Poverty down to 3.9%, so why free ration for 80 crore? PM's economic advisor explains

If poverty in India has declined sharply, why does the government continue to provide free food grains to nearly 80 crore people? Economist Shamika Ravi, a member of the Prime Minister's Economic Advisory Council, says the programme is not simply about poverty but also about providing social protection and improving household nutrition.

"Because we can," Ravi said when asked why free food grains were still being provided despite falling poverty levels.

"Every welfare state provides different kinds of protection to its citizens. Whether it is very rich, affluent Scandinavian countries, whether it is any of the G7 countries, or emerging markets, as countries grow, they provide social protection to their citizens. That's exactly what we are doing," she said while speaking to Business Today Group Editor Siddharth Zarabi.

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'80 crore are not taking free food grains'

Ravi said the number of people eligible for free food grains was different from the number actually availing themselves of the benefit.

"First of all, while 80 crore are eligible, the data very clearly tells you that 80 crore are not taking free food grains. It is close to around 55-56 crores that are availing as per the consumption expenditure."

She said the scheme was intended to ensure that people had access to food during difficult periods.

The economist also argued that savings from free food grains were allowing households to spend more on nutritious food, including fruits, milk, eggs, fish and meat.

"If you just look at the nature of consumption, then you are seeing that the savings from food grains that households are having are getting channeled into expenditure on fruits, fresh fruits, milk and milk products, eggs, fish and meat," Ravi said.

"So what effectively the government has done by providing free food grains is it has fiscalised the food plate. People are eating a much more diverse diet today."

Asked whether nutrition had improved as a result, Ravi replied, "In a very big way."

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Will the free ration scheme continue?

Asked whether the scheme needed to be revised as poverty declined, Ravi said changes would likely come over time. "I think over time it will," she said. "But if you remember just five years back, we would watch on news channels that metric tons getting spoiled because of rains, rats eating the food grain at the FCI godowns."

However, she argued that distributing surplus food grains could be more economical than storing them for extended periods. "Storage is also expensive. We are producing a lot of food grains, far more than we are consuming. So what happens is that distribution and giving it away works out to be far more. It's cheaper than hoarding, storing over many periods of time, and then making it available in the market. So it's a very wise and pragmatic strategy to run."

The economist said that, over time, production itself will shift because people are not consuming as many food grains anymore. In fact, she added, if the household consumption expenditure data is to be seen, every quintile group, right from the richest to the poorest, is consuming 2 kg per capita per month less food grains than we did 12 years back. "We are eating less rice and wheat, but we are producing more and more."

'Poverty down from nearly 30% to 3.9%'

Ravi said poverty in India had fallen sharply over the past 12 years when measured using a consistent definition.

She distinguished between the Tendulkar poverty line, which she described as focused on food requirements, and the Rangarajan poverty line, which also considers expenditure on housing, transport, healthcare and education.

"If you just look at the Rangarajan poverty line, so freezing the definition, India had close to 30% poverty in 2011-12. The latest HCS, household consumption expenditure data tells us it is now down to 3.9%."

The noted economist described the decline as unprecedented and said improvements were visible across the country rather than being concentrated in particular regions.

She also pointed to a convergence in poverty rates across religious and social groups. According to her, the poverty rate among Muslim households in rural India had fallen to 2.4%, compared with nearly 3.9% among Hindu households.