Only three percent of Indians pay income tax; our tax-GDP ratio is among the lowest in the world. This must change. Our elites must realise that India’s poverty has damaging consequences for them, and that they can help decrease it. The food security bill, with all its limitations, will hopefully contribute to generating such awareness, says Praful Bidwai.
After vacillating for years over taking any pro-people measures, the United Progressive Alliance finally did something bold and worthy by having the National Food Security Bill passed in Parliament -- a promise made in the UPA’s “first 100 days” agenda after its return to power in 2009.
The Bill won a resounding victory in the Lok Sabha, with a margin exceeding 100, because non-UPA parties including the Janata Dal-United, the Dravida Munnetra Kazhagam and even the Shiv Sena felt they had no choice but to support it. It sailed through the Rajya Sabha too.
The stage was set by a rare, spirited speech by Congress president Sonia Gandhi, in which she described the legislation as India’s chance to ‘make history’ by abolishing hunger and malnutrition, and emphasised that India cannot afford not to have the law: “The question is not whether we can [raise the resources] or not. We have to do it.”
The NFSB has invested meaning, public purpose and a degree of legitimacy into the UPA’s otherwise corruption-ridden, shoddy and often appalling performance in government under an increasingly right-leaning leadership. This at once put the Bharatiya Janata Party on the defensive. Its leaders were reduced to opposing a measure that represents genuine social progress, and making thoughtless statements about the Bill being about ‘vote security’, not food security.
The BJP now has nothing to offer to the nation but obscurantist programmes like building a temple at Ayodhya, and parochial, and predatory pro-corporate agendas under Narendra Modi’s rabidly communal leadership.
The Bill is open to the criticism that it doesn’t go far enough. Instead of universalising subsidised food provision, it confines it to two-thirds of the population, and truncates it further by limiting the food quota to five kilos of grain per capita per month instead of the 35 kg per family demanded by right-to-food campaigners. The per capita quota puts small households, such as those headed by widows and single women, at a disadvantage.
A universalised Public Distribution System, covering the entire population, has been proved to be more effective and less prone to leakage than one targeted at ‘below-poverty-line’ groups -- in Kerala, Tamil Nadu and even poor, backward Chhattisgarh. The relatively well-off won’t stand in queues at ration shops; they select themselves out of a universal PDS.
Besides, a large proportion even of those officially defined as poor don’t possess BPL ration cards. The ratio can be as high as 40 percent in some highly deprived states. The latest National Sample Survey reveals that 51 percent of rural people possessing less than one-hundredth of a hectare of land have no ration cards of any kind; less than 23 percent have BPL cards.
The problem of identifying the poor remains unresolved. Nevertheless, the broader coverage proposed under the NFSB -- and the simple, attractive formula of rice at Rs 3 per kg, wheat at Rs 2, and coarse grains at Re 1 -- marks a definite improvement over the current situation. It creates a right or entitlement for the poor, which can go some way in reducing acute hunger.
However, right-wing commentators, including neo-liberal economists, credit-rating agencies, multinational and Indian big business, and writers/anchors in the media, have vitriolically attacked the NFSB as an instance of reckless “populism”.
Some claim it will do to little to relieve malnutrition among Indian children, almost one-half of whom suffer from it. Yet others contend that the poor don’t want or deserve subsidies; they aspire to work, earn more and eat better.
And almost all of them say the NFSB will entail excessive wasteful expenditure of Rs 1.25 lakh crores. This will aggravate India’s growing fiscal crisis and further depress already faltering GDP growth, now down to four-five percent. Eventually, this will work against the poor. Besides, if investment and growth are to be revived, India can’t spend so much on food security.
These arguments are specious and driven by elitist and misanthropic motives. India’s fiscal deficit is largely attributable to government profligacy -- a gaping revenue deficit or current spending on itself in excess of income, high interest outgo on public debt, huge subsidies, and spending on unproductive projects -- and failure to tax the affluent. This can’t be an argument against the NFSB.
