In what could be said as a ‘great achievement’ in the words of our ruling party, the government finally succeeded in getting the much talked, discussed and debated Food Security Bill passed in the lower house of parliament. Thanks to the desperation of ruling coalition and moral two-facedness and blatant hypocrisy of the principal opposition party that the Lok Sabha paved a way for Bill to get swiftly passed in the lower house and awaits the same result in the upper house where it is ‘expected’ to be tabled on Thursday. Congress leaders customarily basked in their glory of having once again vindicated in proving itself as the people’s party whose heart cries with pain of the poor, the instrument of proof being the Food Security Bill. The ambitious Bill proposes to provide with food grain entitlements to 75% of the rural population and 50% of the urban population at subsidized rates.
The Bill has been emphatically defended by the policy makers as though it is somehow going to emancipate the poor from hunger and its proposed objectives indeed direct towards the same. The Bill’s implementation would certainly pinch the economy as it demands heavy expenditure on the part government. The Finance Minister however assured the nation that it would not affect the economy adversely. I fervently hope that the finance minister’s apprehensions hold true and the bill succeeds in its noble attempt. For if not, the consequences which wait may not be all encouraging. I therefore believe that it’s essential not to get overwhelmed and carried away by the sentiment of the bill but give a serious second thought towards it. But before I proceed towards expressing my reservations towards the proposed bill I would like to make certain disclaimers as I am likely to be hurled with epithets such as ‘insensitive towards to the poor and destitute’ etc. I am on for uplifting the poor and providing them with the basic necessities like food. Indeed, I am proud to belong to nation which considers that it’s her over-riding duty to provide masses with these basic necessities. I however refuse to be party to any such attempt whose overt cause appears to be noble but covertly it aims at serving petty political purpose of covering the government’s incompetence and ineffectiveness. The bill in my view tries to do precisely the same. Secondly, I stand nowhere in comparison to the giants like Jean Dreze, Amartya Sen and array of other such renowned welfare economists who have been in forefront in implementing such a policy. But as the ‘noble cause in theory’ and its ‘desired implementation’ meet at crossroads, I would humbly like to disagree with such a bill essentially in the capacity of someone who observes Indian politics and who is not much encouraged by the history of such programs and certainly not by the structure of the bill.
FSB – An Insight!
For a State which is signatory to Universal Declaration of Human Rights (1948) and International Covenant on Economic, Social and Cultural Rights (1966) which recognises right to adequate food, the policy such as Food Security Bill is intelligible. Moreover, the Directive Principles of State Policy (DPSP) in the Constitution of India provides that it is duty of the state to raise the level of nutrition and standard of living of the people. Food Security Bill thus comes with a strong constitutional foundation apart from having a stated ‘noble’ cause. Yet what scares me is the manner in which the government has rushed into passing this Bill that it ignored some of the crucial economic consideration. The Food Security Bill in its present form proposes food grain entitlements for up to 75 percent of the rural and up to 50 percent of the urban population. Of these, at least 46 percent of the rural and 28 percent of the urban population will be designated as priority households. The rest will be designated as general households. Such an ambitious project would essentially require equally potent economic structure.
