Can India really afford dynastic politics of this irresponsible sort? Reuters
However, the damage caused by the FSB will be with us long after the UPA is gone. The Bill will result in the following dangers:
1) It will damage the exchequer and stoke inflation – causing the subsidy bill to go higher and higher every year, leading to a pile-up of debts. India will be Greece by 2014.
2) The huge procurement targets needed to feed 75 percent of rural households and 50 percent or urban ones will call for regular increases in food procurement prices. This will again feed inflation.
3) If the monsoon fails in any particular year, we will have to import grain. International food prices are already well above Indian levels. If we enter the market – which we have seldom done – prices will go through the roof. High imports will send the rupee crashing – raising prices again. This is a recipe for disaster.
4) High procurement means closing down three-fourths of the market system in grains since the government becomes a monopoly buyer everywhere.
5) Both poor and rich farmers will try to game the system. If the market gets you a price of Rs 20 a kg for rice, and you can get 35 kg of rice per family per month at Rs 3, who will not buy from the PDS and sell to the market? This is cash transfer by another name: graft will be the only result.
6) The massive bill of Rs 6,00,000 crore for the FSB over three years is essentially money down the drain. It works against the fundamental argument about teaching someone to fish as against feeding him indefinitely. It will create dependencies, when the amount could have been spent to create rural infrastructure to improve agricultural productivity, and incomes. What we have essentially done is consumed the seedcorn of the future by spending money to feed instead of investing in rural infrastructure.
Raghuram Rajan, who teaches at Chicago’s Booth School of Business, said the other day at a lecture organised by Business Standard that the root cause of poverty in India was poor rural productivity. But instead of raising productivity, Indian governments were busy offering palliatives through money transfer schemes like NREGA, higher support prices for food, and, now, the Food Security Bill. This can merely raise rural demand without improving agricultural productivity – causing inflation.
But with UPA-2 listen? Unlikely, for the government has just got its ears tweaked by Sonia Gandhi for delaying her Food Security Bill.
UPA-2 is hastening our tryst with economic disaster.
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