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.

  1. Provide food grains to 67% of the population (approx 800 million) at highly subsidized rates.
  2. 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.
  3. Grains amount to 5 Kg / per person / per month has to be allotted.
  4. Women will be made head of the family according to this scheme. This is very positive step.
  5. 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.
  6. 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.

  1. Cost of this bill as projected by Govt (UPA) : 1.25 lakh crores which will greatly impact current fiscal deficit.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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 ?

  1. Government should have let the economy stabilize first. It could have been after elections.
  2. Could have been more specific about the beneficiaries at center level.
  3. More stringent laws and proper implementation to check corruption specially when poor is involved.
  4. Helping poor to earn money rather than directly feeding him by removing stupid labour laws that hinder our manufacturing.
  5. 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.

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7 Responses to Pros and Cons of Food Security Bill 2013 and its impact on Indian Economy ?

  1. Rohit Banerjee says:

    Wonderfully written!! Thank You for sharing this analysis!
    Keep up the good job!

  2. Food Security bill – worst bill – may cause to Indian people as below:

    Village People are not so educated – once they get their stomach full then they earn little amount of money to Drinks. they become lazy man and don’t work at all – or some work for cash purchase.

    Urban people – will find very much difficult to find workers complete their work. Most of the cities where Labors are Migrated and working their Eg mumbai they all will go to their Native place. All Economic system will disturb.

    Relly very surprise – this is dream project of Smt S.Gandhi, to Paymaal all Indians in very systematic manner – and the country by taking bibes from FDI people.

    They failed in ruling administration – economics of India – they do not discuss any issues with all parties – they do not take their opinions and just they compel their decision.

    Food Security Bill – Will Paaymal and make Lazy to Indians .

    Sarkar ko sirf Vote Bank chahiye. When so much food avaialble then so costly are the things. How they full Indians. Mrs S.Gandhi this will not GAME CHANGER BILL THIS BILL IS CONGRESS CHANGER to SEAT IN OPPOSITIION.

    – Pravina Ruparel

  3. Chandrakanta says:

    I was with the bill..but your points are apt..thanks there! 🙂

  4. Harshal says:

    Just another elitist blog on the FSB.
    India already spends around 90 lakh crore for food subsidies (through Antyodaya Yojana and related schemes), so this is an additional burden of about 30 lakh crore. 1.25 lakh crore is mere 1.2% of India’s annual GDP. We spend 1.6 lakh crore on petroleum subsidies (40% of which gets used in diesel cars, suvs etc.) and much more on tax subsidies given to industries.
    This will be implemented in the next financial year so
    i. Public is not going to get any benefits of this before 2014 elections – so should not influence in a big way in elections
    ii. Wont impact at all the fiscal deficit target of Finance ministry for FY 2013-14

    We must question the govt. by all means but not with incorrect facts.
    People are out biggest asset we must invest on them and it is the responsibility of the govt that economic growth reaches the needy; saying all rural folk just want food and booze is highly elitist and insensitive.

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