The present economic condition of the country however presents a sad story. The fiscal deficit is to tune of around 5% of GDP. And the trend has been consistent since 2008. The consequences have reflected in the current account deficits as well which have had equally troubled figures. Investments in the country are drying as faith in the markets and in the investors is increasing becoming volatile. The sliding of rupee is creating new records and it reaches all time low as against dollar. The inflation and particularly the food inflation still remains a major problem and it is likely to get worse with the speculation that the oil prices in the international markets are on continuous rise. The international scholars and analysts fear that should the crisis in Syria escalates with the increasing western interference the repercussions are likely to be on the oil prices. India remains exposed to such threat. The economy thus is bit vulnerable and government essentially requires maintaining strict fiscal responsibility with discipline if it wishes to have certain positive outcome. Yet, government comes up with something as suicidal as Food Security Bill just to woo the vote bank and beef it up by somehow projecting them as ‘people’s party’. To realize this proposed bill, The Financial Memorandum specifies 26 items of expenses. The total annual estimate for these items is about 95,000 crore. This however is not the complete figure since it excludes the costs that would be incurred for the implementation of Bill. With the inclusion of that, the figure that various experts arrive at is the somewhere around 2 lakh crore to 3.5 lakh crore. Economists and experts argue that the implementation of the bill would cost around 3% of the GDP in its first year itself, of course at the current market prices. Indeed, so much expenditure for one project! The consequences are however staring us with ample of examples. Recall what happened to Greece when she went on haphazard spending by one government and other to expand their voter base. Though there may be inherent exaggeration in the expression and I nowhere want to suggest that India is going the Greece way, nor do I equate their problems with that of India. However I do want to impress upon the point that such expenditures can indeed create problems for a country and it is essential for any government to exercise what Arun Shourie calls ‘fiscal responsibility’. Also the logic of including almost 70% of the total population under the coverage of Bill appears to be frivolous and even more ludicrous. Consider this, recently the government boasted and patted its back for bringing down the poverty levels below 30% if we were to consider the Tendulkar Committee’s Below Poverty Line (BPL). To be precise, the government data revealed that it was successful in bringing down the percentage of ‘absolutely poor’ from 38% to in 2004-05 to 22% in 2011-12. Commendable indeed, however if the Bill is for the poorest of the poor section of society which is incapable of taking care of its food necessities and such population is just 22% as per government, why is their inclusion of almost 70% population? Going too far, is it?
On the other hand the structure of the bill does little to generate the confidence in it. It relies excessively on the redundant and flawed PDS systems which are mired with the problems of large leakages and diversions of subsidised food grains, not to mention the adulteration and low off take of food-grains. I mean, if the PDSs were to function with half the better efficiency than what they do now, the problem of food insecurity could have been addressed to a great extent. Direct Cash Transfers are likely to end up in spending for non-food items and paves way for corruption thus defeating the whole purpose of ‘food security’. Another crucial point regarding the Bill is it divides the group into three categories: the priority group, the general group and the others. Now it is imperative to identify correctly the beneficiaries into their respective categories as the entitlements would vary accordingly as per the need. The PRS study has shown that targeting mechanisms have been prone to large inclusion and exclusion errors. In 2009, an expert group estimated that about 61 percent of the eligible population was excluded from the BPL list while 25 percent of non-poor households were included in the BPL list. The Bill does not clearly explains how these errors will be addressed thus can open a door for lot of errors and also misappropriation and corruption. Since large expenditure is at stake, these are the essential things that should not go unchecked. Apart from that, the bill also has some interesting clauses which provides for something like ‘doorstep delivery’ of foodgrains. Quite a fancy! The Bill also states some objectives which are not related to food security per se. For instance, Schedule III specifies for access to safe and adequate drinking water and sanitation, health care, nutritional, health and educational support to adolescent girls, adequate pensions for senior citizens etc. It so appears that government had tirelessly tried to give such a face to the bill that it becomes impossible to oppose the bill on the moral grounds. No one can actually oppose to these ideas, but merely expressing those ideas and drafting them into bills is not going to solve the problems. There should be proper and concrete machinery with sound rationale in complement with such ideas to get desirable results. The bill essentially lacks in creating any such machinery and thus fails to generate the confidence, howsoever the noble attempt it may be.
