India’s new food security programme, signed into law by the President on Friday and praised by the UN, entails huge financial risks, critics have warned, but food minister KV Thomas said the costs were “manageable”.
Anti-poverty campaigners say the food security law is a necessity in a
country with the world’s largest proportion of the hungry and malnourished children.
For the ruling Congress, the food law fulfils a long-standing election promise and gives it a new benefit to woo voters with, but analysts say precious funds could potentially go into a theft-prone public distribution system (PDS). “What makes us confident is that the PDS is getting more efficient,” Thomas said, rejecting the charges.
The food security law promises cheap staples – mainly rice and wheat – to two-thirds of Indians, or about 810 million Indians. Apart from these core handouts, the bill also seeks to address nutritional concerns of those driving India’s hunger pangs: pregnant women and children.
At Rs 1.24 lakh crore, according to Thomas, the new food security costs would rise by about 23%. The annual food subsidy could now be nearly twice as much as the spending on fertilizers and 35% higher than the expensive oil subsidy, which is gradually shrinking because of a shift to market-determined prices.
Since the food security law takes a “life-cycle” approach, it will require additional Rs. 20,000 crore for cooked meals to children, Rs. 14,512 crore for lactating mothers, another Rs. 6,000 crore for grains outside the PDS route, such as kitchens for elderly. For food relief during disasters, take another Rs. 8,920 crore.
“The macroeconomic implications are quite significant. First, it will raise the government’s food subsidy burden to an estimated 1.0-1.2% of GDP per annum from 0.8% of GDP currently,” Sonal Varma, an economist with Japanese brokerage firm Nomura Holdings, said in a note.
A close scrutiny of India’s estimated food subsidy, however, reveals that even without the food law, India’s food subsidy would have risen to over R1 lakh crore on account of higher population and an increase in prices of grains purchased by the government.
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