Household Consumption: Devilish Interpretation.

A Professor of Marketing was fond of repeating a story tirelessly year after year to his class. By sheer providence, he would tell tad dramatically, the marketing wizards of two leading producers of foot wear, each fierce competitor of the other, land in Africa to survey the market and assess demand for their products. Each is amazed to see person after person walking barefoot. At night, both prepare their reports. One says, no one here uses footwear. I see little demand for our products. Our efforts would be better directed at other markets. I am returning back tomorrow. Other says, no one has even a basic footwear here. The market for our products is immense. I am staying on to survey the market closely and would return only with a full market entry plan. The rest, the professor would announce triumphantly, is as they say history. If anyone thinks this anecdotal story should begin and end in the classroom, then welcome to the news “Villagers in poor states use ration shops less, shows survey data” in Indian Express, and the brave world of *Interpreting data*. Before we proceed, first the data:
The accompanying story had these wonderful nuggets.
  • Rural families in low income states such as Bihar, Uttar Pradesh and West Bengal depend far less on ration shops for wheat and rice than the national average.
  • The data suggests that states with a strong private sector market for foodgrains also deliver on public distribution of the grains.
  • Despite the weak pick-up of rice, pulses and wheat from PDS, consumption of kerosene remains high across the country, underscoring the leakage from the system.
Before one analyses the juicy bits in Express story, an important piece of information follows that is buried at the end. ^^Incidentally, the share of PDS purchases as a percentage of consumption has risen across all staples (rice, wheat, sugar), as well as kerosene, in both rural and urban areas between 2009-10 and 2004-05, when the last survey was conducted^^. First, one must understand the source of Data. The data has come from the periodic surveys that National Sample Survey carries out of household consumption among other surveys it does. The household monthly per capita expenditure [MPCE] in the 66 round was collected on a basis that is tabulated below [the data on household consumption was collected with three reference periods of preceding 7 days, 30 days and 365 days for specified set of items of the consumption basket. Two types of schedules namely Schedule 1.0 Type 1 and Schedule 1.0 Type 2 were canvassedduring the survey].
The word “canvass” here means that the households interviewed are asked to recollect and tell the consumption of various items, their frequency and quantum, expenditure incurred on each, and the sources from where they were obtained among other things. If the share of PDS purchases has increased as a percentage of total expenditure for a basket of goods, then it may indicate several things.
  1. Open market prices have gone too high to put them beyond reach of many, Price differential between items purchased from PDS and open market has increased, and therefore PDS purchases are preferred.
  2. Open market availability has reduced, PDS availability has increased, or PDS access has improved.
  3. PDS delivery has become more efficient.
Any or some of these factors may be true. But one cannot reach an a-priori judgement in the absence of more data. However, one thing is for sure that PDS has started to play a larger role in the lives of people in the quinquennial period under consideration. 

The first table shows that Kerosene pick up is high even in states where pick up of rice, pulses, or wheat is low. Is it possible to adduce from this that kerosene is diverted out of the PDS to “black market” operations? It may be tempting to do so, if one loses sight of the fact that this is not a survey of PDS outlets. Here, far higher number of households are reporting that they pick up kerosene from PDS than other commodities. The leakages can be adduced only by comparing village or tehsil level MPCE data with the audited or reported data of sales from PDS outlets. If households are reporting low uptake of rice, pulses or wheat, whereas PDS outlets are reporting high offtake; then that alone would be confirmation of leakages and malfeasance in PDS system. On the other hand, any high offtake of kerosene from PDS outlets would be corroborated by high uptake of kerosene as per MPCE. Would then one conclude that PDS in these states is corruption free? 
The second unwarranted inference is that the states, which have “strong” private grain markets, have strong PDS delivery too. The obvious eyesores in this “story” are Chhattisgarh and Rajasthan. Chhattisgarh is among the “poorest states” and doesn’t have strong private grain market. But its PDS system apparently has taken great strides [Jean Dreze, noted economist studied it] under the BJP government led by Raman Singh. So it has weak private but strong public delivery of grains. Rajasthan in contrast has traditionally been strong generally in private trade including trade in grains, but PDS delivery appears to be poor. So the latter has strong private but weak public delivery. However, the foregoing analysis is “mere conjecture” because it is based on what is reported by households in terms of their “sourcing” [uptake] without corroborating it with data of offtake from PDS outlets; though the nature of private trade mentioned for both states is accurate.
Lastly, it says that rural families in Bihar, UP and W. Bengal “depend” far less on PDS for their grain requirements. This is mere rephrasing of the headline: *Villagers in poor states use ration shops less, shows survey data*. The words “depend” or “use” suggest that villagers out of volition shun PDS outlets, whereas some other factors may be at play. May be, Poor quality of PDS supply dissuades buyers, PDS doesn’t deliver full entitlement, coarse grains not covered by PDS form staple diet, PDS supplies of grains are diverted to “black market” [whereas kerosene distribution is better monitored by government], etc. could be several of other factors.
Marketing professor could collect many more “anecdotes” to make his basket versatile, if he were only to trawl the mainstream media’s “manufactured news” diligently.
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