Content from the Brookings Institution India Center is now archived. After seven years of an impactful partnership, as of September 11, 2020, Brookings India is now the Centre for Social and Economic Progress, an independent public policy institution based in India.
A few weeks after the Food Security Bill was signed into law, Brookings India hosted a discussion to assess the various issues at stake in the implementation of this new Act (FSA). Participants – including representatives of government, international organizations, civil society, and academia – adopted a decidedly forward-looking and constructive approach as they analyzed the Act’s strengths and weaknesses, and identified ways in which its implementation could be ameliorated. Overall, the discussion covered areas such as the public distribution system, fiscal ramifications of the Act, nutritional concerns, and the role of the central government.
The FSA has received significant criticism for not laying out a framework to restructure the current Public Distribution System (PDS). With the PDS covering only 35% of the population currently, the delivery of grains under the FSA – which targets 67% of the population – is significantly challenged. While most participants agreed with this, they also pointed out that the PDS has already been witnessing an expansion at the state-level, and remained hopeful because the FSA is building on such successes. Economist Reetika Khera pointed out that a number of states – including those like Tamil Nadu, Haryana, and Himachal Pradesh, where the leakages have always been low, but also those like Chhattisgarh and Orissa – have already implemented PDS reforms, through which they have been able to both expand coverage and reduce prices. This, Khera, believed had increased the pressure at the grassroots level, which, combined with pressure from the government-level – in the form of computerization and fixed schedules – made her optimistic that the delivery system would continue to expand and improve.
But given that a lot of the innovations in the PDS have hitherto been happening at the grassroots and state-level, experts expressed their concern about the FSA leading to over-centralization. Economist Bharat Ramaswami stated that he would have liked for the FSA to be more decentralized, adding that it “should have been completely neutral about how the subsidy is delivered,” leaving it up to the states to decide what approach they wanted to follow, including the adoption of hybrid approaches. Khera provided an example to illustrate the over-centralization problem, explaining that the bill calls for per capita-entitlements, but most states currently follow a per-household system. This, she believes, would be a difficult transition administratively, with the scope for corruption. She recommended that states be allowed to decide for themselves whether they want to distribute grains on a per capita or per household basis.
PDS and over-centralization aside, one of the most prominent criticisms of the FSA in the media has been its fiscal ramifications, and the belief that the government cannot afford its high cost currently. However, experts present at the discussion dismissed concerns that the cost of implementing this Act was unduly high. According to Khera, the government had already committed 1.2% of the GDP to food subsidies earlier this year. In terms of the increase in subsidy, she seemed to agree with the Finance Ministry’s estimate of about 25-30,000 crores. With this increase, the subsidies would increase to 1.5% of the GDP, which she pointed out is only fair for an Act that hopes to cover 67% of the population. National Institute of Public Finance and Policy (NIPFP) Director Rathin Roy, agreed with Khera, stating “1-1.3% of the GDP is fair, especially given the much larger amounts spent on national security.” He did point to two additional costs that the government hadn’t considered – that on public infrastructure investments to deliver this huge quantum of grains, and expenditure to improve targeting. But even with these, he believed the total cost of implementing the Act wouldn’t be much more than 1.5 lakh crore. Moving beyond fiscal costs, Principal Adviser to the Commissioners of the Supreme Court, Biraj Patnaik drew attention to the economic cost of inaction, stating, “The question that has remained unanswered is, what is the cost of carrying a burden of 46% malnutrition? What implication does this have on the GDP in terms of increasing health costs in the future?”
Experts unanimously agreed that one of the weakest links of the Act was its failure to adequately address nutrition concerns. In terms of nutrition, Principal Economic Advisor to the Finance Ministry Dipak Dasgupta lamented that various innovations in nutrition being practiced globally were not considered, adding that countries with the best access to calories or food, usually provide universal availability to cooked food. While states like Tamil Nadu already provide prepared meals, a question to consider is if the FSA will interfere with such existing systems, thus reiterating the concern of over-centralization. While the bill does not tackle nutritional issues directly, economists present at the discussion pointed to the implications of food subsidies on nutrition. Patnaik, Ramaswami, and Khera, all agreed that the food subsidy on cereals would free up resources to be spent on other goods. Ramawami explained the economics of this: cereals have low income-elasticity, while pulses, fruits, vegetables, and milk have high income-elasticity; greater disposable income on account of the subsidy would therefore lead to an increase in the consumption of the latter set of goods.
But Ramaswami also stated that we shouldn’t try to bundle too many things together into one bill – if the focus was nutrition, “it would be a different kind of bill.” Brookings India Director of Research Subir Gokarn echoed this view explaining how we tend to attribute to actions a multiplicity of outcomes, or that we expect one act to resolve all issues. Eventually, he stated, the objective of the Act is to provide food security, and other issues need to be dealt with individually. The ultimate question, on which the success of the Act then hinges, is if it will be able to provide this security.