Food Security Bill – A Mirror of Indian Economic Development

The present Government of India which has been in power for two consecutive terms –  kept talking about great economic progress, equal development amongst all sections of the society, an annual growth at a rate of 7% to 9%, a booming economy and so on for its entire first term and for two years in its second term in power .

And now at the near end of its second term in power, the government has introduced a Food Security Bill according to which 75% of Rural Population and half of Urban Population today cannot afford to eat their daily meals and hence require subsidy to buy rice, food grains etc!

So here we are today, after nearly 65 years of Independence, in a situation where the government in power feels that more than half of the country cannot afford to eat their daily meals by paying at the market rate!  So what was the growth story we were talking for all these years all about? How can a country whose more than half the population require subsidy just to eat their two meals a day call itself an “Economic Superpower” or world’s fourth largest economy? So either the economic growth story is a farce OR the actual beneficiaries of the so called development have been only the top few percent who have been minting money at the cost of the rest of the country? The mass support for the Jan Lokpal Anti Corruption Movement led by Anna Hazare and the unearthing of multi-crore scams at frequent intervals provides a better insight into the reality, isn’t it?

And isn’t it ironical that while the government feels the need for the subsidized food, nothing concrete has been done to save tonnes of hard grown food grains from rotting every year! And with this Food Security Bill more food grains will rot because now government will start cornering even more food grains from the market. And not only that, the prices of food grains in the open market will increase further because of reduced supply which will only further increase inflation causing further price rise.

Congress Party calls this Food Security Bill “an extremely innovative scheme” and “a milestone”. After nearly 65 years of Independence it definitely is a milestone. And probably providing huge subsidies is nowadays termed “innovative” too, since it looks like we have run out of all other ideas.

The question is, who is going to pay for these subsidies? Obviously the 63% of the population who will be beneficiaries of this will not be paying for it. But nothing has been detailed in this innovative scheme about the source of money used to fuel this innovation.

And what are the “innovative plans” in place to increase the agricultural output to meet the increased demands of this proposed scheme? Instead what we find in the Bill is a proposal to pay cash, called the ‘Food Security Allowance’, if the government is unable to provide food grains due to a short supply. Logic says that, in case of short supply, the prices in open market would be even higher than normal due to the increased demand.

In case of being unable to supply food grains due to shortage of supply, will the government be providing ‘Food Security Allowance’ on par with the current market price of the food grains? For more than 60% of the population? And what is the guarantee that the market will have enough supplies even at that price? And if not, then can people eat the allowance itself? Or if the government provides allowance at its subsidized rate, then there is obviously no question of any food security because you cant buy food grains at that price in the open market.

So where is the “innovation” in this scheme? It is a fact that there is still a lot of poverty in the society and we need to ensure food security and nutritional security to the poor. But the real innovative solution for that is to boost agricultural production and an efficient storage and distribution system. We already have BPL schemes, and we know how (in)effective they have been. One just has to look at the availability and quality of the food grains supplied under this scheme.

According to World Bank, of the subsidized food grains distributed through the current PDS (Public Distribution System), 60% is NOT reaching the actual beneficiaries. What is the guarantee that the new scheme (Old Win in New Bottle) which would be implemented through the same PDS would be any different?

As stated in this Economic Times article, Food Security Bill is likely to hurt the poor more

The right way to guarantee every Indian food security is to act to make India a major source of the additional food the world demands, to invest in agricultural growth: in harnessing water for scientific irrigation, in extension of know-how as well as in R&D, in rural roads that provide vital physical linkage to markets, in electronic spot exchanges, in scientific storage and efficient transport logistics, in developing as close a link as possible between the farmer and the first stage of food processing and in providing proper regulation of financial markets in agricultural commodities, futures, derivatives and insurance.

Now that would have been really innovative. Offering food grains on subsidy for more than 60% of the population is no “innovative” scheme nor is “good economics”, it is only Bad Politics delivering Bad Economics. While the intentions of providing Food Security to all is very good, the implementation which takes political gains into consideration instead of economic viability and on-ground reality makes it a difficult task to achieve. A really innovative scheme would have been the one which would invest in agricultural production and distribution system so heavily that the cost of food grains itself comes down to affordable level to all sections of the society. Such a scheme would have achieved multiple objectives – increased agricultural growth, increased profits for farmers, uplifting the poor from poverty, food security for the whole nation due to increased farm output, reduced inflation, increased purchasing power in the society and so on.

And the irony remains that for the world’s fourth largest economy and an aspiring economic superpower – more than 60% of its population require subsidy to buy food grains – and this three decades after the slogan “Garibi Hatao” was coined. Where exactly are we going wrong?

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