Many have argued that half the PDS entitlements reach the “non poor”. I believe that resources are scarce, and the government should spend the money on people who need it most. We should thus be concerned if resources are being spent on those who do not need it. In considering whether resources reach the right people, we should remember that we have a rather poor system of identifying the poor. The poverty-line based on which we classify a person as poor is woefully out of date and so people who would be identified by the society as living in abject poverty could be officially classified as ‘non-poor’. As a result, the argument that PDS entitlements reach people who do not need is grossly exaggerated.
In addition to the definition problem, even those who could be officially classified as poor often get excluded given the problems with identification. Proponents of reform are correct in identifying identification to be a problem; but then, they focus mainly on the non-poor being identified (which is an exaggerated problem), whereas my concern is that the poor are often left out in targeted systems.
Further, proponents of reform have made no argument on why the shift to coupons or cash transfers will improve the identification situation. There is absolutely no reason either in theory and practice for the shift from the PDS to lead to an improvement in this dimension. In fact, shifting to cash transfers will only worsen the identification problem: The quality of PDS grains, the need to wait in line to get the grains, and other reasons make the PDS inherently unattractive to most middle-class and rich people. As a result a lot of people who are well-off select themselves out of the PDS, which would not work with a cash transfer program. Further, there are rich possibilities of providing different sets of grains (e.g. coarse grains) that may find a larger set of takers among the poor than those who have the means. Cash offers no such means of self-selection.
UID will solve the identification problem
On a related note some have argued that the introduction of Unique Identity Cards will solve the identification problems for cash transfers. The idea that the use of unique identity cards would solve the identification problem is perhaps the most ill thought solution for the problem of identifying who all need food support. The use of biometric identification will have a limited but significant impact in reducing the number of ghost cardholders, and perhaps in ensuring that the same person does not get multiple entitlements. UID offers no way of identifying whether a person is poor are not. In addition, if the UID is able to offer any help in identification, it can do so equally well for PDS as for cash transfers.