Although there is little consensus on the impact of trade liberalization on poverty and food security, it is nevertheless widely acknowledged that there is a need for governments to establish safety-nets to guard against any potentially harmful effects on the poor and vulnerable sections of society.

Against this background, programs aimed at achieving food security and reducing poverty gain increased importance in the reform era. This study aims to evaluate several such programs that are currently in place in the country from the point of view of their impact, efficiency and financial sustainability. The purpose is to determine how these programs may be improved and propose appropriate policy options for reform, while also keeping in mind the new challenges that might lie ahead.

Specifically, the study evaluates the Public Distribution System (PDS), Public Works Programs, and certain food-based direct intervention programs such as the Integrated Child Development Scheme (ICDS) and Tamil Nadu Integrated Nutrition Program (TINP), with a view to suggest how they can be made more cost effectiveness and better targeted. A summary of the main findings of the study is presented here.

The first chapter of this report provides the background in which the issues of food security and poverty are being studied in the Indian context. During the last five decades there have been highly interventionist trade policies in India that have discriminated against agriculture, particularly in the category of basic foods such as cereals. On the domestic front, there has been substantial control over the pricing, procurement, stocking, marketing and transport of foodgrains. These domestic and international trade policies resulted in a considerable wedge between the domestic and international price of wheat and rice, as observed by Gulati and Kelly (1999).

Due to the historically lower domestic price relative to the international price, it was expected that with liberalization, (i) the volume of exports of rice and wheat would increase and (ii) domestic prices of rice and wheat would rise. In the immediate years following liberalization, both of these were true for wheat, and for rice, export volumes increased while domestic prices did not rise as expected. Against this background, several studies have analyzed the impact of trade liberalization on food security but the results appear to be mixed. Nevertheless, to guard against any possible adverse impacts on the poor and vulnerable sections of the population, there is agreement over the fact that adequate safety nets must be in place in the country.

In the second chapter, the study analyzes the trends in food consumption in India as a backdrop to understanding the status of food security and poverty in the country. The consumption patterns of an average Indian are undergoing significant changes. In general there is an expansion of the shares of non-cereal food and non-food in the consumption basket, while the share of cereals is shrinking. This is true even for the bottom 30% of the population, although in absolute terms cereal consumption per capita has not fallen.

The substitution of non-cereals with cereals is resulting in a decline of calorie intake and is not contributing substantially to protein intake. While the decline in the cereals consumption can be explained by the slow down in the growth in the incomes of the poor and adverse prices of cereals versus non-cereal food, its decline in the seventies and eighties seem to be related to shifts in tastes and preferences.

The complete set of expenditure and own and cross price elasticities are estimated by the demand system. The following results emerge from the exercise: There are marked differences in consumption behavior among the income groups and between rural and urban areas. Estimated price effects indicate the importance of cereal price, especially in rural areas.

The simulation exercise indicates that the adverse relative price of cereals dampens the demand of not only cereals but also that of other food items. The adverse movements in the relative price of cereals together with lower growth in rural incomes may have resulted in the stagnant food consumption in rural areas.

It is noted that during the economic reform period, cereal prices increased faster than in the 1980s. The increase in prices in the 1990s was primarily on account of the increase in procurement price. Procurement prices rose due to devaluation and because the government wanted to compensate the farmer for the prevailing restrictions on trade. Finally, another significant finding is that consumption of non-cereal food, particularly fruits and vegetables, has increased faster during the reform period than in the 1980s.

The third part of the analysis studies the effectiveness of public distribution of food within the country. In particular, the objective is to examine the performance of the Public Distribution System (PDS) with a view to provide suggestions for cost-effective and better-targeted alternatives. This is probably the first study to look at the impact of the PDS on consumption and poverty after the introduction of targeting in 1997.

Two basic questions are addressed with respect to the performance of the PDS:

1. Does the target group receive significant subsidy?
2. Are the subsidies provided in a cost-effective manner?

The evaluation of performance is in terms of extent of food subsidy provided, coverage, impact on consumption and calories, impact on the poor in particular, leakages from the system and targeting errors, and cost effectiveness. The political economy of the PDS is also discussed. The following are the findings from this exercise:

1. The impact on consumption by the poor increased in rural areas between 1986-87 and 1999-00 and poverty also declined during this period. The impact on urban areas has been more or less same.
2. A higher impact of the PDS on consumption by the poor is found in certain states like Andhra Pradesh, Orissa and Tamil Nadu. However, overall the impact of the PDS on the poor is still marginal at the all-India level.
3. The finding in terms of the political economy of the PDS is that the dealers of the PDS, the bureaucrats, politicians, and the Civil Supplies departments have a vested interest in keeping the present system in operation.