Opposition’s Hypocrisy
This one is classic. Explain this – you have one party consistently opposing a policy for months together, sometimes giving political rationale sometimes economic. Former finance minister from the same party (Yashwant Sinha) goes on record saying that the Food Security Bill is ridiculous. On the day of voting, your amendments after amendment (as many as 300) are negated on the floor of the house implying you have serious contentions with the bill. Yet while voting, you go on to vote for the same Bill you had so many problems with and the Leader of Opposition goes on to call it ‘half baked bill’, after having voted for the same, assuring they will make it better once they assume the power. Applause! This indeed is a sorry state for Indian democracy as its principal opposition party has been reduced to such levels. Agreed, there would have been political considerations that went into this decision. They probably decided better than to be on the wrong side of history of having opposed such a noble bill. And so they decide to vote for the same bill they criticized for months despite knowing its economic implications and the political opportunism of the ruling party. But is this opposition we need? Or perhaps we would want a opposition who would have stripped the government of its opportunism, explained the country the possible problems with the bill, provided a viable alternative, rather than disruptions and then march along that path. Would that have taken BJP to wrong side of history? Instead, wouldn’t that have been an important step in proving the credentials of its stance and its ideas rather than giving a weak and faltering image? Would the people accept the government formed by these leaders who apparently lose their stance with time? The opposition party is indeed in serious crisis and they need thorough introspection. It’s high time they shade off the anti-congressism as the only ideology and go out with an agenda that appeals to the new generation of voters. The country needs change yes, but a positive, strong and proactive change. And unless there is a visible possibility of a strong alternative, such a change is highly unlikely.
The Other Way
The poor and underprivileged must be helped, to that there are no second thoughts. And a purely market driven economy can never provide for an inclusive growth. An effective State intervention is inevitable if we are to bring about welfare. However, sound economic growth is a precursor to success of any welfare program. What we see today is the foolish and desperate attempts by the government to shy away with its complete incompetence under the veil of food security bill. Complete failure of policies, rampant corruption, absence of strong leadership, blatant denial and sheer arrogance of the government has fractured economy so much so that the fears of 1991 crisis are rejuvenated. And a feeble response to this comes in the form of a Bill that is expected to cause further trouble to the economic system. This is of course not a first time that a government has bent down to populist measures to bag in the votes after their dismal display of governance. With a food security bill, the government would hope would turn the tide there way in next general elections. All calculations eyeing the same result and it is for this reason the welfare rationale of the bill doesn’t seem to hold too much of water. After all food security bill is not the only way to reach out to the poor. Haven’t enough such welfare schemes already been launched without churning out substantial results? I do not mean to be cynical or pessimist but rather than building and improving on the existing structure why is there so much of passion to bring upon a new game that surely is going to add a lot of burden on the economy? Take for example MNREGA. If we could just ignore the efficacy and controversies that MNREGA is facing, the fact of the matter is scheme like such is far better, in theory at least. The most significant aspect of MNREGA is it aims at capacity building by generating some skill in the unemployed labour by providing them with employment with certain guaranteed minimum wage. The scheme had a vision of self-sufficiency of labours, essentially the female labours and by the virtue of having gained some skills, the effect can sustain. The MNREGA, despite all its lacunas did bring about some positive change. Surjit Bhalla puts statistics released by the NSSO regarding MNREGA to some insightful explanations. According to NSSO survey expenditure on MNREGA in 2011-12 was around 31000 crore and expenditure on food subsidies was about 74000 crore. Summing up, the total expenditure was around 105,000 crore out of which only 14000 crore reached to the poor which is just 13% of the total. Rest vanished in the thin air. Such is the amount of leakages. And the expenditure on proposed food security bill is almost three times of MNREGA with efficiency level expected to remain same. Imagine the cost a tax payer is going to pay for such vote hungry politics. However, if we were to improve on the efficiency of the existing schemes we could well bring about a noticeable difference without getting into a new framework altogether. MNREGA and PDS dole expenditures did help to reduce poverty to about 3 to 4 % in 2011-12. Calculation prove that it should have taken around 8000 crore to achieve this objective yet amount of expenditure was way beyond than required. Shouldn’t government then utilize this spending in improving the existing systems and creating an infrastructure that would sustain such projects? A lot of this money can be used for various other purposes such as health care, sanitation, education which we keep on including in drafts of new bills which lie in the cabinets for years. The issue is thinking of our political class has been narrowed to short term election gains. If were to rise above that, probably we would have been keen on creating difference rather than rejoicing in rhetoric.
