The situational dimension of cash transfers: The inflationary and differentiated effects of the proposed changes in food subsidies in India

Publication Type:

Journal Articles

Authors:

Narendar Pani

Source:

Indian Journal of Human Development, Institute of Human Development, Volume 6, Number 1, p.31–47 (2012)

URL:

http://eprints.nias.res.in/359/

Keywords:

Cash transfers, food subsidies, Inflation, PDS, Poverty

Abstract:

The debate on cash transfers has tended to focus on the means of subsidizing the poor, particularly the possibility of reducing leakages in the Public Distribution System (PDS). Following the capabilities approach, this paper focuses on the ends of the policy, looking at cash transfers in terms of the impact on individuals in households. Through a formal statement of the proposed shift in India from a system of food subsidies embodied in the price of a commodity to one of cash transfers, the paper identifies the macroeconomic dimensions of this shift as well as the diverse impacts on households facing different realities. The macroeconomic effects include inflationary pressure, the possibility of a worsening of the crisis of under-nutrition, and increased risk for farmers hurting the long-term prospects for food security. And the varied effects across different poor households also raise the distinct possibility of the poorest being the most adversely affected by the shift to cash transfers.