Why in the news? 

The Household Consumption Expenditure Survey Data provides an opportunity to analyze the effects of social transfers.

About Public Distribution System (PDS):

• The Public Distribution System (PDS) aims to ensure food security by providing subsidized foodgrains to economically vulnerable sections of society. Under the National Food Security Act (NFSA), 2013, up to 75% of the rural population and 50% of the urban population are eligible for subsidized foodgrains.
• Foodgrains procured by the Food Corporation of India (FCI) are distributed through a network of Fair Price Shops (FPS).

Its structural mandate: 

• Procurement and Distribution: The PDS operates through the procurement of foodgrains by the Food Corporation of India (FCI) from farmers at Minimum Support Prices (MSP). These foodgrains are then allocated to states and union territories based on their requirements and distributed to Fair Price Shops (FPS), which deliver subsidized foodgrains to eligible beneficiaries.
• Identification and Subsidy: Beneficiaries are identified based on the Socio-Economic and Caste Census (SECC) data, classifying households into Priority Households and Antyodaya Anna Yojana (AAY) households. Under the National Food Security Act (NFSA), 2013, eligible households receive rice at ₹3 per kg, wheat at ₹2 per kg, and coarse grains at ₹1 per kg. The system aims to ensure that food security is maintained for the economically vulnerable sections of society.

Observations made by the HCES:2022-23 report  

• The Household Consumption Expenditure Survey (HCES) 2022-23 provides insights into the coverage of social welfare programs, including the Public Distribution System (PDS).
• The survey highlights discrepancies between administrative data and survey estimates due to inclusion and exclusion errors, offering detailed characteristics of households benefiting from these programs.

Imputation of values for food and non-food items    

Note: Imputation of values for food and non-food items refers to the process of assigning a monetary value to items received by households for free or at a subsidised rate through social welfare programs like the Public Distribution System (PDS) in India.

• Purpose: Imputation is done to estimate the total consumption expenditure of households more accurately. It accounts for the fact that households receive goods (such as foodgrains from PDS) without directly paying for them, thus impacting their overall consumption.
• Methodology: The National Sample Survey Office (NSSO) and other agencies use statistical methods to assign a value to these items. This involves determining the modal (most common) or percentile prices of the items received, which may vary by state and rural/urban classification.
• Types of Items Imputed: Imputation covers both food and non-food items. In the context of the PDS, it primarily includes foodgrains but can extend to other essential commodities provided through government schemes.
• Data Sources: Data for imputation can come from surveys like the HCES, where households report receiving these items. NSSO surveys typically provide detailed guidelines on how imputation values are derived and applied in their reports.
• Impact on Analysis: Imputing values allows analysts to compute metrics like the Monthly Per Capita Consumption Expenditure (MPCE) accurately, reflecting the true economic status and welfare impact of households.

 Implications for Poverty

• Economic Relief for Poorer Households: By providing foodgrains at highly subsidized rates, the PDS reduces the financial burden on poorer households, allowing them to allocate their limited resources to other essential needs.
• Enhanced Measurement of Poverty: Imputing the value of free or subsidised items received through programs like the PDS allows for a more comprehensive assessment of household consumption. Including these imputed values in poverty measurements provides a more accurate reflection of the economic well-being of households.
• Policy Insights and Targeting: Understanding how imputed values impact poverty metrics helps policymakers in targeting social welfare programs more effectively.
• Diversification of Diet: Access to subsidized foodgrains from the PDS allows households to free up resources, potentially enabling them to purchase a more diverse range of nutrient and protein-rich foods such as vegetables, milk, pulses, eggs, fish, and meat

Way forward: 

• Enhancing Efficiency and Targeting: Improve the identification and targeting of beneficiaries through updated and accurate data collection methods. Continuous validation and updating of Socio-Economic and Caste Census (SECC) data can help in reducing inclusion and exclusion errors.
• Promoting Nutritional Security and Health Outcomes: Expand the scope of subsidized items beyond basic grains to include more nutritious food options like pulses, edible oils, and fruits.

Mains PYQ: 

Q What are the major challenges of Public Distribution System (PDS) in India? How can it be made effective and transparent? (2022)

Q Food Security Bill is expected to eliminate hunger and malnutrition in India. Critically discuss various apprehensions in its effective implementation along with the concerns it has generated in WTO. (2013)

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