How to make Direct Benefit Transfers work for the people -Karthik Muralidharan, Paul Niehaus and Sandip Sukhtankar
Replacing India's Public Distribution System with Direct Benefit Transfers will improve efficiency, but shouldn't be implemented at the cost of individual choice.
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.
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