Food Security: What’s the fuss about?

This is a wrong point to make in the times of the tanking rupee, low investment, flight of capital and the general climate of economic pessimism, and some economists are not going to love it at all, but what’s so wrong with the Food Security Act?

Let’s ignore the furious political spin being given to it. If you have heard it right, in parliament and elsewhere, no party is against it in principle. In fact, all want wider coverage of the poor than provided under the ordinance.

Even Narendra Modi’s argument against the Bill is not against its core idea per se. His issue is more about the Centre dictating terms to the states. If one has been careful to notice, many states, including those controlled by the BJP, already have better and more expansive food security programmes. The only important addition in the ordinance is the legal guarantee it offers.

Interestingly, no economist has complained about the finances of the states going to dogs because of their food security schemes. But let that rest. So it is safe to say the food security legislation is backed by political consensus. If some party claims that it was forced to back the Bill because it could not be seen to be opposing a pro-poor Bill, it is an exercise in hypocrisy, nothing beyond empty posturing. If you don’t have the courage to speak out against what you believe is wrong, you should not be speaking at all.

The expenditure argument put forth by many economists does not hold either. At around 1.7 per cent of the GDP, India’s social sector spending is among the lowest in the world. Even China spends much higher, around 5.5 per cent, and among developed countries it is even higher. The Food Security Act would push it up by a few notches, maybe to 2 per cent or tad more. Contrary to the dominant perception around the cost implication of the ill, it won’t bleed the exchequer dry as the architecture for the major money-guzzling components of this legislation such as the PDS system, mid-day meals, ICDS already exists.

The government has been a gigantic failure in managing the economy but to pin down all its failings to the safety net schemes and pro-poor measures such as the NREGA is uncalled for. The arguments against it don’t take into account the fact that the subsidy for the rich accounts for more than 7 per cent of the GDP. It comes in the form of special tax rates, exemptions, deductions, rebates, deferrals and credits. Aren’t the taxes foregone and the exemptions a burden on the economy? Why do we then grudge the poor so much – this is particularly when the middle class and the rich are the real beneficiaries most of the subsidies?

If the worry is about the disruption it would cause to the economy, then every interventionist programme is disruptive with both positive and negative consequences. NREGA, the argument goes, has distorted the wage structure in the rural areas and made agriculture expensive. Besides it has stoked inflationary tendencies in the economy. But it has also provided better purchasing power to rural households and improved their quality of life. It takes time for economies to shift to a fresh equilibrium. The Food Security Act, once implemented, would cause a similar shift. However, it need not be at the cost of growth or the wider economy as it is widely believed.

If it’s about the timing, then everyone, and his aunt, has been arguing that such schemes don’t deliver electorally, it’s only growth and the benefits thereof that count. Then what’s the fuss about? The new legislation would take long to roll-out and the chances of the Congress reaping political benefits out of it are limited. Now that the government is almost through with its pet project, it should shift focus to the other areas of the economy. There’s nothing too wrong about the Food Security Act.