Myth #1: The Food Subsidy Bill is an epochal event - a 'game changer'
- Truth #1: The food subsidy bill is a reformed Public Distribution System (PDS), and some more (lactating and pregnant women, hunger allowance etc). In that sense, it can be called PDS+. The core of the program is the same as the existing PDS - a part of the population is entitled to highly subsidised foodgrains (earlier only wheat and rice; now including millets) which are provided by Fair Price Shops (FPS) across the country.
- Truth #2: The PDS has been in existence, in one form or the other, for the majority of our country's life since independence. We have tried several different versions of the PDS - targeted, universal and then back to targeted. Life's come a full circle, since the food subsidy bill is taking us back to a near-universal coverage.
- Truth #3: The significant departures of the FSB from the PDS are four-fold: (1) inclusion of millets - in my opinion, a long-due and impactful step (2) recognition of PDS food as a right - always existed but good to put it on paper (3) women to be holders of ration cards - was probably true in-practice even earlier, but women's agency within the household is further strengthened (4) equality of prices for rich and poor - this is seen to lead to higher efficiency because of reduced potential of cross-selling.
Myth #2: The Food Subsidy will destroy our fiscal stability
- Truth #1: The food subsidy bill is not astronomically more expensive than the existing PDS. The existing food subsidy bill crossed 1 lakh crore rupees sometime in the early 2010s. The food subsidy bill (which will subsume the existing PDS) is expected to cost somewhere around 1.25 lakh crores. It is a ~25% increase; surely a significant increase, but not one that is going to break India's back.
- Truth #2: The food subsidy burden (PDS + others) has been stable around 0.6-0.8% since when my generation was both. Even a 25% increase in the burden is going to take us to ~1% of GDP. I'm not saying these are small numbers; all I'm saying is that we've been living with these large numbers for a long time and we've both grown, and stagnated, with these numbers. Let's not portray the food subsidy as a cataclysmic event.
- Truth #3: Today I read news reports that India's debt to GDP ratio has gone below 70%. So, we've been reducing our debt/GDP ratio significantly in recent times. Also, debt/GDP ratio in India is lower than in several other major economics; in fact, it is close to the 60% that is required to be a part of the EU. India's fiscal situation is not alarmingly bad.
Myth #3: The bill is throwing money down a dysfunctional drain
- Truth #1: The PDS efficiency is estimated to be around 40% by various agencies. This is extremely poor, but does not compare too badly with existing cash transfers in India. Most Government programs show a similar efficiency level. The argument can then be made that the Government should withdraw from provision. Instead, I make an argument similar to the infant industry argument - live with an inefficient system, improve governance and then reap the benefits later.
- Truth #2: The PDS has worked very well in states such as Tamil Nadu, Himachal Pradesh and Chattisgarh. The efficiency of the PDS in Tamil Nadu (where everyone - poor or rich, is entitled to 20kg) is above 90%. Hence, the PDS is a leaky drain that can be, and has been, fixed.
- Truth #1: In any country, cereals are the cheapest sources of calories and proteins. Giving subsidised rice and wheat ensures that a minimum part of a person's daily needs are met.
- Truth #2: Cereals are the least perishable of foods, and hence best suited for long-distance transportation. The food security bill, in fact, is a positive step in that it goes beyond wheat and rice, and includes millets, which are lower than wheat and rice.
- Truth #3: By giving subsidised cereals to people, the Government is saving them a lot of money. This money can then be used by the households to diversify their food basket. Instead, if the Government were to transfer fruits and vegetables, then wastage would be much higher. Hence, the design and intent is to transfer the most efficient food and then let people save up and buy their own stuff.
Myth #5: The Government should restrict itself to creating jobs
- Truth #1: In an ideal situation, this argument works. But India is unable to create jobs for different reasons - primary among them being labour laws. Instead of arguing against food subsidy at this stage, argue for labour and land reforms and then talk about phasing out food subsidy.
- Truth #2: Wages as a percentage of productivity in every sector has declined in the past few years - i.e. lesser and lesser of our growth is being distributed in the population as wages. The growth we've been seeing is increasingly less inclusive. We can't wait till food reaches the poorest guy by trickling down. More active intervention is needed.
- Truth #3: Food is different from other goods and services because it is a fundamental human need. I believe that principally, something as basic as food cannot be left to economic systems, which are falling. Economic systems have shifted from feudalism to capitalism and might shift further. We cannot let the vagaries of our economics affect human lives. Practically, the Government is also the owner of all water in the country - hence, extend the same principle to food and the Government's intervention in food markets is not only justified, but also necessary.
