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With economic growth in the doldrums, the rupee hovering near a historic low and business confidence at rock bottom, you would think the Indian government has better things to do than roll out yet another controversial new subsidy. Think again. If the government has its way, it will go into next year’s elections having passed a gargantuan food security law whose costs—economic, environmental and moral—will have to be paid down by future generations.
The new law, which the government plans to pass in a special session of Parliament later this summer, will provide five kilograms of highly subsidized rice, wheat and other grains to two-thirds of India’s population, or about 800 million people. The grains will be priced at between one and three rupees (2 to 5 cents) per kilogram, up to 90% below prevailing market prices. A giant state-owned company, the Food Corporation of India, will distribute them through a vast nationwide network of so-called “ration shops.”
If this sounds like something cooked up by a Soviet planner on a bad day, there’s a reason for it. It came out of the limitless imagination of the National Advisory Council, a gaggle of activists and do-gooders who advise Sonia Gandhi, India’s most powerful politician and Prime Minister Manmohan Singh’s boss. The food security law betrays the same false assumptions as the rest of an elaborate “rights” framework the government has erected over the past decade: that India’s poor must be counted expansively rather than carefully, that they’re looking for a handout rather than a hand up, and that government outlays matter more than outcomes.
Other programs from the same stable of ideas include an expansive rural employment guarantee scheme (effectively a “right to dig ditches”), and a “right to education” policy that has sunk India’s already abysmal math and reading scores (teachers aren’t allowed to fail students). But even by these exalted standards, the food security bill marks a new low.
To start with, it’s unaffordable. The government claims the program will cost about $22 billion a year, or $4.5 billion more than an existing food subsidy program that covers 325 million people. But the Commission for Agricultural Costs and Prices, itself a government body, says the real cost may be high as $42 billion per year.
Meanwhile, Finance Minister Palaniappan Chidambaram is telling foreign business and government leaders that Delhi is serious about reining in its fiscal deficit (budgeted at 5.2% of GDP in the fiscal year ended March 31). It’s hard to see how he can square that assertion with such a large new entitlement.
Even if India could afford such spending, the program would still be illogical. Simply put, hunger is yesterday’s battle.
In 1983, 15% of Indians answered “yes” when asked if they had “been hungry in some or all months of the year.” Thanks to rising incomes spurred by economic reforms begun in 1991, by 2005 the proportion of hungry Indians had fallen to 2%, or about 25 million people. So why doesn’t government target aid at the truly needy who appear unable to help themselves, rather than spreading largesse to two-thirds of the population?
And if ending malnutrition is the goal, then India ought to fix its woeful public sanitation and do a better job of educating citizens about a balanced diet. Again, a shortage of food grains is not the problem.
Predictably enough, India’s public distribution system is notoriously corrupt. By some estimates, up to half of the food grains procured by the government are siphoned off by middlemen before they reach their intended beneficiaries.
Former Chief Economic Advisor Arvind Virmani has called the Food Corporation of India “one of the most inefficient and corrupt organizations in government.” In India, that’s saying something. According to news reports, over the past seven years just one state, West Bengal, has had to cancel more than six million fake cards used to buy grains allegedly meant for the poor.
Why, then, has the government come up with such a harebrained idea? Quite simply, because India has failed to learn the lessons from its failed socialist past. Populist politicians enhance both their electoral prospects and their bank balances by hatching do-gooder schemes that leak like a sieve.
Lawmakers who may privately disapprove hold their tongues for fear of being labeled anti-poor. The supposedly right-of-center Bharatiya Janata Party’s main criticism of the bill: What took you so long?
Meanwhile, a gaggle of leftist intellectuals who have never encountered a government handout they didn’t like—such as Amartya Sen and Jean Dreze—have given the whole enterprise a veneer of respectability. Mr. Sen claims without evidence that children are dying each week the bill isn’t passed. Such emotional arguments make a rational discussion of the subject virtually impossible.
Ultimately though, someone must pay for the profligacy, and the costs aren’t merely measured in dollars. Already the stench of corruption has brought tens of thousands to the street in protest over the past two years. As Indians grow richer, more and more ask themselves why they must emigrate to Singapore, the U.S. or Australia in order to live a productive life untouched by day-to-day corruption.
Should Parliament make the mistake of rubber-stamping this awful food law, expect those lines at embassies of better-run nations to only grow longer. And count on the number of those betting on India to quickly snap out of its economic slump to dwindle further.
Mr. Dhume is a resident fellow at the American Enterprise Institute, and a columnist for WSJ.com. Follow him on Twitter @dhume01
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