Real Consumption Levels and Public Distribution System in India

The policy of allocation of foodgrains under the Public Distribution System (PDS) has been very ad hoc in India with allocation being fixed on a 'historical basis'. This paper uses four sets of pooled equations for predicting stable levels of per capita consumption of rice and wheat in physical terms in rural and urban India. Foodgrain demand and the own-price, cross price and income elasticities of demand are estimated for all states. A formula that is based on the concept of subsidising real consumption through PDS is proposed.