The Indian political class has gone into a needless tizzy after US President George Bush suggested last week that the growing prosperity in India and China is responsible for rising food prices.
Bush has typically peddled a semi-truth. His administration’s subsidies for corn-based biofuels have also pushed up food prices. But the general point is not worth getting worked up about, just as saying that the economic boom in India and China has fuelled the rise in oil prices should not raise any eyebrows.
The more important issue is to come up with solutions to the food crisis. We believe that the long-term solutions will come from economic incentives for farmers to grow more, fewer trade restrictions, genetic engineering and public investment in rural infrastructure. But these will have an impact over the years. The more immediate challenge is to ensure that the poor get cheap food through the government welfare system.
However, this welfare system is creaking and inefficient. Finance minister P. Chidambaram had said in Bangalore last week that 39% of the foodgrain that goes through the public distribution system (PDS) is lost because of leakages, which is a euphemism for pilfering and corruption. “My job is to give a good price to farmers, procure enough foodgrain and give it to the states. My responsibility stops here and the state’s responsibility begins. They have to make sure foodgrain goes to the PDS shops without any leakage,” Chidambaram said.
Passing the buck does not help solve problems. There have been repeated calls to make radical changes in the PDS system and ensure that subsidized food actually reaches the poor rather than being sold in the open market at a higher price for a quick profit. But, it is now time to also ask whether the PDS system needs to be scrapped altogether. It is time the government replaced its inefficient welfare schemes with a system of direct cash transfers to poor families.
Such cash transfers will not only eliminate a large layer of corrupt officials, but will also give wider choices to poor families which, until now, have not known anything beyond atta and chawal. Our continued economic growth requires a healthy working population.
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