Publication - Project Report
The Food Security Bill was passed by the Lok Sabha (the Lower House of the Indian parliament) in August 2013. The purpose of the legislation is to remove hunger and reduce malnutrition. The extent to which it will be able to do so depends largely on whether it results in higher food consumption. The Bill intends to provide 75% of the rural population and 50% of the urban population with the national assured minimum entitlement (NAME) of 5 kilograms of grain per person per month. There is currently substantial variation in both prices and quantities of grain consumed through the Public Distribution System (PDS) because individual states, such as Chhattisgarh, Jharkhand and Tamil Nadu, have been topping up grain subsidies received from the Centre, and also because the distribution system functions poorly in some states such as Assam, Bihar and Haryana. For households that are already consuming more than the entitled amount and purchasing their marginal consumption from the market, the new legislation will be like a pure income transfer. While this may increase grain consumption through an income effect, the propensity to purchase grain out of additional income is likely to be small. On the other hand, for other households the new entitlements would reduce the marginal price of food grains significantly and could well lead to sharp declines in the incidence of hunger and malnutrition. Given the broad intended coverage of the new Bill, there are likely to be some families in each state for whom this is true with the numbers being much larger in areas with high PDS prices and low existing coverage. Our aims in this project are threefold: To estimate the distribution of food grain consumption with data from the most recent rounds of the National Sample Surveys. This will allow us to examine whether malnutrition rates at the sub-state level (available from other secondary sources, such as the National Family Health Survey (NFHS)) are closely linked to the consumption of food or whether they result from other causes, especially morbidity. To examine the fraction of households for whom the Bill is largely an income transfer and the fraction for which a well-implemented program would change the marginal price of grains and therefore increase the share of grains in the consumption basket. The analysis will shed light on the Bill’s potential to increase food consumption and through this reduce malnutrition. We will also explore the distributional benefits of the Bill. To examine the development in calorie consumption of individual states, which have experienced sharp increases in the coverage of subsidized grains in the past. Relevant examples are Chhattisgarh (1999-00 to 2009-10) and Oddisha (2004-05 to 2009-10). This will provide addition evidence of the Bill’s potential to increase food consumption. There is an active and long-standing debate on whether public transfers should be in cash or in-kind. Many economists advocate direct cash transfers to the poor instead of handing out in-kind transfers through subsidized grains. This position is based on an equivalency between the two types of transfers under certain conditions as well as the argument that cash is a more efficient way to reach the poor. We will directly shed light on this question, and whether the Food Bill should mainly be seen as a large set of income transfers, or whether it is likely to actually increase consumption of food grains.