Besides the global recession, India’s current economic slowdown is explained by the recent withdrawal of ‘hot money’ by speculators and foreign institutional investors (who expect interest rates to rise in the US), falling investment in domestic industry, greater capital outflows, and the panic caused by the falling rupee.
The likely additional annual expenditure on account of the NFSB will be just about Rs 30,000 crore, a fraction of the annual total claimed by subsidies -- Rs 2.6 lakh crore. Fuel subsidies -- largely enjoyed by the rich -- alone claim Rs 1.6 lakh crore. Fertiliser subsidies account for another Rs 66,000 crore.
Even more enormous are the various tax write-offs and exemptions for rich people, industry and exporters. The last budget sacrificed revenues of Rs 5.74 lakh crore on this count -- a sum larger than the entire fiscal deficit. The gold and diamond industry alone got Rs 60,000 crore in tax breaks.
Surely, spending just about 1.25 percent of GDP on food security isn’t excessive or exorbitant: India spends about the same on the central paramilitary forces and three times as much on the military. Feeding our people cannot be such a meagre component of comprehensive or human security, and so inferior in priority to guarding our borders or internal security.
There’s another way of looking at the NFSB expenditure -- as an investment in people, or as delayed compensation for compelling them to spend their own money on healthcare and education because public expenditure on these high-priority items has fallen well short of the target, respectively three and six percent of GDP, year after year.
It also won’t do to argue, as some do, that the five kg cereal quota doesn’t mean much as it represents just about half the current per capita consumption of cereals; people will still have to go to the open market for the other half. Well, one-half isn’t insubstantial. In any case, this argues in favour of raising the quota, not giving up on food security.
The argument that food security should focus on high-protein foods and vegetables instead of cereals is similarly misplaced. True, the share of spending on cereals in total food consumption expenditure has fallen over the last 20 years in both cities and villages.
But cereals and pulses (lentils) still remain nutritionally central as staples in the Indian diet. There’s a strong argument for boosting the dwindling consumption of pulses, a good and relatively cheap source of protein, by including them in the PDS.
Some economists have proposed that food delivery through the PDS should be replaced by cash coupons or Direct Benefits Transfer because that will be cheaper and more efficient, and give the beneficiary ‘multiple choices’ in the market. As a ‘free consumer’, s/he can buy grain, or eggs or meat instead of grain, or whatever.
This is an altogether pernicious idea. It assumes that India’s entire population has bank accounts or that an “Aadhar” (digital unique-identity number)-based cash-transfer system will work flawlessly. But just about 40 percent of Indians have bank accounts. And Aadhar is full of holes. Its iris and fingerprint scans have proved unreliable. Identity cards have been issued bearing pictures of trees and dogs; men have been misidentified as women.
Worse, the DBT is itself deeply flawed. The Hindu has just exposed a major DBT scandal involving the delivery of a number of centrally sponsored insurance and health schemes for farmers through ICICI Lombard GIC Ltd. The insurance company has been accused of recruiting hundreds of fictitious beneficiaries, collecting premiums from the government on bogus utilisation certificates, and rejecting genuine damage claims, amongst other anomalies.
Besides, there’s no such thing as a ‘free market’ with abundant consumer choices in rural India. The State often has to step in to procure commodities and deliver them.
Underlying all these right-wing criticisms of the NFSB is a dogged, dogmatic reluctance to make the State accept responsibility for providing basic services or public goods to the people, and an obsession with corporate-oriented ‘free-market’ solutions to people’s basic needs, while continuing with undeserved handouts to the rich and privileged.
This profoundly elitist approach militates against the public interest. It will perpetuate dualism in a society already marked by obscene and growing inequalities, whose rich are among the lowest-taxed people anywhere, with a top income-tax rate of just 30 percent -- compared to 50 percent-plus in the UK, Spain, Belgium or Sweden.
Only three percent of Indians pay income tax; and there’s no inheritance tax or death duty in our skewed society. Our tax-GDP ratio is among the lowest in the world. This must change. Our elites must realise that India’s poverty has damaging consequences for them, and that they can help decrease it. The food security bill, with all its limitations, will hopefully contribute to generating such awareness.