‘The best way to feed the poor is to create more jobs’

Rajiv Kumar Senior Fellow, Centre for Policy Research
Rajiv Kumar Senior Fellow, Centre for Policy Research

What’s driving the massive opposition to the Food Security Bill? What is wrong with its economics?
It’s not the right time for a move that will surely impact the exchequer’s health. With the economy in dire straits, this gives out the signal that the government doesn’t bother about fiscal health. It’s uncanny how the Food Security Bill was passed even as the finance minister came out with a 10-point plan to fix the economy. The government has been in denial about the crisis. It kicks investor confidence down. The investors then say, “Let’s get out of here.” They could have brought in the Bill earlier, or after the General Election.

I don’t think the Bill is a good idea. With 40 percent leakage in the PDS, the subsidised foodgrain anyway doesn’t reach those who need it the most and they have to buy it from the market at higher prices. To cover 81 percent of the population, the Food Corporation of India will have to procure much more food. That will reduce what will be available to the open markets and drive up the prices. So the people will end up paying more because of the Bill.

The people suffer not from hunger but malnourishment. We need more non-cereal food, but the Bill will ensure we produce yet more cereal.

The Food Bill is said to cost the exchequer Rs 1.25 lakh crore. How do you interpret this figure?
An additional expenditure will surely have to be incurred, and it will be a recurring expenditure — around Rs 6,00,000 crore over the next five years. It will add an estimated outlay of 1.3 percent of the GDP to the 2 percent that goes into subsidies today. This year, the outlay is expected to be Rs 61,000 crore and this will only increase in the coming years. This amounts to nationalisation of the food trade and will be a governance nightmare. I think the burden for 2014-15 will be twice the pegged amount.

Corporate India welcomes incentives to the private sector, provision of land and other resources at subsidised rates. So why is investing in food for the poor not considered an incentive but a burden?
I am opposed to creating entitlements and then being unable to implement them. When 20 million tonnes of foodgrain stocks is simply rotting away, why doesn’t the government just distribute it? It is hypocritical that we want to legislate our way to welfare instead. If this subsidy comes in the way of creating rural infrastructure, doesn’t that affect the poor?

The government gives land to corporates at a subsidised price because the social rate of return — defined by jobs, technology, value-addition — is higher than the returns to the private party. It is wrong to compare that with food subsidy etc. Change the nature of subsidies across the board. Fuel and fertiliser subsidies are a big deadweight on our exchequer and must be got rid of.

There is a fear that such measures disincentivise work and make the people lazy. Can these not be seen instead as an investment in our demographic dividend?
The best way to provide food is to make it cheaper and generate more employment so people earn more. Giving away food doles will not help the economy or create livelihood options for the people.

Did the Food Bill spook the stock markets and cause the rupee to tumble?
That happened because the Food Bill reflects an inconsistency is what the government says it wants to do and what it actually does. Such moves shatter the investors’ confidence in the government and its ability to manage the economy.



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