The case against the food security Bill—that it is costly and it mollycoddles the poor—is deeply flawed
The point is to consider not only the costs of the national food security Bill, but also the costs of not investing in the better nourishment of millions of our people. Photo: Pradeep Gaur/Mint
This article was first published by Livemint on 26th August, 2013
The debates around the national food security Bill—which will create legal duties for the state to provide food to citizens—have become overheated and often deeply polarized. Some of the fiercest criticisms relate to the costs of the food legislation, suggesting that a floundering economy cannot afford the huge public expenditure required. It has also been argued that economic growth is a much more reliable and sustainable way to end hunger than public food provisioning.
The unease of those who worry that the law is wasteful and populist stems from the high costs of the food law—an estimated annual burden of Rs1.25 trillion, they argue, is profligate, and will inflate deficits and fuel inflation.
These need to be taken with a pinch of salt.
First, what is relevant is not the total but the marginal increase in public expenditure that the food Bill entails. This amounts to Rs25,000 crore, which seems a more reasonable expansion if we are convinced that what the law offers is a useful public investment. Second, we can manage public deficits if we are willing to tax more. India’s tax to gross domestic product (GDP) ratio is lower than that of most industrialized market economies. Further, it is excessively reliant on indirect instead of direct taxes, something that burdens the poor disproportionately. India also gives tax holidays amounting to Rs5 trillion every year to the corporate sector, and this is justified as necessary for wealth and job creation.
The overwhelming evidence from high growth years is that this has been a period of virtually jobless growth, which underlines that there is no substitute for public investment to enhance livelihoods. There is need also to enhance the integrity of India’s tax efforts. All of this suggests there is considerable scope for taxing the rich to ensure investments in the nutrition, health and education of the working poor.
Also, we need to weigh the costs of not making these investments, the enormous costs of hunger, preventable diseases and deaths on the morale and productivity of several hundred million working people and growing children. Oxford economist Sabina Alkire in an article (This Bill won’t eat your money, The Hindu, 29 July) offers a telling global comparison. She points out that India “has a higher proportion of stunted children than nearly any other country on earth, yet spends half the proportion of GDP that lower, middle-income Asian countries spend on social protection and less than one-fifth of what high-income countries in Asia spend.”
In lower, middle-income countries, these expenses are 3.4% of GDP. India’s is a mere half of that at 1.7% and even this low level is reached largely because of the rural jobs guarantee programme that ensures 100 days of paid work to all poor households in villages. The average for upper, middle-income countries is 4% of GDP and 10.2% for high-income countries. Japan spends 19.2% and China, 5.4%. Even Singapore spends more than twice as much as India, at 3.5% of GDP.
The criticisms of an expanded public distribution system are sweeping but deserve careful consideration. Management guru Gurcharan Das feels that not only cheap food will disincentivize work, but the money that will go into financing the food provisioning could have been far better spent in providing public goods such as roads, schools, power and law and order. It would encourage entrepreneurs to start businesses, which would create sustainable jobs and raise the state’s tax revenues. These taxes, he suggests, would make it possible to invest in more public goods. Thus, a virtuous circle would be created and lift the society’s standard of living.
Again, such arguments miss the point. First, the belief that impoverished people will work less if they are able to access cheaper cereals fails to acknowledge both the hard toil that characterize the lives of millions of India’s poor, and the fact that like all of us they aim for much more than a full stomach. Moreover, spending on food is not a populist dole but an investment in India’s greatest economic resource—its vast young population in the productive age-group—imperative for consolidating the gains of India’s demographic dividend. Every second child in India is malnourished, which means that the brains and bodies of every second young adult are not developed to their full potential. A well-nourished and well-educated workforce would be more productive and have higher morale, the best guarantee to sustain higher economic growth. The savings on the cost of cereals would place more disposable income in their hands, and this enhanced spending by millions would stimulate growth from below. An assured expanded national market could stimulate agriculture, which still employs the majority of India’s food deprived people.
The point is to consider not only the costs of the national food security Bill, but also the costs of not investing in the better nourishment of millions of our people. Growth cannot be sustained much longer on the thin shoulders of hungry people.