Indian food and welfare schemes

Abstract

The Indian Government has identified a unique opportunity in using Information and Communication Technology (ICT) based solutions to streamline its inefficient, ineffective, and expensive subsidy operations. By bringing all subsidies, mainly food and fertilizer subsidy, under the ICT platform, the government aims to make its subsidy operations and delivery mechanisms- transparent, efficient, and effective. <br /> Food subsidy is the largest component of government’s subsidy bill and is focus of the paper. Authors evaluate the possibility of substituting the existing system of subsidized grain distribution, i.e. Public Distribution System (PDS) with ICT-based Direct Benefit Transfer (DBT) system. Implementing DBT for food will imply substitution of the existing physical grain entitlement system under PDS/NFSA with a cash transfer made directly into the bank accounts of the beneficiaries. <br /> The ongoing policy discussions and strategies for executing DBT-food in India are observed to be prescriptive in nature and suffer, inter alia, on two accounts. One, they view the transition of states from existing PDS to ICT based DBT food as one-disruptive change rather than as an incremental process that contributes to making a system gradually ready for the big transition. Two, by prescribing a uniform timeline for implementation in all the 36 Indian states and Union Territories (UTs), policy makers fail to acknowledge the diverse economic, social, and financial vulnerabilities in different parts of country. <br /> The paper attempts to address this gap in political thinking and strategy formulation and present a case for a phased approach to roll out DBT in the Indian food sector. It proposes a scientific way of evaluating a state/UT’s “readiness” for shifting from PDS to DBT in food. The “readiness” analysis involves studying a state’s performance on three parameters: their demographics, performance of existing PDS and the current state of their banking infrastructure. Identification of these parameters draws on learning from national and international experiences in DBT for food, in particular that of Chandigarh and Puducherry (where it is completely rolled-out) that are detailed in the paper’s first part.