The Public Distribution System (PDS) is an important social security programme in India. Its objective is to ensure food security. Today, up to 75% of the rural population and 50% of the urban population are eligible for subsidised foodgrains under the National Food Security Act (NFSA), 2013. If the cost of consuming foodgrains from the PDS is subsidised, this then frees up resources for a household to spend on other items such as vegetables, milk, pulses, egg, fish, meat and other nutrient and protein-rich food items. It is an empirical question whether households indeed diversify their food consumption. With the release of data from the Household Consumption Expenditure Survey (HCES):2022-23, there will be renewed interest in the above line of inquiry, i.e., the impact of consumption of free food items from the PDS on expenditure on items other than foodgrains.
On representativeness
To the extent possible, the HCES:2022-23 canvassed information on food and non-food items received by households free of cost through various social welfare programmes. In the HCES:2022-23 report published by the National Sample Survey Office (NSSO) and available on the Ministry of Statistics and Programme Implementation website, there is detailed information on pages 15 to 18. The objective of the survey is not to provide precise estimates of the proportion of households receiving benefits under every scheme. In most cases, survey estimates of coverage of a programme will be lower than that suggested by the administrative data. A common conjecture in the literature on the PDS is inclusion error (when an ineligible household consumes from the PDS) and exclusion error (when an eligible household is not consuming foodgrains from the PDS). For this purpose, researchers will compare the proportion of households consuming PDS items with the coverage under the NFSA. While care should be exercised in terms of interpreting the estimates, one advantage of the survey data is that it allows us to examine the characteristics of households that report benefits from the programmes.
Unless detailed information is sought on the nature of an ailment or disease in the case of health shocks, and waiver of fees or reimbursement in school or college, imputing the value of free medical services and education services received by the households is not possible. In the case of education and health, the NSSO conducts separate surveys where detailed information is canvassed on out-of-pocket expenditure and free services that are availed by a household. One might ask why one cannot use data on information paid by households to impute the value of medical services. Insurance products are treated as an investment and not consumption. The relevant information is sought as part of the All India Debt & Investment Survey, and not as part of the HCES.
In order to provide guidance to analysts and researchers, the NSSO, for the first time, decided to impute the value figures of selected food and non-food items which were received free. This allows us to compute two metrics. The first is the Monthly Per Capita Consumption Expenditure (MPCE) of a household, which is the ratio of monthly consumption expenditure to household size. The second metric is the value of household consumption in a month considering the imputed value of free food and non-food items, i.e., ‘MPCE with imputation’. Both metrics are published by the NSSO in its report.
Imputation of values
The NSSO has suggested two sets of values for each State and by sector (rural, urban) for imputation of food and non-food items received free of cost — modal unit price and the 25th percentile unit price. Consumption expenditure refers to out-of-pocket expenditure while value of consumption would include free and subsidised items consumed by households. In the report published by the NSSO, imputation has been done using the modal price only for items received free. The operative word is free and not subsidised. Thus, no imputation is done for the purchase of food items from the PDS at nominal regulated prices.
The main item that a large proportion of households received free was foodgrains from the PDS. Not surprisingly, at the all-India level, we find that in rural and urban India, about 94% and 95%, respectively, of the value of imputed items is attributable to food items. When we consider all the households, i.e., even those who did not receive any free items, the imputed value for food is ₹82 and ₹59 in rural and urban areas, respectively.
The report published by the NSSO has the average value of MPCE among those in the bottom 5% of distribution by the MPCE, 5-10, 10-20, 30-40, 40-50, 50-60, 70-80, 80-90, 90-95 and top 5% of distribution. Each interval is called a fractile class. The average MPCE of those in the bottom 5% of MPCE distribution is ₹1,373 in rural and ₹2,001 in urban. This means that the MPCE of 5% of Indians is less than this cut off. When we focus on the imputed value of consumption of those in the bottom end of the rural distribution, we find that 20% of those in this fractile class, or about 1% of India’s rural population is actually in the next fractile class, i.e., 5%-10%. In absolute terms this is about 86 lakh individuals in rural India. Similar patterns are observed till the sixth fractile class. In urban areas too, we see upward movement. There are different patterns observed across the major States. Needless to say, depending on their use case, researchers can impute the modal value for calculations for purchases from the PDS at the subsidised rate. This will increase the average MPCE with imputation. In short, there is evidence that even a limited imputation exercise establishes that in-kind social transfers help increase the value of consumption of poorer households.
Implications for poverty
Ever since the release of the report, there have been calls for a larger discussion on where the poverty line should be drawn. Among the issues that need to be considered is whether one needs to estimate the number of poor households based on the expenditure or based on the total value of consumption which includes the value of free items consumed. Needless to say, in-kind social transfers have implications for the well-being of households that are at the bottom end of consumption or income distribution.
Amitava Saha is Deputy Director General, Survey Design and Research Division, National Sample Survey Office, Kolkata. Gopal Saha is Deputy Director, Survey Design and Research Division, National Sample Survey Office, Kolkata. The views expressed are personal
Published - July 13, 2024 12:08 am IST
