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Inflation vs. Food Security: The Quandary of India’s “Fair Price” Ration Shops

India Human Development Survey identifies three major challenges facing India’s grain distribution program

What happens in a populous country when basic food staples are subsidized? Researchers from India's National Council of Applied Economic Research and the University of Maryland examined data from the India Human Development Survey in order to understand the outcomes of a large-scale program to feed the hungry by making rice, wheat, and millet available to households at a low cost. Sonalde Desai, MPRC Faculty Associate and one of the principal investigators of the India Human Development Survey, described their findings in a recent article in The Gulf Today.

Survey results showed that even though the program was intended primarily to benefit the poor, up to 29% (urban) and 43% (rural) of high-income households were also enrolled in the program. This suggests that the program has not been successful in identifying which households have the greatest need. Also, the grain allowance covers only about half of a household’s cereal intake, leaving the family to purchase the other half at regular prices. If the large scale of the program inadvertently causes grain prices to rise, families may end up spending just as much with the ration shops in place as they did before. In addition, there were large regional differences in the way that families used the ration shops, with nearly 85% of people in the south using food from ration shops, as compared to only 40% in the north.

Desai identifies three major challenges of the program: successfully identifying the households who have the greatest need; avoiding a potential rise in cereal prices; and addressing the disparities that exist between states.

Read the story in The Gulf Today

Learn more about the India Human Development Survey