Good Politics But Disastrous Economics

The Food Security Bill (FSB) is the world’s largest experiment of providing food grain to the poor. In a nation, where around 10 million people die of malnutrition, due to chronic hunger or hunger-related diseases every year, this Bill may prove to be a panacea, ending the country’s widespread poverty. India contributes 40 per cent to the world’s overall maternal, neo-natal, infant and child deaths. We have half the world’s undernourished children. Fifty-four per cent of our women suffer from anaemia.

If the Congress-led UPA can pull it off, the FSB will be the biggest trump card in the forthcoming elections. While the BJP and a clutch of other opposition parties have put up a muted clamour opposing it, the fact remains that implementation of this scheme can severely impact India’s prevalent economic conditions.

The proposed Bill came on the same day when the RBI released its Financial Stability Report which stated that India’s inflation risk remains high and a slowdown in revenue collections and higher spending on subsidies may throw fresh challenges. It also said that India’s trade deficit for this fiscal is expected to widen sharply to between $155 billion and $160 billion from a little above $104 billion a year ago. The nation will have to resort to larg-scale import of food grains as our own grain output is not adequate to handle such a voluminous expenditure programme. Besides skewing the food inflation to a higher side, the move will also result in a steep rise in prices of food grains for non-beneficiaries.

If the Bill is implemented in letter and spirit, an additional sum of Rs 27,000 crore annually will hit the exchequer. Can a government which is burdened with whopping food, fuel and fertiliser subsidies, afford such a large expenditure programme? MNEGRA is already a huge burden on the government.

Another weak point in the right to food security is that it will use the extremely “leaky” public distribution system to distribute food grains. A recent study estimates that as much as 55 per cent of the grains supplied through the public distribution system leaked out along the distribution chain, with only 45 per cent actually sold to beneficiaries through fair-price shops.

Seriousness of the government agricultural policy can be determined from the fact that in the last 20 years, over 1.6 million hectares of land have been transferred for real-estate and industrial development purposes; natural forest cover is rapidly declining; water resources are drying up and becoming polluted; agricultural production costs have gone up by 189 per cent and small and marginal farmers have seen no policy interventions aimed at structural protection against the vagaries of the open market.

It would be better for the government to focus on productivity enhancement rather than on doling out subsidies at the expense of taxpayers. India is not a food-deficit country; we produce surplus food grains, we export it and we also   let it rot in the godowns, rats and vermin destroy 20 per cent of the production. But, for various reasons, we cannot ensure that it reaches our hungry millions.

For the last two decades, the per capita food production in India has been stagnant at around 460 grams per person per day. Although pulses are a key source of protein, their availability has gone down from 70 grams per day in the 1960s to 42 grams today. We have adopted new technologies to usher in green revolution. Hybrid seeds, chemical fertilizer and pesticides, farm equipment have all helped in increasing agricultural production. The state of Punjab has lost its community techniques by rampant use of chemicals, resulting in steep decline in soil fertility.

For the Congress, the bill was simply an extension of the promises the party had made in its election manifesto. Sonia Gandhi believes in it and so do other parties which have voted for it. With this ordinance, the Congress has firmly gone back to the garibi hatao politics of Indira Gandhi.

To conclude, the basic point is that food security will turn out to be a fairly expensive proposition. As a nation, we have made big mistakes on the economic and the financial front in the nearly 66 years of Independence but the passage of the Food Security Bill might turn out to be our biggest mistake till date.