Bangladesh's President Abdus Sattar attempted today to allay concerns about the capability of his three-month-old administration by naming a new, smaller Cabinet that omitted some members who he said "had failed to maintain their honesty and dedication, which led to public resentment and confusion."

Food is politics in the poor and overcrowded nation of Bangladesh and, during a visit there last week, it was clear that a sudden jump in prices was seen as a lack of confidence that Sattar's government could handle a food crisis on top of other economic woes and challenges for power by the military.

The price of rice, the staple of most Bangladeshi diets, soared 25 percent within three days as reports of poor harvests raised the specter of a famine this summer. In 1974 a famine there played a major role in bringing about the assassination of a president and the overthrow of his government because of its inability to get food to starving Bangladeshis.

Besides fears of a famine, Sattar had been troubled by divisiveness within his ruling party, charges of corruption in his Cabinet and pressure from the military for a greater share of political power.

In an attempt to give a sense of national unity to the new Cabinet, the three military chiefs were present yesterday at the swearing-in of the new members, and opposition parties hailed Sattar's move.

Most prominent among those left out of the new Cabinet are Jamaluddin Ahmed, deputy prime minister and industries minister; Finance Minister M. Saifur Rahman, Food Minister A. Momen Khan and Energy Minister Kazi Anwarul Huq.

"Ceaseless national efforts to maintain the democratic process are now fraught with a danger due to the selfish activities" of a few members of the Cabinet, Sattar said in a televised address last night in which he announced dissolution of the old Cabinet. He gave no details of the accusations.

While the price of rice is the most immediate difficulty facing Bangladesh, the larger problem extends to the survival of democratic institutions in a fragile environment where people even in the best of times live at near-starvation conditions and where the usual Third World pressures on an elected government are compounded by overwhelming poverty.

Bangladesh already had surprised the world by successfully making the transition to Sattar's government after the assassination of president Ziaur Rahman in a Army mutiny last May.

But the driving force now is fear of famine, and the more Sattar, 76 and in frail health, and his former Cabinet tried last week to reassure the public that they had the situation well in hand, the more panic buying grew and prices increased.

"The price of life in Bangladesh is tied to the price of rice," one international aid official with long experience there observed in an interview in Dacca, the capital city, last week.

Past food crises and the government's success or failure in dealing with them remain vivid memories there. In the great famine of 1943, during World War II, the ruling British used scarce transportation to carry weapons to the Burma front rather than to bring food to the starving people of East Bengal, which is now Bangladesh. Almost 2 million people died during that famine.

Even more vividly recalled is the 1974 drought, which led to the assassination of Sheikh Mujibur Rahman, the political father of Bangladesh, who was blamed for failing to get available food to starving people in villages.

The deaths of that famine are contrasted with the performance of Ziaur Rahman, who in 1979 managed to procure enough grain from abroad and get it to hungry people during a drought that cut food production far more than the current shortage.

The Sattar government has been trying to emulate that performance, but a lack of public confidence has hurt its efforts. Sattar appears to be looking for the Cabinet shift to restore faith in his administration.

"It is generally believed that the government is not strong enough nor credible enough to face the crisis," said one well-informed Dacca resident last week. In 1979, he said, "there was a feeling" that Ziaur Rahman "would do something. The feeling is lacking now."

"If the government was the one we had a year ago," an international aid worker in Dacca said, "the problem would not be as great. There would be confidence" in the government.

Part of Sattar's problem has been his inability until now to keep his campaign promise to rid his Cabinet of ministers widely believed to be corrupt. Even though he won election in November with a 70 percent majority, he is believed to have mortgaged himself with so many political debts that he could not until now do the housecleaning he had promised.

There is open talk in Dacca of a military takeover with discussions commonly centering on when, rather than whether, it will take place.

The Army chief-of-staff, Lt. Gen. H.M. Ershad, has asserted since the election that the military should share an undefined constitutional role in the social, economic and political affairs of Bangladesh.

Since he and his Army had played a major part in ensuring a democratic transition after Zia's death at the hands of rebellious officers and since they tacitly had supported Sattar's candidacy, Ershad was shocked when the newly elected president announced that the only constitutional role he saw for the military in a democracy is to defend the country's borders.

Ershad countered with a press conference repeating his demand, and he later issued a long statement giving the philosophic basis for it. Despite all his public statements, however, the exact role he wants the Army to play still remains fuzzy--even to Sattar aides who have met with him.

It is unclear whether Sattar's Cabinet purge will satisfy the military. If not, there are indications he has another plan in mind: keeping the larger council but creating a small executive committee on which the military chiefs would have an equal say with the civilian ministers. It does not, however, meet the military's demands for a constitutional and policy-making role in government.

Clearly, Sattar is trying to solve the food crisis as a way of holding the military at bay.

With two crops still in the ground, food production for the year is estimated at only 4 percent less than what had been expected. But Bangladesh exists on such a thin margin that even minor disruptions in the food supply create shockwaves.

Furthermore, Western donors of food had decided that the country was doing so well that they cut their aid allotments this year by one-third. Adding to Bangladesh's food woes is an annual population increase of about 2.5 percent.

The World Bank last month issued an emergency call to the Western nations that traditionally give Bangladesh food for quick delivery of a half million tons of grain. Government officials and aid experts here agree that will get the country through the current crisis if crops in the ground come in as expected.

If not, "we could have a disaster," one Western food expert said.

Government officials expressed confidence last week that the donors would come through, although there are few firm commitments.

Among the laggard donors is the United States, traditionally Bangladesh's major source of food aid. The Reagan administration has neither approved the normal program of food nor acted on the emergency request.

Most aid experts say the country should keep about 1.1 million tons of food in its warehouses to get through the emergency period and to provide food for the needy.

Releasing food from warehouses to the market is the government's best method of combating price increases caused by panic buying. But until now, officials here have been reluctant to draw down reserves, which amount to only 900,000 tons.

Sattar said in an interview, however, that the government will release food in the anticipation that aid donors would come through quickly.

If they do not, it is widely expected that the government will buy grain even if they have to borrow foreign currency from banks, something Bangladesh can ill afford.