Saturday, September 7, 2013

Food Security

Food Security refers to physical and economic access, at all times, to sufficient, safe and nutritious food for people to meet their dietary needs for an active and healthy life.

A country grappling with hunger and malnutrition like India needs to put special emphasis on food security. India is a unique case in the sense that despite maintaining buffer stocks of several tonnes of foodgrains, people of the country die due to hunger. This happens due to two reasons -
a) Lack of adequate marketing and warehousing which leads to a lot of wastage
b) Insufficient purchasing power of the rural and urban poor

India has put in place a system of Public Distribution System (PDS) that allows poor people to get subsidized foodgrains from Fair Price Shops (FPS). However, it suffers from defects such as leakages, duplicate beneficiaries etc.

Taking note of the seriousness of the problem of hunger, India enacted the Food Security Bill which seeks to give subsidised grains to 67 percent of the population (including 75 percent rural and 50 per cent urban).

How will it help?
a) Poor will get insulated from food inflation
b) RBI can now be free to focus exclusively on "core inflation" which deciding its monetary policy
c) It will lead to human development which is a prerequisite to economic development

How it can harm?
a) It will raise the cost of food subsidy to 1.25 percent of GDP from the current 0.9 percent of GDP
b) It may distort agricultural market - To enforce food the provisions of the Bill, the government will need to procure more foodgrains, which may see a rise in the Minimum Support Prices of those grains, thus incentivising their production while no such incentive will exist for other crops. In such a situation, production of other agricultural may decline.
c) It may also lead to food inflation

Overall, it is a positive move but India will need to guard against the pitfalls of the Bill. It will also need to revamp its PDS and correctly identify the beneficiaries. 

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