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  • Publication | 2026
Food subsidies in India: Revisiting the estimates
Global Food and Nutrition Security

There is a view that the fis­cal bur­den of food sub­si­dies in India is un­sus­tain­able. Yet pop­u­lar de­bate and dis­cus­sion around the costs of these food sub­si­dies, rel­a­tive to their ben­e­fits, are mis­lead­ing for two rea­sons. First, they typ­i­cally treat re­ported bud­getary sub­sidy es­ti­mates—i.e. the fis­cal cost to the gov­ern­ment of the dis­tri­b­u­tion of food via ra­tion shops—as equiv­a­lent to “trans­fers” to ben­e­fi­cia­ries. Sec­ondly, they tend to focus ex­clu­sively on con­sumers. In doing so, they ne­glect the two-part na­ture of the food dis­tri­b­u­tion sys­tem, which in­cludes pay­ments to farm­ers at the time of pro­cure­ment. This paper ex­am­ines ways of mea­sur­ing the costs and value of the food sub­sidy. We pre­sent es­ti­mates that com­bine the im­plicit value of ben­e­fits to con­sumers aris­ing from the re­duced price of grain sold to con­sumers via ra­tion shops, with im­plicit ben­e­fits to farm­ers, in terms of the price dif­fer­ence be­tween what farm­ers are paid by the gov­ern­ment and what they would have ob­tained in the open mar­ket. This ap­proach shows that each rupee of the “food sub­sidy” re­ported in gov­ern­ment ac­counts rep­re­sents a trans­fer worth Rs 1.29 to con­sumers and farm­ers, on av­er­age, over the pe­riod 2001–02 to 2022–23. That is, each rupee trans­ferred to these groups is as­so­ci­ated with a cost of Rs 0.79 to the gov­ern­ment.