The Fear That The Food Bill Will Make A Massive Dent In Our Deficit Is Misplaced
Some of these fears are not valid. And the fear that the bill is somehow going to make a massive dent in our deficit is entirely misplaced. Our current account deficit is a little over 4% of our country’s income (GDP). Compared to that, all of our subsidies – oil, food et al taken together are half of that – 2% of the GDP. The food subsidies as they stand right now are only 0.8% of the GDP. With the new food bill, this will go up by, at most, another 0.15% to 1% of the GDP.
Firstly, it is not true that our economy is sinking. Our GDP growth stands at 4.8 to 4.9%. Yes, there was a glorious period for about 5 or 6 years from 2004 to 2010 when our growth rates hovered between 7 and 9%. But it has never been that high in the history of independent India. However it is true that at 4.8%, our growth rate is now at the lower end of the average since 1991 when our economy first opened up to world markets. But even at this growth rate, we are better off than most economies of the world, except China. We are still in the top 10 and have not been downgraded yet. Where we are weak is our current account deficit or borrowings versus current spending. Most countries, even in Asia, have a positive current account and ours has historically been a deficit one. This makes us vulnerable to what happens in the world market. Our deficit is largely because we import vast quantities of gold and oil.
Professor Abhijit Sen, member of the Planning Commission and an economist who has taught at JNU, Sussex, Oxford and Cambridge, has spent more than twenty years planning India’s grain policy, rural credit and food distribution. In a conversation with Revati Laul, he dispels the myths surrounding the controversial Food Security Bill. Click here for complete interview at Tehelka