Poll populism, thy name is Indian politics. A case in example is the Food Security Bill (FSB), which is devoid of the basic principles of economics. With general elections slated to be held in 2014, the UPA government’s FSB offers 90 per cent subsidy on wheat and rice at Rs2-3 per kg to almost 67 per cent of the population.
Several economists from India and abroad have voiced their concern about the likely mismanagement and the drawbacks in this legislation. They are worried that such a Bill can lead to rampant corruption dismantling the basics of agriculture in an economy which is farm-based. The Bill, based on virtually free supplies of food grain seems to be aimed at eradicating whatever little work culture we have, making the national economy further defunct.
In the present scenario, even if the food is made available, the supply of safe water and unhygienic conditions continue to be problematic in the targeted rural areas. We will still have malnourished and sick people on our hands despite free food grain. So, ideally, policymakers need to mull over investing in improving the environment rather than doling out subsidies.
In fact, the ambiguity on the FSB has already spurred hoarding of grains. About 77 million tonnes (mt) of grains have been stocked up till now, under the supervisory control of the government. However, the offtake has been lower than allocations indicating that there are very few takers of subsidised grain. At the same time, the food ministry is reluctant to use this stock either domestically or for exports, even as they rot with nobody being held accountable.
Another issue is storage of grains. According to Commission for Agriculture Costs and Prices (CACP), buffer reserves needed are about 47 mt only. With 30 mt surplus grain, it is evident that private trade stands marginalised whereas the trend should be more of private trade. By all means, the public distribution system fiasco may be repeated in the FSB as the low-priced grain would find its way back in the open market at much higher price.
While Government intervention is deemed good for luring the votes, it makes bad economic sense. Any policy that is not backed by principles of open trade, needs to be discarded. Market experts are critical of FSB and point out that it will not only limit availability in the market, but at the same time it would raise food inflation and fiscal deficit as well.
The economy, at this juncture, certainly cannot afford ill-thought out food security bill and be further humbled by ever-widening fiscal deficit. All this is, because political gains and vote bank politics have more weightage than the welfare of the nation.