Dear Mrs Gandhi,
We, a group of academic economists, are writing to you about the proposed National Food Security Act, legislation that is of profound importance to India’s economy.
We believe it is appropriate that India pursues the goal of genuine food security for all through a law that guarantees a minimum transfer to every adult except a small subset of the most affluent who are easy to identify (only income taxpayers, government employees, and owners of motor vehicles and landed property worth more than Rs 10 lakh should be excluded.) Experience has shown that any less-inclusionary programme inevitably leaves out large numbers of poor people and thus defeats the goal of food security. Moreover, the inclusion of the “middle classes” creates a body of relatively empowered citizens who will protest whenever the benefits stop coming.
However, expanding coverage to a majority of the population through the public distribution system (PDS) is problematic. More than two decades of research is remarkably consistent in showing large illegal diversions of subsidized grains to the open market. In addition, numerous case studies have shown that even when the poor possess ration cards, they face problems with respect to the low quality of grain, unpredictable availability, and irregular hours of operation of PDS shops. Many poor households do not use the PDS even when they have the necessary entitlement.
It is vital, therefore, to not only consider comprehensive reform of PDS, but also to actively and urgently explore alternative models of subsidy delivery. For instance, it is very likely that in the very near future, technology and infrastructure may allow us to deliver subsidies seamlessly through direct transfers whether in terms of food stamps or cash.
We wish to stress that while the theoretical case for direct monetary transfers (indexed to food prices) is quite strong, we are not advocating an immediate switch over to such a system. We believe that experimentation with alternatives will provide us the evidence to expand whichever system is shown to work the best.
Accordingly, we urge you to draft the National Food Security Act in a way that would (1) provide an entitlement to a fixed basket of food or its monetary equivalent to all but the richest individuals, and (2) permit alternatives to the public distribution system for delivering this entitlement. The method of delivering the subsidy should be left open to change as the available technology and the associated infrastructure change.
Dilip Abreu: Princeton University
Farzana Afridi: ISI, New Delhi
Pulapre Balakrishnan: CDS,Thiruvananthapuram
Abhijit Banerjee: Massachusetts Institute of Technology
Sangeeta Bansal: JNU, Delhi
Pranab Bardhan: University of California, Berkeley
V Bhaskar: University College, London
Sukanta Bhattacharya: University of Calcutta
Archishman Chakraborty:York University
Satya Chakravarty: ISI, Kolkata
Amrita Dhillon: University of Warwick
Anil B Deolalikar: University of California, Riverside
Chandrahas Deshpande: Maharashtra Economic Development Corporation, Mumbai
Bhaskar Dutta: University of Warwick and ISI, Delhi
Mukesh Eswaran: University of British Columbia
Maitreesh Ghatak: London School of Economics
Chetan Ghate: ISI, Delhi
Parikshit Ghosh: Delhi School of Economics
Ashima Goyal: IGIDR, Mumbai
Sumeet Gulati: University of British Columbia
Tarun Kabiraj: ISI, Kolkata
Ashok Kotwal: University of British Columbia
Amartya Lahiri: University of British Columbia
S Madheswaran: Institute for Social and Economic Change,Bangalore
Anandi Mani: University of Warwick
Debasis Mishra: ISI, Delhi
Manipushpak Mitra: ISI, Kolkata
Dilip Mookherjee: Boston University
Anirban Mukherjee: Globesyn Business School, Kolkata
Sharun Mukand: University of Warwick
Karthik Muralidharan: University of California, San Diego
Rohini Pande: Harvard Universit
Bharat Ramaswami: ISI, Delhi
Debraj Ray: New York University
Ranjan Ray: Monash University
Tridip Ray: ISI, Delhi
Shubhro Sarkar: IGIDR, Mumbai
Arunava Sen: ISI, Delhi
Rajiv Sethi: Barnard College,Columbia University
Sudhir Shah: Delhi School of Economics
E Somanathan: ISI, Delhi
K Sundaram: Delhi School of Economics
Sandip Sukhtankar: Dartmouth College
Vandana Upadhyay: Rajiv Gandhi University, Itanagar
Wilima Wadhwa: ISI and ASER Centre, Delhi
Note: This is an open letter to Sonia Gandhi, chairperson of NAC.