In what could be said as a ‘great achievement’ in the words of our ruling party, the government finally succeeded in getting the much talked, discussed and debated Food Security Bill passed in the lower house of parliament. Thanks to the desperation of ruling coalition and moral two-facedness and blatant hypocrisy of the principal opposition party that the Lok Sabha paved a way for Bill to get swiftly passed in the lower house and awaits the same result in the upper house where it is ‘expected’ to be tabled on Thursday. Congress leaders customarily basked in their glory of having once again vindicated in proving itself as the people’s party whose heart cries with pain of the poor, the instrument of proof being the Food Security Bill. The ambitious Bill proposes to provide with food grain entitlements to 75% of the rural population and 50% of the urban population at subsidized rates.
The Bill has been emphatically defended by the policy makers as though it is somehow going to emancipate the poor from hunger and its proposed objectives indeed direct towards the same. The Bill’s implementation would certainly pinch the economy as it demands heavy expenditure on the part government. The Finance Minister however assured the nation that it would not affect the economy adversely. I fervently hope that the finance minister’s apprehensions hold true and the bill succeeds in its noble attempt. For if not, the consequences which wait may not be all encouraging. I therefore believe that it’s essential not to get overwhelmed and carried away by the sentiment of the bill but give a serious second thought towards it. But before I proceed towards expressing my reservations towards the proposed bill I would like to make certain disclaimers as I am likely to be hurled with epithets such as ‘insensitive towards to the poor and destitute’ etc. I am on for uplifting the poor and providing them with the basic necessities like food. Indeed, I am proud to belong to nation which considers that it’s her over-riding duty to provide masses with these basic necessities. I however refuse to be party to any such attempt whose overt cause appears to be noble but covertly it aims at serving petty political purpose of covering the government’s incompetence and ineffectiveness. The bill in my view tries to do precisely the same. Secondly, I stand nowhere in comparison to the giants like Jean Dreze, Amartya Sen and array of other such renowned welfare economists who have been in forefront in implementing such a policy. But as the ‘noble cause in theory’ and its ‘desired implementation’ meet at crossroads, I would humbly like to disagree with such a bill essentially in the capacity of someone who observes Indian politics and who is not much encouraged by the history of such programs and certainly not by the structure of the bill.
FSB – An Insight!
For a State which is signatory to Universal Declaration of Human Rights (1948) and International Covenant on Economic, Social and Cultural Rights (1966) which recognises right to adequate food, the policy such as Food Security Bill is intelligible. Moreover, the Directive Principles of State Policy (DPSP) in the Constitution of India provides that it is duty of the state to raise the level of nutrition and standard of living of the people. Food Security Bill thus comes with a strong constitutional foundation apart from having a stated ‘noble’ cause. Yet what scares me is the manner in which the government has rushed into passing this Bill that it ignored some of the crucial economic consideration. The Food Security Bill in its present form proposes food grain entitlements for up to 75 percent of the rural and up to 50 percent of the urban population. Of these, at least 46 percent of the rural and 28 percent of the urban population will be designated as priority households. The rest will be designated as general households. Such an ambitious project would essentially require equally potent economic structure.
