Reassessing Food Subsidies in India

• 29 Mar 2025

For Prelims: Household Consumption Expenditure Survey, National Food Security Act (NFSA), 2013, NITI Aayog, Multidimensional Poverty 

For Mains: Need to Reform the Food Subsidy Programmes in India, State of Poverty in India, Government Measures for Poverty Elimination. 

Source: BL 

Why in News? 

The Household Consumption Expenditure Survey (HCES) 2023-24 reveals a significant rise in household incomes, reduced poverty levels, and improved food expenditure capacity. This raises the need to reassess the National Food Security Act (NFSA), 2013, which was based on 2011-12 data and currently provides highly subsidized food to over 81 crore people. 

Poverty Lines Estimation in India 

• Tendulkar Committee (2009): Defined the poverty line based on minimum calorie intake, setting it at Rs 27/day for rural and Rs 33/day for urban areas (2004-05 prices), emphasizing income and basic needs for poverty measurement. 
  • This metric continues to form the basis of India's official poverty assessment. 
• Rangarajan Committee (2014): Revised the poverty line to Rs 32/day for rural and Rs 47/day for urban areas, considering broader consumption patterns and socio-economic factors, including education and health. 
  • Estimated poverty rate at 29.5% for 2011-12, compared to 21.9% by Tendulkar. 
  • The report is not adopted for official planning or poverty estimates. 

Why is there a Need to Reassess the Food Subsidy Programmes in India? 

• Rising Consumption: The Monthly Per Capita Consumption Expenditure (MPCE) has seen a significant rise across both rural and urban areas.  
  • In 2023-24, rural MPCE increased to Rs 4,122 (from Rs 2,079 at 2011-12 prices), marking a 45% rise from 2011-12 levels, while urban MPCE reached Rs 6,996 (from Rs 3,632 at 2011-12 prices), reflecting a 38% increase. 
• Decline in Poverty Levels: A recent study by SBI (2025) estimates India's poverty ratio at 4-4.5% in 2024, with extreme poverty of around 6.7 crore people in poverty. 
  • Using the inflation-adjusted Tendulkar poverty line, it estimated that rural poverty declined from 25.7% in FY12 to 4.86% in FY24, while urban poverty fell from 13.7% in FY12 to 4.09% in FY24.  
  • India’s extreme poverty fell to 8.7% (12.9 crore people) in 2024 from 21.9% in 2011-12 (World Bank).  
  • Only 11.28% of the population was living in multidimensional poverty in FY23, as per the MPI. 
• Discrepancy in NFSA Beneficiary Coverage: The NFSA provides subsidized food to 81 crore people (75% rural and 50% urban population).  
  • However, with poverty now around 10%, the coverage exceeds the actual need, indicating that many Priority Household (PHH) beneficiaries may no longer require subsidies. 
• Opportunity Cost of Food Subsidy: The government spends Rs 2 lakh crore annually on NFSA.  
  • Rationalizing beneficiary coverage could free up resources for key sectors like employment generation, industrial growth, and social infrastructure. 
• Shanta Kumar Committee (2015): It also recommended reducing the PDS coverage to 40% of the population to better target subsidies. 

What are the Key Highlights of the HCES 2023-24?  

Click to Read: Key Findings of the HCES 2023-24 

What is the Status of Poverty in India? 

Click to Read: Poverty in India 

Antyodaya Anna Yojana (AAY) & Priority Households (PHH) 

• Under the National Food Security Act (NFSA), 2013, beneficiaries are categorized into AAY and PHH. 
• Antyodaya Anna Yojana (AAY) Households: AAY covers the poorest of the poor, including landless laborers, marginal farmers, and daily wage earners. Each household receives 35 kg of food grains per month under NFSA. 
• Priority Households (PHH): PHH includes vulnerable populations identified by states based on socio-economic criteria.  
  • Each member is entitled to 5 kg of food grains per month, totaling around 20 kg per family (average size: 4.2). 
• Coverage: AAY covers around 9 crore people, while PHH covers 72 crore people, making up NFSA’s 81 crore total beneficiaries. 

What is the National Food Security Act (NFSA), 2013? 

Click to Read: National Food Security Act (NFSA), 2013

How Can Food Subsidy Programmes Be Made More Effective? 

• Data-Driven Targeting: Using HCES 2023-24 data, NFSA beneficiary lists can be rationalised based on current poverty levels.  
  • Setting clear inclusion and exclusion criteria will help ensure that only those who truly need assistance receive benefits. 
• Gradual Reform of Food Subsidies: Continue food subsidies for Antyodaya Anna Yojana (AAY) households while transitioning Priority Households (PHH) to Direct Benefit Transfer (DBT) for greater flexibility.  
  • Implement a phased plan to reduce subsidized foodgrain dependence for non-poor households. 
• Technology-Driven Transparency: Use Aadhaar-linked databases and AI-based monitoring to prevent leakages, while integrating tax, vehicle, and employment records to update beneficiary lists. 
• Shift Toward Nutritional Security: Focus on providing nutrient-rich foods (fruits, vegetables, pulses) to combat micronutrient deficiencies like anemia and stunted growth. 
  • As per the State of Food Security and Nutrition in the World (2023), around 74% of India's population could not afford a healthy diet. 
• Local Purchase with DBT: Allow beneficiaries to purchase food from local markets using DBT-linked accounts, reducing transportation costs and making distribution more efficient, thereby lowering the food subsidy bill. 
• Universal Basic Income (UBI) and Policy Realignment: Introduce UBI or unemployment benefits to provide direct financial support, ensuring a minimum standard of living.  
  • As spending shifts towards education, healthcare, and housing, food security policies must adapt to focus on broader socio-economic needs, improving access to essential services alongside affordable food. 

Conclusion 

With the significant reduction in poverty levels and enhanced household consumption capacity, the expansive coverage of the National Food Security Act (NFSA) may require reassessment. Optimizing the food subsidy program can help reallocate resources towards employment generation and economic growth, fostering a more sustainable and inclusive welfare system for India. 

Drishti Mains Question:

Examine the need for reassessing food subsidy programs in India. Suggest measures to enhance efficiency and targeting in food distribution. 

UPSC Civil Services Examination, Previous Year Question (PYQ) 

Prelims 

Q. The Multi-dimensional Poverty Index developed by Oxford Poverty and Human Development Initiative with UNDP support covers which of the following? (2012)

1. Deprivation of education, health, assets and services at household level 
2. Purchasing power parity at national level 
3. Extent of budget deficit and GDP growth rate at national level 

Select the correct answer using the codes given below: 

(a) 1 only 

(b) 2 and 3 only 

(c) 1 and 3 only 

(d) 1, 2 and 3 

Ans: (a)

---

Mains

Q. Despite Consistent experience of high growth, India still goes with the lowest indicators of human development. Examine the issues that make balanced and inclusive development elusive. (2016)

Q. Professor Amartya Sen has advocated important reforms in the realms of primary education and primary health care. What are your suggestions to improve their status and performance? (2016)