thirds of the Indian population is absolutely poor and in need of food subsidies of 5 kg per person per month virtually free of cost (actually at Rs 2 per kg, with the market price at about Rs 18 a kg).

In my previous article (‘The unimportance of NREGA’, IE, July 24), I had estimated the effect of the employment guarantee dole (NREGA) on poverty reduction. In this article, I look at the effect of the three times larger dole of food subsidies on poverty reduction. Food subsidies are financed by the middle-class taxpayer, and provided by the Food Corporation of India (FCI), a government organisation in charge of procuring, storing and administering the supply of food to the ration shop.

There are two important leakages in food subsidy expenditures. (A leakage is defined as expenditure that does not reach the intended poor beneficiary.) The first leakage is in the quantity of foodgrains the government (FCI) states it has delivered to people, rich or poor, versus what the people actually receive

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