Every time an update on some development index is released, it presents an occasion for public intellectuals to clamour for more state intervention. The Global Hunger Index (GHI) is a recent example of this trend.
The GHI is a compound of the proportion of persons who are undernourished, the proportion of children under five who are undernourished and the child mortality rate. The GHI is scored between zero and 100 and the higher the score, the worse off the country. In South Asia, India is one of the worst performers and ranked only above Bangladesh in 2010: All other countries were ranked better.
Some facts of the situation are clear. GHI data shows that 22% Indians were undernourished in 2010, barely 2 percentage points less than the proportion in 1990-92.
It has also been pointed out that in the past decade, if not earlier, the calorie intake of the disadvantaged citizens has fallen. These developments have occurred in a period of relatively high gross domestic product growth.
This immediately led to calls for more state intervention in providing food to the poor and the destitute and a hastening of the food security legislation. Such policy advice represents more of the medicine that led to the malady in the first place.
While the story is complex, supply-side constraints have undoubtedly played a part in the sorry tale. But what is ignored here is that if greater public intervention to supply cheap food is resorted to, it will only worsen the situation. For what is spent on subsidizing consumption represents a serious opportunity cost elsewhere: forgone public investment in the country’s crumbling agriculture sector. A simple example illustrates the problem well. Today, at a minimum, the government subsidizes a kilo of foodgrains to the tune of Rs10. In early July, the Union government held a stock of 58 million tonnes of foodgrains. The subsidy on this amount is Rs580 million. And this is just an annual figure on just one part of the agricultural economy.
This distortion in spending/investment priorities is the key reason for supply bottlenecks that lead to inflation (which is a tax on the poor) and declining food availability. No one wants to highlight this dark aspect of Indian political economy. State intervention has to have some logic to it. It should not be reduced to a mere slogan.
Will state intervention in food markets help the poor? Tell us at firstname.lastname@example.org