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Are food subsidies viable : Opinion of a citizen journalist
The Lower House of Parliament passed the much talked about Food Security Bill. The UPA2 dubbed it as the game-changer. The treasurer would have to bear an addition burden of around 24 billion USD. According to scheme around 800 million Indians; about two-third of the population, would get Rice at 3 INR per Kg, Wheat at 2 INR per Kg and other grains at around 1 INR per Kg.

Despite of the record production it appears likely that Indian government may have to import grains if full consumption is planned and executed. In reality, there will be many drain-outs and many deserving people may not be able to get their allocated food grain quota which as of now is 5 Kg per person for the deserving classes. If Indian government imports a lot then it needs to be careful in making permanent stakes in all aspects of production in exporting countries. It should try to have some possession of agriculture land there and should have some say in the whole food production chain as it matters a lot for the government; politically and socially. It should cleverly sign the paper transaction through agriculture derivatives in commodity markets.

To be fair and correct, the intent of the Bill is noble, laudable and praiseworthy. It is 2013; almost two and half decades since the arrival of newest consciousness, and nobody in this high consciousness era should sleep empty-stomach or half-hungry in India. This becomes more important in view of the projection of India as a major economic hub and rising global Asian power. Definitely poor and downtrodden do deserve some protection from their state. Sure, the quality of grain would not be that good but it would eliminate hunger to a great extent.

But here comes a real question. Whether the Indian Union government can provide that huge subsidy without becoming more dependent on foreign governments? The fact is that fiscal deficit is rising with alarming rate and growth is slowing down a bit. Therefore, the Reserve Bank of India (RBI) may find it difficult to print a lot INR without inflationary effect. The fact is that India’s export is around 250-300 billion USD and this additional import, believing that almost half of the grain is imported, would be almost one-twentieth  of the total export. But with time India’s imports are going to increase at very fast rate and such would affect the buying power of currency and exchange rates. The sinking INR could make the estimated budget soaring by something about 1.2 to 1.5 times. This could induce a vicious cycle of inflation and lower growth, if the economy is not managed properly. Moreover, the investors may loose confidence in Indian markets if subsidies are not sustainable. It could increase the interest rates and the capacity of Indian state to borrow and lend. It could affect the sovereignty of the Indian state and therefore, subsidies could be resisted and protested by the middle classes and above.

Having measured pros and cons of the food subsidy let me put some questions and I will answer them myself.

Should the poor not dream? Should they abandon their dreams just because it takes away some freedom from the middle classes and above? Or from the other side of the coin should the upper classes suffer because of poor? Whose state is it? Can inflation because of one section of society be in-exported to another section? It is legal that is for sure, but is it ethical?

Now answers one-by-one. Poor should have aspirations and they should be part of India growth story as much as it is possible. Indian poor are very tolerant people and they have not protested against their existing humiliating conditions despite of there being such protests worldwide. Therefore, they deserve attention and a help from all possible people who can. Instead of abandoning their dreams they should see newer ones but they should be proportionate and reasonable. The fact is that Indian middle classes do not have that deep pocket and therefore, there should be balance in overall approach of the governments. The Indian government should avoid increase in direct and indirect taxes, at least for the middle classes and below.

The Indian state should belong to all: caste people, outcaste and minorities. But this is in theory. In practice the upper caste people from all religious identities are the dominant people and they are going to remain so in any foreseeable future. The fact is that all constituents of state should have as much symbiotic relationship as possible and should have a possible common future. Through taxation, printing and borrowing the Union and state governments can provide subsidies but it is so difficult to redistribute wealth and resources in India. The fact is in-export of inflation is not that ethical but it needs to be quantified. Again, the government should not put too much burden on middle classes.    

I personally doubt that the subsidies that Indian government provide in totality are durable and sustainable in long-term. But if it can then this is well-done by the UPA2 government and the passage of the Bill in the Upper House of the Parliament would make life easier for the UPA2 parties in the forthcoming general elections.

Editorial NOTE: This article is categorized under Opinion Section. The views expressed in this article are solely those of the author and do not necessarily represent the views of merinews.com. In case you have a opposing view, please click here to share the same in the comments section.
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