Based on the findings, three options for reform are suggested: (i) revamping the existing PDS through decentralization, (ii) introducing food stamps, and (iii) replacing it with the food-for-work program. In the short run the authors also recommend that decentralization of the PDS and better targeting through village-level government units, known as Panchayats, can be attempted. The study is also in favor of linking the PDS with employment programs and the ICDS in order to improve targeting. This aspect is discussed in greater detail in a later section of the study. In the medium term, a move toward food stamps and the replacement of the PDS with a food-for-work or cash-forwork program are suggested.

The fourth chapter of the study looks at the impact of the Public Works Programmes on food security in the country. Public works programs play an important role in raising economic access of the poor. The case for RWPs (Rural Works Programs) lies primarily in the self-targeting nature of the schemes. However, public works are often criticized, with some justification, for creating unproductive (low productive) assets, providing only short-term supplementary income, and for not raising the skill levels of workers. The analysis shows that wage employment programs like the Employment Guarantee Scheme, Jawahar Rojgar Yojana and Employment Assurance Scheme seem to be more pro-poor than programs like the Integrated Rural Development Program (self-employment programs) and the Public Distribution System. They also achieve the additional objective of creating productive assets. However, the authors recommend the effective involvement of Panchayats (village-level government units) in order to ensure better planning of projects at the local level using local priorities and greater involvement of voluntary organizations as ways to ensure that the assets created may be more productive and better maintained.

Finally, the authors also make the point that in the changing context of trade liberalization, public works also can be used promoting diversification of agriculture. Although they are not a substitute for a sustained and broad based growth process, the authors believe that in a country like India, which has surplus labor and poor infrastructure, these programs can be a useful component for providing food security at the household level.

The next section of the report analyzes two direct food-based intervention programs for pre-school children in India, namely the Integrated Child Development Service (ICDS) and the Tamilnadu Integrated Nutrition Project (TINP). These schemes are evaluated using three parameters: targeting—whether they cover the entire group for whom they have been designed, effectiveness—do the programs bring about the anticipated results, and efficiency—for a unit of money spent per person, how much eventually reaches the individual and the benefit-cost ratio of the programs. The important findings of the study are presented below:

About 50 percent of children below three years are undernourished in rural India and about 38 percent in urban India. Even in states like Maharashtra and Tamil Nadu where per capita (real) state domestic product has grown significantly in the last decade, commensurate improvements in nutritional status cannot be seen.

The recent evaluation studies of the ICDS have shown improving trends in child nutritional status in the project areas. The studies found a reduction in severe undernutrition but minimal impact in reducing moderate under-nutrition. The projects also contributed to a reduction in the infant mortality rate and the incidence of low birth weights.

A national evaluation of the ICDS, however, revealed an unsatisfactory performance overall. The nutritional status of children in ICDS areas was found to be only slightly better than in non-ICDS areas. The percentage of severely malnourished children below the age of three in the ICDS areas is lower by 1.8 percentage points than the non-ICDS areas, and for children 3-6 years old, by 1.5 percentage points. The percentage of moderately malnourished children in ICDS areas is 2.5 and 3.4 percentage points lower than in the non-ICDS areas for the two subgroups. The two major limitations of this study are that there has not been an evaluation of the cost-effectiveness of the ICDS program and regional disaggregates have not been provided.

The Tamil Nadu Integrated Program on the other hand has been hailed a success. The scheme has reduced severe malnutrition without any apparent need to fear a reversal of the problem. The important lessons to be drawn from this scheme's success are effective management with very few leakages, educating the mother and adolescent girls about good nutrition and health practices, and increasing participation by the community and the involvement of the government in running the program efficiently. However, the questions of sustainability in terms of the cost of the program and its contribution in reducing moderate and mild under-nutrition are yet to be addressed.

This study finds that there is a paucity of relevant, reliable and timely data to study the trends in nutritional status even in the areas where the ICDS program is being implemented. There is a provision for a Management Information System (MIS) for all the ICDS blocks that is supposed to keep track of bottlenecks in the program and maintain regular records of the nutritional status, immunization rates, and participation rates. While this is a good idea, it must be ensured that the data is more accessible for research purposes.

The study also finds that most evaluations have assessed impact on anthropometric indicators, rather than aspects like improvements in cognitive development, school achievement of the child or poverty status of the household. Information on these aspects will go a long way in convincing (a) the policy makers about the need for such programs and their efficient management, and (b) the participants about the impacts in order to encourage greater community participation, which would result in more effective outcomes.

By providing a detailed analysis of some of the major government-operated programs in place today, the hope is that there will be a better understanding of the specific areas where the government needs to focus its attention and resources in order to achieve better targeting and greater cost-efficiency. In this way the reforms can be undertaken with greater confidence and without sacrificing the goals of social welfare.

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