Top of Form Bottom of Form * Article * Comments (16) India Real Time HOME PAGE » By Vibhuti Agarwal and Shefali Anand Though approved by the Cabinet Sunday, the fate of the much-anticipated Food Security Bill, which will guarantee cheap food for India’s masses, is far from sealed.But it already is scaring economists who see it as a huge financial burden on the government at precisely the wrong time. Divyakant Solanki/European Pressphoto Agency Economists believe spending as proposed by the food security bill “will just make the fiscal side bleed even more. ” Analysts said the Cabinet’s nod was done with an eye toward the assembly elections in five states early next year. The bill is to be tabled in Parliament this week.And in an unusual step, Parliament Monday extended its session by three days to end early next week, according to Indian media reports, giving legislators more time to deliberate. Still, political analysts say the Food Security Bill may not get passed by the end of the session since Parliament’s attention is likely to be taken up with a contentious anti-corruption bill. After being introduced, the food bill will likely be sent to a standing committee for further discussion, a process which typically takes weeks.Once it does reach the voting stage, all political parties are expected to support the bill which will provide subsidized food grains to 75% of the rural population and about half of urban households. “No political party is in a position to refute a pro-poor measure openly,” said Chintamani Mahapatra, professor of political science at New Delhi’s Jawaharlal Nehru University. But analysts denounced the bill saying that it will not spur economic development but instead add to the government’s financial burden. Measures that should have been decided on grounds of economic policies are being worked out on the basis of political calculations,” said Mr. Mahapatra. India is already reeling under a spate of bad news this year on the economic and capital markets fronts. The country’s economic growth is expected to slow down to 7% or lower for the year through March 31, thanks to a combination of several interest rate increases and a lack of reforms by the government as well as some blowback from the European financial crisis.India’s benchmark stock market index has lost 24% this year, and the Indian rupee has lost nearly 20% in value against the dollar. India’s fiscal deficit for the year through March 31 is expected to be 5. 5% of gross domestic product, higher than most other Asian countries and above the government’s official target of 4. 6%. Economists say that India can’t sustain such a high fiscal deficit for long. New spending as proposed by the food security bill “will just make the fiscal side bleed even more,” said Rajeev Malik, senior economist at securities firm CLSA Asia-Pacific Markets in Singapore. It just boggles me that a trained economist as a prime minister can allow all this irresponsibility under his watch,” said Mr. Malik, referring to Prime Minister Manmohan Singh. To meet the requirements of the Food Security Bill, India will annually need 60 million to 61 million tons of grains to feed people who will be eligible for assistance under the program, up from around 55 million tons it needs now for state-run welfare programs. This will cause food subsidies to balloon to an estimated 949. 3 billion rupees ($18. 05 billion) in the first year of implementing the food security program, up from around 673 billion rupees now. The government will also need an investment of 1. 1 trillion rupees to boost farm output over next few years. “This is a big challenge. The country will have to take responsibility of producing huge quantities of food grains,” India’s Agriculture Minister Sharad Pawar, who was earlier opposed to the bill, said on television news channels after the Cabinet passed the Bill Sunday.
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