Food subsidy and the poor

Print edition : October 18, 1997
Interview with Dr. K.N. Raj.

Professor K.N. Raj is one of India's most eminent economists and an expert on the economy of Kerala. Dr. Raj, who is Honorary Emeritus Fellow and Chairman of the Governing Body of the Centre for Development Studies, Thiruvananthapuram, spoke to R. Krishnakumar. Excerpts:

What is the most important achievement of the public distribution system (PDS) in Kerala?

It covers the lowest income groups very well. That is, after all, the main rationale of a PDS. It is not the upper classes that should be its target.

What will be the impact of the TPDS policy on Kerala?

I think the 40 per cent now demarcated in Kerala as below the poverty line should be adequate. Politically, there might be a big furore about this. Many people think the middle class is a low-income group; that is not correct.

What will be the impact on food availability?

They will have to pay. Obviously it is a free market. Prices are likely to rise. They will have to pay the price. The only consideration is: are they so poor that the Government has to take special care of them? It is only then that the PDS would be the right thing to do. Otherwise, it is a general subsidising of the bulk of the population. I do not believe in such subsidisation. It is not good economics or good politics. It is the politics of the middle class.

How will you then ensure food security to the sections of the population that find themselves out of the system in a food-deficit State?

Is the market likely to make enough supplies to prevent a very sharp rise in prices? Unless there is extreme shortage, such a rise in price is unlikely.

I am a little prejudiced with regard to the middle class to which I belong. What is the middle class in India in terms of income distribution? Except the top 3 per cent at the most, the next 20 to 30 per cent are middle class. You can say one half of the population are the ones who are the really poor, and they are the ones who should get it. There is hardly any discussion about them, whether it is in Parliament or the State Assembly.

Are you saying that you favour excluding families not below the poverty line from the universal PDS system in the State?

If adequate quantities of supplies are there for 40 per cent of the population, I think that will be more than ample in Kerala. But how many people are really poor in Kerala? There are no income-distribution studies in the State. Unlike in Pakistan and so on, the bulk of the people who went to West Asia are people from the lower strata. In need terms, their incomes are considerably supplemented. Actually what they should consider is not income but consumer expenditure and if I remember correctly, consumer expenditure per head in Kerala is very close to that in Punjab and Haryana, which are the highest in India. That is the real measure. Which means, really, there is no case for this at all.

Dr. K.N. Raj.-K. GAJENDRAN

You talk of universal subsidy. After all, when you give subsidy you have got to tax someone else. And what is worrying is the tendency to reduce direct taxes on the rich and increase the burden on the poor, through direct and indirect taxes. For, ultimately, the balancing is done by raising indirect taxes.

There is the criticism that a Government which is trying to exclude people from food subsidy has announced a huge hike in salary for its employees.

I would agree with that proposition a little. It again shows that bias. I think this tendency has to be curbed.

There is a second tier of PDS in Kerala.

Yes, I think that is the best of all the systems. Administrative costs are low, but materials are still made available. What is available in the Maveli stores are really the essentials of life; they cover a wide range of commodities, not merely rice, but vegetables and so on. (Food Minister) Chandrasekharan Nair has done a good job there. For these stores are cutting into the retail and wholesale margins which are otherwise very large. The scheme cuts out the middleman.

I however believe that major and drastic changes need careful thought. We have succeeded in the last 40 years to move into a situation which on the whole keeps the people reasonably happy and contented. If we upset this, the consequences might be very serious.

In Kerala a measure such as excluding a large section of people from a well-established system of food security can cause such a disturbance.

I do not know whether (that will happen). Of course, politics being what it is, if the CPI(M) supports the present Government, then the Congress will bring this up as a big issue. There is no principle in all this.

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