FOOD SECURITY BILL:- The question is how will this higher expenditure be financed? Given that the economy is in a breakdown mode. Food Security Bill, might turn out to be our biggest mistake till date. The government estimate of the cost of food security at Rs 1,24,723 crore which is likely to be even more higher. The government’s estimated cost of food security comes at 11.10%(Rs 1,24,723 expressed as a % of Rs 11,22,799 crore) of the total receipts. It covers around two-thirds of the population—even those who are not really needy. Food security will also mean a higher expenditure for the government in the days to come. A higher expenditure will mean a higher fiscal deficit. Fiscal deficit is defined as the difference between what a government earns and what it spends. The question is how will this higher expenditure be financed? Given that the economy is in a breakdown mode. If India does not save enough, it means it will have to borrow capital from abroad. And when these foreign borrowings need to be repaid, dollars will need to be bought. This will put pressure on the rupee and lead to its depreciation against the dollar. A recent study by Jha and Ramaswami estimates that in 2004-05, 70 per cent of the poor received no grain through the pubic distribution system while 70 per cent of those who did receive it were non-poor. They also estimate that as much as 55 per cent of the grain supplied through the public distribution system leaked out along the distribution chain, with only 45 per cent actually sold to beneficiaries through fair-price shops. The share of food subsidy received by the poor turned out to be astonishingly low 10.5 per cent.” Estimates made by CACP suggest that the public distribution system has a leakage of 40.4%.Estimates made by CACP suggest that the public distribution system has a leakage of 40.4%............ firstpost/economy/food-security-the-biggest-mistake-india-might-have-made-till-date-1062841.html
Posted on: Tue, 27 Aug 2013 05:13:01 +0000
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