From free ration to school uniforms, in-kind welfare moves nearly 22 crore Indians to a higher consumption bracket

Nearly 22 crore Indians move into higher consumption brackets once the value of free goods and services given by governments is counted. These include foodgrains under the public distribution system (PDS), laptops, bicycles and school uniforms.

The finding comes from a study published in a journal of the National Statistics Office (NSO), according to a Times of India (TOI) report by Shiva Rajora. The 22 crore people make up around 19% of the rural population and 8.4% of the urban population.

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The study used unit-level data from the Household Consumption Expenditure Survey (HCES) 2022-23. It gave a monetary value to the free goods households received and counted it in their monthly per capita consumption expenditure (MPCE). After this adjustment, 15.8% of the population at the national level moved into a higher MPCE category.

Counting these transfers also lowered consumption inequality, as measured by the Gini coefficient. The study points to a rise in effective purchasing power, since households need less cash to buy goods they now get free.

Wide gaps between states

West Bengal tops the list. Over 40% of its population moves up, which includes 46.5% of its rural population and 24.9% of its urban population. Chhattisgarh follows at 29.2%, then Assam at 29%, Karnataka at 28.4% and Uttar Pradesh at 22.7%.

The share is much lower in industrialised states and states with a higher consumption baseline. Gujarat has 3.7% of its population moving up, Kerala 4.6% and Haryana 7.1%, according to the TOI report.

Concerns have been raised that several such transfers are populist and are often announced ahead of elections. The study concludes, however, that in-kind welfare works as a progressive measure.

Most of the upward movement is at the bottom of the consumption pyramid, which indicates that the benefits reach lower-income households.

The researchers note that the 22-crore figure is a conservative estimate. Free healthcare under schemes such as Ayushman Bharat (PM-JAY) and free school education are left out of the calculations because of limits in the survey design.

The study says that counting the out-of-pocket savings on health and education would show an even wider rise in living standards across households.

(With inputs from TOI)