Providing food security for its people is a heavy burden on the Indian government’s already stretched budget. It could potentially be a powerful card to play to lure in voters.
“Policies,” said Sir Geoffrey Vickers, “are decisions giving directions, coherence and continuity to the course of action for which the decision-making body is responsible.”
It is hard to imagine how the political scientist in Vickers would have defined policies, after observing the directionless, ill-thought out actions of the Manmohan Singh-led UPA coalition in India, which meanders from one poor policy decision to another.
When looking at the flip-flop of the UPA government over the Foreign Direct Investment (FDI) in Multi Brand Retail and the Food Security Bill, a better analogy could be drawn with a “headless chicken, running directionless”, rather than the “directions” and “coherence” Sir Geoffrey refers to.
The Indian economy, which has suffered from excessive governmental control as well as unnecessary amounts of red tape, was liberalized in the early 1990s. The “license-quota-permit raj” resulted in the “Hindu rate of growth" in the economy, which had been stagnant for decades. Incidentally, the current Prime Minister Manmohan Singh was then Finance Minister of the country.
However, that the development achieved from liberalizing the economy has failed to reach the common mass in the country. Despite incessant talk about “inclusive growth” and rising GDP, the dramatic rise in the number of the poor and the intensity of poverty in the country tells a different story. That the population of children suffering from malnutrition in India is double what it is in sub-Saharan Africais indicative of the fact that the GDP growth rate has failed to have the “trickle down” effect intended to help the common people.
The Forbes International list of billionaires shows an ever-increasing number of Indian billionaires. This is the reality of ”liberalization”, which has only helped crony capitalism flourish, aided by rampant corruption in India.
Fortunately for the Indian policy maker, Forbes has no similar list for poverty. If it did, no amount of skullduggery could conceal the vast class divide.
The efforts of the UPA government to bludgeon the FDI in multi-brand retail was met with stiff resistance from the opposition parties and the people alike, who see the bill as an effort to accentuate this dichotomy. If the bill had been converted into an act, it, would have permitted 51% foreign direct investment in multi brand retail, and would adversely impact millions of farmers and small retail traders.
The fear of an imminent entry of multi-national behemoths like Wal-Mart through the FDI route united the people to an extent that the government was forced to postpone the introduction of the bill in Parliament. Though the plan has been deferred for the time being, apprehensions have been raised by the statement of the Finance Minister, Pranab Mukherjee, who, while commenting on the decision of the government to put the bill on the back burner, said, “we have not shelved it.”
India, unlike more developed countries, still prescribes to outdated methods in agriculture, with land holdings of extremely small size and the practice of sub-letting of agricultural land to the marginal and poor farmers being the norm. With the government showing no inclination to focus on agriculture, and harvesting being mostly rainfed, farm produce has stagnated in most of the country. Lack of micro-finance in rural areas coupled with failing crops, have played farmers into the hands of the money lenders, who charge exorbitant rates of interest for loans provided at times of need.
Figures available from National Crime Records Bureau indicate that over a quarter of a million farmers committed suicide between 1995 and 2010. When coupled with the fact that between 1991 and 2001 the number of cultivators dropped by seven million, a crisis that the government is unwilling to face is mounting.
Hundreds of thousands of small retail traders also foresee misery if corporate giants like Wal-Mart are permitted to enter the multi-brand retail market. Small retailers in India, unlike those of the West, are part of the community system, with a vital socio-economic role which is not restricted to a simple consumer-seller relationship.
It does not require a soothsayer to predict that agriculturists and small retail traders will be overwhelmed by the bargaining and coercive power of multinational companies like Wal-Mart, whose ethical standards have be criticized.
Even Hillary Clinton, who has served on Wal-Mart’s board of Directors, was forced to admit: “Now I know that Wal-Mart’s policies do not reflect the best way of doing business and the values that I think are important in America.” Studies around the world have revealed that agricultural outputs have declined in areas where Wal-Mart and their ilk have started operations.
The fact that these multinationals donate generously to the corpus of political parties and the influential bureaucrats who call the shots in policy matters, is perhaps a small footnote in the story. Not surprisingly, no study appears to have been conducted by the government on the feasibility of FDI in multi brand retail policy under Indian socio-economic conditions.