The present economic condition of the country however presents a sad story. The fiscal deficit is to tune of around 5% of GDP. And the trend has been consistent since 2008. The consequences have reflected in the current account deficits as well which have had equally troubled figures. Investments in the country are drying as faith in the markets and in the investors is increasing becoming volatile. The sliding of rupee is creating new records and it reaches all time low as against dollar. The inflation and particularly the food inflation still remains a major problem and it is likely to get worse with the speculation that the oil prices in the international markets are on continuous rise. The international scholars and analysts fear that should the crisis in Syria escalates with the increasing western interference the repercussions are likely to be on the oil prices. India remains exposed to such threat. The economy thus is bit vulnerable and government essentially requires maintaining strict fiscal responsibility with discipline if it wishes to have certain positive outcome. Yet, government comes up with something as suicidal as Food Security Bill just to woo the vote bank and beef it up by somehow projecting them as ‘people’s party’. To realize this proposed bill, The Financial Memorandum specifies 26 items of expenses. The total annual estimate for these items is about 95,000 crore. This however is not the complete figure since it excludes the costs that would be incurred for the implementation of Bill. With the inclusion of that, the figure that various experts arrive at is the somewhere around 2 lakh crore to 3.5 lakh crore. Economists and experts argue that the implementation of the bill would cost around 3% of the GDP in its first year itself, of course at the current market prices. Indeed, so much expenditure for one project! The consequences are however staring us with ample of examples. Recall what happened to Greece when she went on haphazard spending by one government and other to expand their voter base. Though there may be inherent exaggeration in the expression and I nowhere want to suggest that India is going the Greece way, nor do I equate their problems with that of India. However I do want to impress upon the point that such expenditures can indeed create problems for a country and it is essential for any government to exercise what Arun Shourie calls ‘fiscal responsibility’. Also the logic of including almost 70% of the total population under the coverage of Bill appears to be frivolous and even more ludicrous. Consider this, recently the government boasted and patted its back for bringing down the poverty levels below 30% if we were to consider the Tendulkar Committee’s Below Poverty Line (BPL). To be precise, the government data revealed that it was successful in bringing down the percentage of ‘absolutely poor’ from 38% to in 2004-05 to 22% in 2011-12. Commendable indeed, however if the Bill is for the poorest of the poor section of society which is incapable of taking care of its food necessities and such population is just 22% as per government, why is their inclusion of almost 70% population? Going too far, is it?
On the other hand the structure of the bill does little to generate the confidence in it. It relies excessively on the redundant and flawed PDS systems which are mired with the problems of large leakages and diversions of subsidised food grains, not to mention the adulteration and low off take of food-grains. I mean, if the PDSs were to function with half the better efficiency than what they do now, the problem of food insecurity could have been addressed to a great extent. Direct Cash Transfers are likely to end up in spending for non-food items and paves way for corruption thus defeating the whole purpose of ‘food security’. Another crucial point regarding the Bill is it divides the group into three categories: the priority group, the general group and the others. Now it is imperative to identify correctly the beneficiaries into their respective categories as the entitlements would vary accordingly as per the need. The PRS study has shown that targeting mechanisms have been prone to large inclusion and exclusion errors. In 2009, an expert group estimated that about 61 percent of the eligible population was excluded from the BPL list while 25 percent of non-poor households were included in the BPL list. The Bill does not clearly explains how these errors will be addressed thus can open a door for lot of errors and also misappropriation and corruption. Since large expenditure is at stake, these are the essential things that should not go unchecked. Apart from that, the bill also has some interesting clauses which provides for something like ‘doorstep delivery’ of foodgrains. Quite a fancy! The Bill also states some objectives which are not related to food security per se. For instance, Schedule III specifies for access to safe and adequate drinking water and sanitation, health care, nutritional, health and educational support to adolescent girls, adequate pensions for senior citizens etc. It so appears that government had tirelessly tried to give such a face to the bill that it becomes impossible to oppose the bill on the moral grounds. No one can actually oppose to these ideas, but merely expressing those ideas and drafting them into bills is not going to solve the problems. There should be proper and concrete machinery with sound rationale in complement with such ideas to get desirable results. The bill essentially lacks in creating any such machinery and thus fails to generate the confidence, howsoever the noble attempt it may be.
