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Rakesh Kochhar

Executive coach & business consultant, CoachNme

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Is it good economics to provide subdized food grains or good politics?

Lets take the example of India. Can a country of 1.2 Billion people provide subsidzed / free foodgrains to nearly to 600 million persons near the poverty line in India. Food inflation is officially at 9.3% p.a while in reality its around 20%.p.a.
Then there are supply side constraints as agriculture growth rate over 10years average 2.7% p.a. only. Compare this to the population growth rate 1.4% p.a.Further India has recently been running large current account and fiscal deficits threatening its budget calculations.
Elections are going to be held in two years. The economy has decelerated to 6.5%p.a. growth rate from 10% p.a.over last 3 years.The rupee has fallen by over 20% against the dollar in last 2 months.The Sensex its at its lowest in last 2 years.
Other developing economies especially the PIGS are already being bailed out. Can India take this contrarian route?.
What about the fundamental rights of food and security for its citizens? Can this be overlooked because they don't have the buying power or employment opportunities to feed themselves?
Whose rights need to be protected? The economy or its Citizens? Is the proposed Food grain security bill a step in the right direction? Are there other alternatives?

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    Shweta Verma

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    Dec 24 2011: as a short term or medium term measure, i think subsidized food is necessary. In last 2 months, i have interviewed (as part of my PhD research) women widowed due to conflict in Kashmir. Kashmir is not known for starvation deaths of malnutrition. I met poor women who have benefitted from the subsidy as they could then use rest of the money (whatever little) for something else at home or for children. For some of them, its the subsidy in food and edcuation system, that got thier children where they are (along with other kinds of support from community).

    They hope to see lesser struggles and much better days once thier children start earning. Thats when they may not need this subsidy. So yes, the parallel thing has to be employment opprtunities so that such subsidies are not needed in high numbers in future.

    Just the food subsidies will not secure a better future even though this subsidy is required as of now.
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      Thadeus Frei

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      Dec 25 2011: The subsidies, however, destroy small farmers in India while supporting huge farms to sell them more cheaply. Subsidies can be good but they can have adverse effects if you subsidize the wrong sectors.

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