India’s ‘game-changing’ cheap food program draws concern


India’s ruling party says a vast new food program for the poor is a “game-changer” to fight endemic malnutrition, but analysts are expressing concern about its implementation and cost.

The Cabinet issued an executive order late Wednesday introducing the National Food Security Bill, which was approved by the president Thursday and is expected to be a vote-winning measure.

The populist program — which the government says will add 230 billion rupees ($3.8 billion) per year to the country’s existing 900 billion rupee food subsidy bill — will offer subsidized grain to an estimated 810 million people.

It has been pushed strongly by the head of the ruling Congress party, Sonia Gandhi, who has insisted on honoring a 2009 election pledge despite concerns about the impact on government finances and food prices.

“It is going to be a game-changer in terms of poverty eradication,” senior Congress party leader Tom Vadukkan said. “If basic needs like hunger are not met, you can’t talk about (economic) development.”

Despite two decades of strong economic growth, India still struggles to feed its population adequately, with a major survey last year showing that 42 percent of children under age 5 were underweight.

The new measure, which will offer 5 kg of food per person per month for as little as 1 rupee (1 U.S. cent) per kilo, is considered key to the Congress-led coalition’s fortunes in national elections due in 2014.

“If it wins us votes, then that is an afterthought,” Vadukkan, also a party spokesman, claimed. “Naturally, anything good that you do gains you popularity.”

India’s opposition parties have rounded on the government for ramming through a controversial program without a parliamentary debate, but the executive order is only temporary and must be converted into law.

It will be introduced later this month or in August in the next session of Parliament, which has been stalled for much of the last two years due to repeated protests by the opposition.

“It is just a political gimmick in a hurry,” said Rajnath Singh, leader of the opposition Bharatiya Janata Party.

Critics of the food program say India can ill-afford such a costly subsidy burden at a time of slowing economic growth and when credit ratings agencies are eyeing the country’s large deficit.

“India’s current macroeconomic position does not provide the space to implement this policy,” said Sonal Varma, an economist with Nomura Securities.

Economic growth is at a decade-low rate of 5.0 percent, the government is running large fiscal and current account deficits, and the rupee has slumped to a historic low against the dollar.

Indians classed as below the poverty line already receive subsidized kerosene, cooking gas, fertilizers and wheat through what is the world’s biggest public distribution system.

But the chaotic welfare programs are notoriously inefficient and are riddled with corruption. Many of the 360 million people who receive subsidized grain complain about the poor quality. A study by the national Planning Commission in 2005 showed that an estimated 58 percent of grain purchased by the government failed to meet its intended target.

Siddhartha Sanyal, chief India economist with Barclays Capital, said that implementation would be a “huge logistical problem, with coordination required from all states.”

Photos of rotting grain left out in the open due to a chronic shortage of storage facilities are an annual feature in newspapers during the monsoon season.

Reaction among farmers’ groups was mixed, with some saying the government had done too little to support the sector that is the biggest employer nationally.

“If the government can implement it effectively, it will benefit the weaker sections of society,” said M.J. Khan, president of International Agriculture Consulting Group, a New Delhi-based nonprofit organization. “But the distribution system has to be improved and strengthened for the scheme to be a success.”

Subhash Agrawal, founder of India Focus, a private think tank also in New Delhi, criticized the use of an ordinance to set up the program but said there was a good chance of it being passed into law.

“Politicians don’t want to be seen opposing measures to feed the poor, even if they object to the details of the bill,” he said.

The left-leaning Congress party has a record of passing large welfare programs such as the 2005 Rural Employment Guarantee Act, which guaranteed a minimum number of days of public employment. But it has suffered a scandal-hit second term undermined by corruption.