India attempts to pass food security bill under economic strain

September 4, 2013

According to The Washington Post, India plans to subsidize wheat, rice, and cereals for approximately 800 million people under a $20 billion system to cut malnutrition and ease poverty. The food security bill, sent to the president for approval, guarantees citizens a legal right to food. Two-thirds of India’s citizens live in poverty and half of the country’s children are malnourished. But the $20 billion annual cost of the bill, which consolidates and expands existing subsidies, has drawn renewed attention to strained government finances at a time when India is close to an economic crisis.

The legislation was passed by India’s upper house of parliament on Sept. 2 after being passed in the lower house. It allows those who qualify to buy 5 kilograms of rice a month for 3 rupees (4.5 cents) a kilogram. Wheat will cost 2 rupees a kilogram, and for cereals the cost is 1 rupee. Pregnant women and new mothers will also receive at least 6,000 rupees ($90) in aid. The expanded spending will increase food subsidies from 0.8% of gross domestic product to 1.2%.

Moody’s credit ratings agency said the food bill would hinder the government’s ability to consolidate its finances. The Reserve Bank of India also warned in its annual report that the bill could exacerbate strains on the government budget and limit its room for maneuver in the future.

The Washington Post article