The World Bank last week released a comprehensive report titled Social Protection for a Changing India, spanning the gamut of so-called social sector schemes that the country pursues for the benefit of its poor and marginalized people. Of these schemes, the report identifies the Public Distribution System (PDS) as perhaps the one most in need of reform.
That PDS wastes more than it distributes is widely acknowledged. The report estimates that the scheme consumes around 1% of India’s gross domestic product, but reiterates the fact that its impact on the poor is limited. This, it says, is due to “a combination of high leakage of grains…a range of demand and supply issues in programme design and implementation, and considerable leakage of subsidies to the non-poor”. In fact, it cites 2005 figures from the Planning Commission to say that close to 60% of the foodgrains meant for PDS are diverted or leaked. With such generous wastages, that the scheme has failed to have a lasting socioeconomic impact on its target population is no surprise.
It is also ironical that the scheme has done least where it was needed most—the report highlights the fact that poor states tend to see lesser penetration of PDS services than better off ones.
The report has two important recommendations for social protection schemes in India: one, a more determined move towards cash-based subsidies, and two, decentralization of schemes to allow state-specific solutions to take root. Both of these should alleviate the current mess in PDS. The latter, specifically, is crucial. The government has shown a penchant for centrally funded and controlled programmes. This has its flip side. One, it often creates near-insurmountable difficulties in distribution of foodgrains. Two, it ensures that states have little stake in proper implementation of such schemes; this is unlikely to change unless the incentives are forced down their throat. Three, because the needs of one state often differ from that of another, the Centre’s one-size-fits-all approach doesn’t solve problems at the grass-roots level. But most of all, such devolution to states is absolutely necessary if India is to reduce the debilitating burden of PDS on its Central exchequer.
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