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By Sanchi Bhat in Kkurrent! - On

Food security bill 2013 has been dubbed as the Vote Security bill for 2014 elections. Before drawing such a harsh conclusion, one must wonder if it really is that bad. There has to be a silver lining amongst this seemingly crap situation. To come to a conclusion let’s analyze the pros and cons of this bill.

 

Pros:

 

Every eligible person gets it:

That’s right. Papa, mama, chacha, chachi, taao ji all get it through the Public Distribution System as long as they meet the eligibility criteria (which is dependent on the state government and the people that belong to the Antyodaya Anna Yojana (AAY)). Basically, the bill covers 67 % of the 1.2 billion Indian people. Given that India has the largest number of youth in the country, a food distribution at this massive scale, if successful, will mean a healthier labour force. This implies more productivity and a higher GDP. But, this is solely and only dependent on the success of this bill.

The Prices:

The prices for these household are incredibly low. Rice is sold for Rs. 3 a kg, wheat for Rs. 2 a kg and grains for Rs. 1 per kg. That means, a kilo of grains is going to be cheaper than Parle’s Mango Bite toffee. Compare that with the prevailing prices of Rs 50 per kg for rice and Rs. 18 per kg of wheat. The good part is that the people who benefit from this will spend less on food, which means they’ll have more to spend on education and daily need items. From an economic point of view, it means more demand for manufactured goods as compared to agricultural (as the food aspect would be taken care of). This should lead to more manufacturing to meet rural demand.

Woman and Child Empowerment :


Ration cards would be issued in the name of the eldest adult woman in the household. Pregnant and lactating women will be given special meals/ take home ration and a Rs. 6000 per month benefit. Children will be given hot meals or take home ration.

CONS:


Cost of the Bill:


The bill is projected to cost the government Rs 125000 crore. That is equivalent to 3% of the total value of all goods and serives produced  in a year. So basically we can say bye-bye to 3 percent of our GDP. Needless to say, this cost is very high. How is it going to be financed? That’s right! By the common man; income taxes and the like. Even worse is when the government not only tax us (or increases the taxes to finance a massive scheme such as this) but also starts selling its interest bearing papers on a huge scale in the money market. To put it simply; the government asks people to lend money to it (people like you and me) and promises annual return (the interest rate as a percentage of the initial amount. Also, the time depends on contract to contract) and at the end of the contract pays the initial amount you gave. Kind of like a bank account, but only issued by the government and until a certain time.
Government interest papers (called bonds) are supposed to be risk free, that is, there is guaranteed payback. However, if the cost burden on the government becomes too high, the government might fail to pay its own people. We don’t want the Greek financial issues now would we?

Administration:


I truly believe we have a one of a kind democracy, where there is a good law for everything. But, administrative issues are like the devil that suck the very life force out of these laws. Need I say the  ‘C’ word that gets every Indian fired up and shoot a few politicians?
Speaking of corruption, India does have transparency issues. With the coal files of the coal gate scam gone missing right under Manmohan’s nose and the RTI being attacked to be amended by the parties now a days, will the food security bill be really secure from the politicians? Will it reach the target?

A subsidy economy:


Another aspect that comes to my mind and is probably the thing I have wondered why nobody even thought of is the subsidy economy. Do we really want to create an army of un-skilled, un educated people who are well fed for three years?(yes FSB is only for three years from commencement) Instead couldn’t this money be used for education? Skill development? Healthcare? Yes, the results of investment in these sectors come late. But, these results are ever-lasting and will yield a higher GDP for our nation. Creating a dependent-on-government-for-food economy is not the answer to our problem. Creating an independent-self-sustaining one is.
Time will tell the extent of success of this bill. Whether it is right or wrong is something for you to decide. Let’s hope India provide food security to the malnourished more than the general security to its women.
*fingers crossed*

Sanchi Bhat

A self-professed economist out to prove, through independent research and economic models, that happiness lies in gobbling chocolates!

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