Pros and Cons of Food Security Bill 2013 and its impact on Indian Economy ?
Food Security Bill, or should we name it as Political Security Bill.
Amidst so much political and economic turmoil, launching such a large scale cost involving project doesn’t go well with much of our educated population. This can have far reaching implications on our economy.
Before we discuss any further, let me brief you about Food Security Bill we talking about.
- Provide food grains to 67% of the population (approx 800 million) at highly subsidized rates.
- There will be fixed quota per state of grains allotted. Onus is on the respective states to decide the beneficiaries . This can lead to wide regional disparities as a person not eligible for such great benefits in one state may be eligible in other state.
- Grains amount to 5 Kg / per person / per month has to be allotted.
- Women will be made head of the family according to this scheme. This is very positive step.
- Special maternity benefits : Free Meal for every pregnant and lactating mothers (during pregnancy and 6 months after child birth).Also, allowance of Rs.6000 will be given in installments as maternity benefits.
- Special privileges for children under different age groups like free meals etc.
If you want more details about how this scheme will be implemented , please click HERE.
That was all about the features of Food Security Bill. Now lets discuss why general public (I mean proper educated public) and opposition party is against this bill.
- Cost of this bill as projected by Govt (UPA) : 1.25 lakh crores which will greatly impact current fiscal deficit.
- As per honesty in our country is concerned, we all are aware of it. So, no need to say that this system is also prone to much corruption as number of beneficiaries is to be decided at state level. Corrupt ministers can illegally hoard the grains and make shortage of grains as an excuse.
- With such high procurement of grains by govt , little will be left in open market which will lead to demand-supply imbalance and can lead to rise in prices and hence inflation.
- As our major exports are of grains, FSB will hamper our exports, leading to more Current account deficit. More CAD means more rupee fall, means more expensive imports (sply oil used in transportation) , means more inflation.
- Government will need to borrow high amounts from Banks to finance such huge project. So, banks will be lending more to government, leaving less for general public which will hamper private sector growth.
Less growth means loss of jobs, less production and that implies more to be imported from outside India (as in case of Coal), which puts pressure on our foreign exchange and again we get into this vicious circle of a bad thing resulting in another.
- Narendra Modi had written a letter to PM citing some flaws in this system. You can READ IT HERE.
What could have been better way to handle this ?
- Government should have let the economy stabilize first. It could have been after elections.
- Could have been more specific about the beneficiaries at center level.
- More stringent laws and proper implementation to check corruption specially when poor is involved.
- Helping poor to earn money rather than directly feeding him by removing stupid labour laws that hinder our manufacturing.
- Enforcing the GST (Goods and Services Tax.) What is GST ?
Q : Can you think of more ways in which this law can be made implemented better.
This was my analysis from what I heard economists saying about this initiative. You may have some different view or may have some more ideas to add to it . Please do share your ideas .
I hope you like this post . Thanks for reading at RsInsight.