How Can Food Subsidies Work Better? Answers from India and the Philippines

Publication | September 2010

The study explores the outcomes of food subsidies to the poor in the case of India and the Philippines. Both countries operate in-kind food subsidy programs with similar mandates, commonalities in functioning, and substantial budgetary outlays. The goal of the study is to quantify the gains to the poor from an additional unit of public spending on food subsidies. We find the expected income impacts on the poor are not more than 5% of incremental spending in either country. Part of the reason for such a low impact is poor participation in the program. But equally, it is also the case that the share of the poor in the total food subsidy is small. The reason why the poor receive such small shares is not just poor targeting. The main factor is program waste (due to fraud and excess costs). Such waste accounts for as much as 71% of the total public spending.

Contents 

  • Abstract
  • Program Description
  • Impact of Food Subsidies on the Poor
  • Computing the Fraction of Subsidy Received by the Poor
  • Targeting Errors
  • Leakages Due to Illegal Diversions
  • Excess Costs
  • Expected Income Gain to the Poor
  • Policy Options
  • References