World Bank gives a thumbs-down to Indian PDS

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World Bank
New Delhi, May 19: Critics of the Indian government's Public Distribution System have now got a we-said-you-so moment after the World Bank gave a thumbs down to the method. On May 17, the World Bank said that the system is more prone to failure due to huge leakage and wastage and recommended cash transfer as an alternate method to provide subsidised food to the poor.

In its report titled Social Protection for a Changing India, released on May 17, the World Bank stated, “No country in the world has a well-functioning PDS system. India is no exception... The public distribution system continues to absorb substantial public resources at almost one per cent of GDP. While it covers up to 25 per cent of the households, its benefits for the poor have been limited."

It added, “Leakages and diversion of grains are high. Only 41 per cent of the grains released by government reach households, according to 2004-05 NSS (the latest data available) with some states doing much worse. In 2001, the planning commission has estimated this leakage of BPL grains at 58 per cent nationally."

The report was prepared by the organisation after a request from the Indian government.

John Blomquist, the World Bank's lead economist for social protection in India said to reporters that for the short-term future, the PDS can continue but for medium to long terms it should be replaced by a cash-based subsidy.

The report gave instances from around the world including India where targeted cash transfer has yielded better result than the PDS. It cites the example of Bihar where the government has already introduced coupons or stamps to improve access to food.

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