Opposition’s Hypocrisy
This one is classic. Explain this – you have one party consistently opposing a policy for months together, sometimes giving political rationale sometimes economic. Former finance minister from the same party (Yashwant Sinha) goes on record saying that the Food Security Bill is ridiculous. On the day of voting, your amendments after amendment (as many as 300) are negated on the floor of the house implying you have serious contentions with the bill. Yet while voting, you go on to vote for the same Bill you had so many problems with and the Leader of Opposition goes on to call it ‘half baked bill’, after having voted for the same, assuring they will make it better once they assume the power. Applause! This indeed is a sorry state for Indian democracy as its principal opposition party has been reduced to such levels. Agreed, there would have been political considerations that went into this decision. They probably decided better than to be on the wrong side of history of having opposed such a noble bill. And so they decide to vote for the same bill they criticized for months despite knowing its economic implications and the political opportunism of the ruling party. But is this opposition we need? Or perhaps we would want a opposition who would have stripped the government of its opportunism, explained the country the possible problems with the bill, provided a viable alternative, rather than disruptions and then march along that path. Would that have taken BJP to wrong side of history? Instead, wouldn’t that have been an important step in proving the credentials of its stance and its ideas rather than giving a weak and faltering image? Would the people accept the government formed by these leaders who apparently lose their stance with time? The opposition party is indeed in serious crisis and they need thorough introspection. It’s high time they shade off the anti-congressism as the only ideology and go out with an agenda that appeals to the new generation of voters. The country needs change yes, but a positive, strong and proactive change. And unless there is a visible possibility of a strong alternative, such a change is highly unlikely.
The Other Way
The poor and underprivileged must be helped, to that there are no second thoughts. And a purely market driven economy can never provide for an inclusive growth. An effective State intervention is inevitable if we are to bring about welfare. However, sound economic growth is a precursor to success of any welfare program. What we see today is the foolish and desperate attempts by the government to shy away with its complete incompetence under the veil of food security bill. Complete failure of policies, rampant corruption, absence of strong leadership, blatant denial and sheer arrogance of the government has fractured economy so much so that the fears of 1991 crisis are rejuvenated. And a feeble response to this comes in the form of a Bill that is expected to cause further trouble to the economic system. This is of course not a first time that a government has bent down to populist measures to bag in the votes after their dismal display of governance. With a food security bill, the government would hope would turn the tide there way in next general elections. All calculations eyeing the same result and it is for this reason the welfare rationale of the bill doesn’t seem to hold too much of water. After all food security bill is not the only way to reach out to the poor. Haven’t enough such welfare schemes already been launched without churning out substantial results? I do not mean to be cynical or pessimist but rather than building and improving on the existing structure why is there so much of passion to bring upon a new game that surely is going to add a lot of burden on the economy? Take for example MNREGA. If we could just ignore the efficacy and controversies that MNREGA is facing, the fact of the matter is scheme like such is far better, in theory at least. The most significant aspect of MNREGA is it aims at capacity building by generating some skill in the unemployed labour by providing them with employment with certain guaranteed minimum wage. The scheme had a vision of self-sufficiency of labours, essentially the female labours and by the virtue of having gained some skills, the effect can sustain. The MNREGA, despite all its lacunas did bring about some positive change. Surjit Bhalla puts statistics released by the NSSO regarding MNREGA to some insightful explanations. According to NSSO survey expenditure on MNREGA in 2011-12 was around 31000 crore and expenditure on food subsidies was about 74000 crore. Summing up, the total expenditure was around 105,000 crore out of which only 14000 crore reached to the poor which is just 13% of the total. Rest vanished in the thin air. Such is the amount of leakages. And the expenditure on proposed food security bill is almost three times of MNREGA with efficiency level expected to remain same. Imagine the cost a tax payer is going to pay for such vote hungry politics. However, if we were to improve on the efficiency of the existing schemes we could well bring about a noticeable difference without getting into a new framework altogether. MNREGA and PDS dole expenditures did help to reduce poverty to about 3 to 4 % in 2011-12. Calculation prove that it should have taken around 8000 crore to achieve this objective yet amount of expenditure was way beyond than required. Shouldn’t government then utilize this spending in improving the existing systems and creating an infrastructure that would sustain such projects? A lot of this money can be used for various other purposes such as health care, sanitation, education which we keep on including in drafts of new bills which lie in the cabinets for years. The issue is thinking of our political class has been narrowed to short term election gains. If were to rise above that, probably we would have been keen on creating difference rather than rejoicing in rhetoric.