Friday, July 25, 2008

Distributing food in India and China: learning from experience

Many governments use public distribution systems to make food available at reasonable rates and guarantee food security for their citizens. The experiences of India and China offer insights for all developing countries.

There are 363 million undernourished people in India and China (two-thirds of whom are in India). Both countries face similar problems: a huge population, limited agricultural resources and unstable world markets that threaten national food security. Food production has improved recently, but both countries still need systems to support people facing food insecurity. Research from the United Nations University compares the food public distribution systems (PDS) in India and China.

In India, the government has used private markets and PDS to distribute food at fixed prices. In China, the state bought grain to supply to people issued with ration cards.

Key characteristics of the PDS include:

  • The Chinese state monopolised grain marketing, assuming responsibility for feeding the entire registered urban population. In India, the state handles less than 10 percent of grain production.
  • The Chinese PDS favoured the registered urban population, irrespective of wealth, although they also issued ration cards to rural people not producing enough grain. The Indian system provided subsidised food to both rural and urban people.
  • The PDS in both India and China have significantly contributed to national food security, particularly by maintaining stocks of grain to protect against disasters.

These systems are effective because they make food available at reasonable rates to people who do not produce their own food, those who do not produce enough and those who cannot afford market prices. However, both of these systems are very expensive for the state, as food is supplied to consumers below market costs.

Furthermore, as both countries became economically stronger, PDS changed. China tried to reduce its subsidy by allowing its PDS to disintegrate in the 1990s, and reforming its social security system to provide cash transfers to those in need. India chose not to remove its subsidy, but tried to contain it by making the PDS more efficient and reaching poor people more effectively, introducing the Targeted Public Distribution System in 1997.

All countries, including China and India, can learn lessons from these experiences:

  • A food subsidy can be a cheap and effective form of social security for poor people.
  • A country’s level of development should help to determine the form of social security. A shift from food subsidy to cash payments can only take place if it is cost-effective, as in China. At present, India should retain the targeted PDS.
  • A buffer stock of food reserves, controlled by the central government, is essential to deal with market fluctuations and any large-scale food shortages.
  • India could learn from China in managing its buffer stock more flexibly, for example by exporting excess stock or using it for processed food or animal feed.

‘The Public Distribution Systems of Foodgrains and Implications for Food Security: A Comparison of the Experiences of India and China’, Research Paper No.2006/98, UNU-WIDER: Helsinki, by Zhang-Yue Zhou and Guanghua Wan, 2006 (PDF) Full document.

Funded by: Royal Ministry of Foreign Affairs (Denmark); Ministry for Foreign Affairs (Finland); Royal Ministry of Foreign Affairs (Norway); Swedish International Development Cooperation Agency; UK Department for International Development

id21 Research Highlight: 2 March 2007

Further Information:
Guanghua Wan
UNU World Institute for Development Economics Research
Katajanokanlaituri 6 B
00160 Helsinki

Tel: +358 9 6159911
Fax: +358 9 61599333
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