The food program is expected to be a key vote-getter for the Congress party’s beleaguered and corruption-tainted government. But many analysts say the expensive scheme will further weaken Asia’s third-largest economy, coming as it does just as India has posted its lowest economic growth in a decade, the rupee is at a record low against the U.S. dollar and investment is slowing.
The mammoth scheme to provide rice, wheat and coarse grains such as millet and maize to the poor at below-market prices will increase the government’s annual food subsidy bill to more than $21 billion, up from more than $15 billion, a senior official said several weeks ago, speaking on the condition of anonymity because the program was not yet approved. It also includes a pledge to distribute cash if the grain is not delivered, especially to the homeless, pregnant women, lactating mothers and the elderly.
The measure will widen India’s high fiscal deficit, exacerbating worries abroad, analysts say.
“It is an invitation to fiscal disaster and a negative review by international rating agencies,” said Shankkar Aiyar, an economic commentator. “Other emerging economies like China, Brazil and Indonesia are working to enlarge capacity, create infrastructure, jobs, better incomes and growth. But India seems to be traveling back in time, creating a grid of doles.”
About two-thirds of India’s 1.2 billion people live on less than $2 a day, according to the World Bank. The country is a major rice and wheat producer, but it is also home to one-fourth of the world’s hungry poor, according to the World Food Program. An independent survey in 2011 found that four out of 10 Indian children were severely malnourished.
Several state governments run similar cheap or free food-grain schemes for the poor, but Wednesday’s order makes it a guaranteed, uniform legal right across the country.
Advocates of the measure say it may not end hunger overnight but will create a legal right over which the poor can go to court instead of going to bed hungry. But some critics say the real issue is no longer hunger but the need for more-nutritious food, such as milk and eggs.
“Guaranteeing food was a commitment we had made to the poor people of this country,” said Ajay Maken, the general secretary of the Congress party, recalling a campaign promise from the 2009 national elections. “Anyone opposing food security is opposing the welfare of poor people.”