The expenditure on providing food security will add minimally to India’s public spending which is less than what even lower middle income Asian countries spend on social protection
In recent media coverage, critics often argue that the cost of the National Food Security Bill (NFSB) is excessive. The Economic Times referred to the NFSB as a “money guzzling measure” and according to CNBC-TV18, Rahul Bajaj, chair of Bajaj Auto, said that “all such give-aways are populist measures.” The New York Times’ India blog cited Ashutosh Varshney of Brown University as arguing that the NFSB “is very consistent with the overall thrust of the government to become the welfare party of India.” And Yashwant Sinha, former Union Finance Minister, emphatically branded it as “senseless welfarism.” But what would constitute even a minimally adequate response to food insecurity in India?
A recent UNICEF report on child malnutrition finds that India is home to 61 million stunted children under five — the most of any country — and 38 per cent of all stunted children in the world. After India, the country with the second largest number of stunted children is Nigeria with 11 million, then Pakistan (10 million), and China (eight million). Even as a proportion of the child population, stunting levels in India are higher than in any other large country in the world, according to the same UNICEF report.
Given the magnitude of food security challenges faced by India’s current and future work force, the charge that India’s NFSB is excessive strikes outside ears as exceedingly strange. One’s confusion is slightly compounded because it seems some critics dramatically exaggerate the cost of the Bill – in order to deem it unaffordable. At present, India spends about 0.9 per cent of GDP on food subsidies, and after the NFSB that will rise to a little less than 1.25 per cent.
The Financial Times cited Gurcharan Das, the author of India Grows at Night as saying: “India just cannot afford this colossal spending… This new spending will increase India’s fiscal deficit and could well lead to a downgrade of the country’s sovereign rating to junk status.” The “money-guzzling” Economic Times article warned that the NFSB endangered the fiscal deficit target, and Vinay Khattar warned that it “could partly hurt the ongoing recovery.” CNBC-TV18 covered B. Muthuramam, the non-executive director of Tata Steel, as arguing, “Food security is important but the government needs to be able to generate enough wealth in the country to be able to afford food security.” The Indian Express cited the Confederation of Indian Industry (CII) statement, which read: “Under the present economic situation, the government can hardly afford to allow the fiscal deficit roadmap to be compromised in any way.” These dire warnings seem to overlook the fact that additional expenditures can be offset by cuts elsewhere. It is, as always, a question of priorities.
So how do India’s fiscal priorities compare with others’? The Asia Development Bank has just released a report on Social Protection in Asia covering 35 countries. It compares India with the other 18 lower middle income countries in Asia. In lower middle income countries, relevant expenditures (on social insurance, social assistance, and labour market programmes) are, on average, 3.4 per cent of GDP. India’s is a mere half of that at 1.7 per cent. Even that low level is reached largely because of MGNREGA, not existing food security costs. Among low income countries, the Kyrgyz Republic (whose GDP per capita is only $871 (2009)), invests eight per cent of GDP in social protection. Upper middle income countries spend four per cent of GDP on average, and high income countries spend 10.2 per cent. Japan spends a massive 19.2 per cent of GDP on social protection and China 5.4 per cent. Even Singapore — which can hardly be called populist — still spends more than twice as much as India, at 3.5 per cent of GDP.
So, across the political spectrum in Asia, which in general has much lower rates of malnutrition than India, governments invest more in social protection. Perhaps parties of many stripes recognise that healthy workers with strong bodies and brains are essential for sustained economic growth — as well as human development.
Naturally, there are many legitimate concerns regarding the NFSB — ranging from democratic engagement to corruption to targeting to household allocations — and these must be addressed. But discussions of the size of the budget envelope should debate what an adequate response would be. India has a higher proportion of stunted children than nearly any other country on earth, yet spends half the proportion of GDP that lower middle income Asian countries spend on social protection and less than one-fifth of what high income countries in Asia spend. The costs of NFSB are not the making of a nanny state.
(Sabina Alkire is director of the Oxford Poverty and Human Development Initiative at Oxford University.)