Giving Compass' Take:

• Karthik Muralidharan, Paul Niehaus, and Sandip Sukhtankar discuss the challenges of India's Public Distribution System.

• How can social programs be made more efficient and effective? How can programs better serve the needs of individuals? 

• Find out how co-creation informs better social programs. 

The Public Distribution System (PDS) is India’s flagship food security programme but also suffers from well-known inefficiencies. Even official government estimates suggest that a large share of public spending on the PDS does not reach intended beneficiaries. Thus, the idea of Direct Benefits Transfer (DBT) in lieu of subsidised food has emerged as a leading policy alternative, with the Prime Minister himself suggesting that the PDS should be replaced by DBT.

It is easy to see the appeal of DBT: monthly transfers into bank accounts could cut administrative costs and leakage while empowering beneficiaries to purchase food of their choice. But DBT also poses considerable risks: poor implementation may make beneficiaries worse off; the value of transfers may be inadequate (especially if they are not indexed to market prices and inflation); and access to banks/ATMs and markets may vary across locations. Recipients may also use cash for non-food items, which might be their preference but would reduce the impact on policy goals for food security and nutrition.

Over the last few years, we examined these issues in pilots of DBT in-lieu of PDS in three Union Territories (Chandigarh, Puducherry, and Dadra Nagar Haveli), conducting three rounds of surveys with a representative sample of over 6,000 households. Our main findings were as follows:

First, DBT implementation improved over time but remained a challenge even 18 months into the rollout.

Second, costs varied across beneficiaries.

Finally, beneficiary preference for DBT over in-kind PDS benefits evolved over time. In our first round of surveys (six months into the programme), two-thirds of beneficiaries preferred PDS to DBT. However, in our third round (18 months into the programme), this had reversed with two-thirds now preferring DBT to PDS.

Read the full article about the Public Distribution System by Karthik Muralidharan, Paul Niehaus, and Sandip Sukhtankar at India Development Review.