Author: Shenggen Fan, IFPRI
The Indian government recently proposed a revised version of the ambitious National Food Security Bill.
This law could be a game-changer for national food security if the resulting large-scale program is effectively designed, targeted and implemented. But the question remains: how can India get results from the program without draining limited government resources and crowding out more productive investments?
The proposed bill will give two-thirds of India’s population access to 5 kilograms of rice, wheat, and coarse cereals per month at heavily subsidised prices, while those in the poorest category will receive 35 kilograms of food grains. Approximately 75 per cent of rural residents and 50 per cent of urban residents will be covered by the subsidy scheme. An especially important feature is the provision of free nutritious meals to children and pregnant and lactating women. The bill is expected to be debated and voted on in Parliament in the coming weeks. With elections due next year, the ruling party is keen to make the bill a cornerstone of its re-election campaign.
Estimates indicate that the current cost of food subsidies in India is more than 20 times what it was two decades ago, hovering around 0.8 per cent of GDP during the past five years. The proposed subsidy has an estimated price tag of US$24 billion and will require roughly 62 million tons of food grains. This raises financial sustainability questions given India’s recent economic slowdown and efforts to cut its fiscal deficit. Another concern is the potential distortion of grain markets. The government often buys grains for more than their market value but distributes them at lower prices to the beneficiaries of its programs, resulting in inefficient and unsustainable consumption and production patterns (including overproduction). These problems are exacerbated by subsidies for fertilisers, water and electricity.
The bill can help the poor and hungry, but to get the best results India will need a better targeted and transparent public food distribution system. Overcoming the system’s current corruption and high leakage/waste requires improved monitoring and infrastructure, including expanded and upgraded food storage facilities. Much can be learned from states like Chhattisgarh and Tamil Nadu, where increased local participation (through, for example, cooperative ration shops) and innovative technologies (including smart cards and computerised records) have made food distribution more efficient and better targeted. Several states have also implemented quasi-universal coverage, which some argue minimises targeting errors, but it is unclear to what extent the benefits outweigh the financial costs compared to more targeted programs. Furthermore, clarification is needed on how to consolidate the proposed bill with existing state-level food subsidies and other relevant policies.
In addition to increasing short-term food access, more productive social protection policies are needed to reduce recipients’ dependence on subsidies and give them more autonomy. India can learn from cross-sectoral initiatives in countries like Brazil, Ethiopia and Bangladesh, where income/food transfers were bundled with education and healthcare initiatives. These efforts need to be accompanied by public and private investments and services that give smallholders the chance to increase their productivity, including access to improved technologies and marketing infrastructure that address smallholder-specific needs and constraints.
Another related issue is the focus of India’s food security strategy since the Green Revolution on high-calorie but low-nutrient rice and wheat. Now is the time to diversify the diets of all beneficiaries by shifting support, such as R&D investment, toward more nutrient-rich foods, including pulses, which the poor are increasingly unable to afford.
Although the bill focuses on food subsidies it leaves the door open for the government to introduce other types of transfers, such as direct cash transfers and vouchers. However, no clear plan exists on how these different schemes will come together. While cash transfers have the potential to reduce costs and market distortions, their success can be significantly hindered by poor banking infrastructure and the absence of well-functioning markets and supermarkets. They are also vulnerable to uneven distribution within households due to biased social norms that favour male household members.
What is more, the effectiveness of different types of transfers varies across development outcomes. For example, a comparison of several transfer modalities shows that food vouchers led to the largest improvements in dietary diversity followed closely by cash transfers, while food transfers led to the largest increase in calorie intake. In light of this, India should treat different types of transfers as complementary food security tools. This attitude will allow policy makers to adjust when and how much cash and food is transferred based on the desired outcome, market conditions and the ability of institutions to deliver.
Finally, before deciding on a course of action the government has to ask whether it will work in India. Before scaling up policies, the government should promote local innovation and the evaluation of experiments. Much can be learned from India’s own experience in developing programs such as the Mahatma Gandhi National Rural Employment Guarantee Scheme, and from the experience of other developing countries.
Above all, the proposed bill must not be seen as a miracle cure for India’s food security problems. It is only one part of a comprehensive and long-term food security strategy that promotes better-targeted benefits, more nutritious foods, and productivity-enhancing investments. Many unanswered questions remain and more research is needed on the underlying causes of food insecurity and the appropriate mix of solutions in the context of India.
Shenggen Fan is Director-General of the International Food Policy Research Institute.