As if to compensate for the potential socio-economic disaster arising from FDI in multi brand retail, the government has progressed with the “headless chicken” model by introducing the National Food Security bill in the Indian Parliament.
The Food Security bill envisages providing extremely cheap grain to people who live below the poverty line, and then on an “as and when available” basis to those lying above it.
The bill has been drafted in a haphazard manner. The poverty line has been drawn by the government without reference to any supporting economic or social studies. In rural areas it is put as Rs. 26, less than 50 US cents, per day. The bar is slightly higher in urban areas at Rs. 32.
The government now plans to review the poverty line. There is no deadline for setting up the review committee and then deciding on its recommendations. It is a classic case of putting the cart before the horse.
India is already teetering on the verge of an economic crisis and is battling with a rising fiscal deficit and inflation. It can hardly afford the 48% food subsidy increase needed to implement the Food Security bill. That the ghost of subsidies comes back to haunt the poorest of poor is an obvious but uncomfortable economic truth.
The insincere attitude of the government in providing food security is further reflected in a clause in the bill. It absolves the government of any responsibility of providing grain under the provisions of the Act, in the case of any man-made or natural catastrophes such as war or drought. This fails to account for the fact that the country is dependent on rain water to cater for 60% of its harvesting needs.
The rush with which the bill has been drafted and introduced in the Parliament of the country suggests that the bill is designed to provide more security to the electoral prospects of the Congress party than food security to the poor. The Congress party, which is the dominant partner in the UPA coalition, faces the daunting prospect of facing the electorate in five states bound for state assembly elections in January-February of 2012.
One of the election bound states is the state of Uttar Pradesh, which sends the maximum number of representatives to the national parliament, and plays an important role in Indian politics. Suffering from economic mismanagement for decades and also host to the highest population in the country, Uttar Pradesh also contributes significantly to the number of poor, and especially the poor living in rural areas.
Rahul Gandhi, who in true tradition of the dynastic politics of the Congress party has been anointed the heir apparent to the post of Prime Minister, has been touring Uttar Pradesh incessantly, with the aim of regaining the steadily eroding support for his party. His carefully managed photo-ops, picturing him on visits to the houses of the rural poor has so far failed to make an impact on the electorate.
The Food Security bill, is therefore seen an electoral gift from the Congress party, making a last ditch attempt to influence the electorate. A poor showing in the state election has the potential to derail the attempt of the Congress party to regain power at the Centre in the 2014 National elections. The image of the party, suffering massively from a series of financial scams, needs a face-lift. The government feels that the Food Security Bill might be the magic wand to attract the poor, who, historically, utilize their voting rights more than the urban middle class. This accounts for the insane rush to introduce and get the bill passed by Parliament before the state elections.
That the Food Security bill has more political ambitions than any concerns for the poor can be ascertained from the fact that the government has made no efforts to revive the Public Distribution System (PDS). The PDS, created for distributing cheap food grains to the poor, has failed miserably, with middlemen and bureaucrats profiteering at the cost of the targeted population. Governmental apathy towards the PDS has resulted in a well-intentioned scheme gone awry.
With the agricultural output stagnating, agricultural scientists are of the opinion that the country will not been able to mete out the required quantity of food grains for distribution under the Food Security bill. The misery is exacerbated by ill-maintained food warehouses, loss in transportation of food grains, and massive corruption in distribution.
In a scathing observation, the Supreme Court of India, taking umbrage at news reports of food grains rotting in the open government warehouses while people faced starvation and malnutrition, asked the UPA government as to why this food grain could not be distributed to the poor for free. The response from the government has been muted.
Apparently, it is politically expedient to let the poor starve and then show them the mirage of food before elections. The poor are obviously hungry enough not to question the policies which brought them there in the first place.
Keeping people hungry and unemployed may be good politics, but it is poor economics. Manmohan Singh needs to make a judgment call. But will electoral compulsions permit him to do that?
That remains the million dollar question.
The views expressed in this article are the author's own and do not necessarily reflect Fair Observer’s editorial policy.