Editorial of the Day (13 July): PDS and Household Expenditure

Context: The Household Consumption Expenditure Survey (HCES), 2022-23 illuminated the significant impact of the Public Distribution System (PDS) on diversifying household food consumption.

Objective of PDS

• The Public Distribution System (PDS) in India aims to ensure food security.
• Up to 75% of the rural population and 50% of the urban population are eligible for subsidised foodgrains under the National Food Security Act (NFSA), 2013.
• Subsidised food grains allow households to spend more on other nutrient and protein-rich food items such as vegetables, milk, pulses, eggs, fish, and meat.

Household Consumption Expenditure Survey (HCES):2022-23

• Data Collection: The survey gathered information on both food and non-food items received for free through various social welfare programs.
• Published by: National Sample Survey Office (NSSO)
• Survey Limitations: The HCES does not aim to provide precise coverage estimates for each scheme, generally showing lower coverage than administrative data.
• Errors and Data Interpretation:
  • Inclusion Error: Occurs when an ineligible household consumes from the PDS.
  • Exclusion Error: Happens when an eligible household does not consume foodgrains from the PDS.
  • Research Utilisation: The survey enables examination of the characteristics of households that benefit from social programs, though with careful interpretation needed.
  • Imputation of Free Items’ Values
  • Methodology: For the first time, the NSSO has imputed values for free received items, enhancing analysis capabilities.
• Metrics Introduced:
  • Monthly Per Capita Consumption Expenditure (MPCE): The ratio of monthly consumption expenditure to household size.
  • MPCE with Imputation: Incorporates the imputed value of free items into the monthly consumption calculation.
  • Value Settings: Imputation values are set at modal unit price and 25th percentile unit price, only for free items, not for subsidised purchases.

What are the Key Findings?

• Food Items:
  • At the all-India level, about 94% of the value of imputed items in rural areas and 95% in urban areas are attributable to food items.
  • The imputed value for food items for all households, including those not receiving free items, is ₹82 in rural and ₹59 in urban areas.
• MPCE Distribution
  • The average MPCE among the bottom 5% of the distribution is ₹1,373 in rural and ₹2,001 in urban areas.
  • 20% of those in the bottom 5% of rural MPCE distribution move to the next fractile class (5%-10%) after imputation, affecting about 86 lakh individuals.
  • Similar upward movements are observed in urban areas and other fractile classes.

Implications for Poverty Measurement

• Post-report release, there is a debate on redefining the poverty line based on total value of consumption, including free items.
• In-kind social transfers have significant implications for the well-being of households at the bottom end of consumption or income distribution.

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