These food subsidies inflate prices

When India achieved independence more than fifty years ago, the people of the country were much afflicted by endemic hunger. They still are. Since India is often considered to be one of the great success stories in tackling the food problem, the belief in success has to be scrutinized in the light of the grim reality that we can observe.

The positive perception in not, however, entirely mistaken. Certain things have been achieved, and it is important to see what has been accomplished and what remains to be done. Some positive things have certainly occurred. First, pre-independence India had a stagnating agriculture, and this has been firmly replaced by an imposing expansion of the production possibilities in Indian agriculture, through innovative departures. The technological limits have been widely expanded. What holds up Indian food consumption today is not any operational inability to produce more food, but a far reaching failure to make the poor of the country able to afford enough food.

Second, substantial famines that so plagued India until independence has been effectively eliminated: the last sizeable famine occurred in 1943 – four years before independence. And yet this creditable record in famine prevention has not been matched by a similar success in eliminating the pervasive presence of endemic hunger that blights the lives of hundreds of millions of people in this country.

Indeed, India has not, it should be absolutely, clear, done well in tackling the pervasive presence of persistent hunger. Not only are there persistent recurrences of severe hunger and starvation in particular regions, but there is also a gigantic prevalence of endemic hunger across much of India. Indeed, India does much worse in this respect than even Sub-Saharan Africa. Estimates of general undernourishment - what is sometimes called “protein-energy malnutrition” - are nearly twice as high in India as in sub-Saharan Africa. It is astonishing that despite the intermittent occurrence of famine in Africa, it too manages to ensure a much higher level of regular nourishment than does India. About half of all Indian children are, it appears, chronically undernourished, and more than half of all adult women suffer from anaemia. In maternal undernourishment as well as the incidence of underweight babies, and also in the frequency of cardiovascular diseases in later life (to which adults are particularly prone if nutritionally deprived in the womb), India’s record is among the very worst in the world.

What, then, should we do, indeed what can we do? People have to go hungry if they do not have the means to buy enough food. Hunger is primarily a problem of general poverty, and thus overall economic growth and its distributional pattern cannot but be important in solving the hunger problem. It is particularly critical to pay attention to employment opportunities, other ways of acquiring economic means, and also food prices, which influence people’s ability to buy food, and thus affect the food entitlements they effectively enjoy. It is also crucial to use the means of specialized delivery of food that particularly helps poor children, such as more extensive use of feeding in the school. This can not only increase the incentive of children to go to school, but also actually make them healthier and less undernourished. The Supreme Court has been judicious in emphasizing the importance of this right.

Further, since undernourishment is not only a cause of ill health, but can also result from it, attention has to be paid to health care, in general, and to the prevention of endemic diseases that prevent absorption of nutrients, in particular. There is also plenty of evidence to indicate that lack of basic education too contributes to undernourishment, partly because knowledge and communication are important, but also because the ability to secure jobs and incomes are influenced by the level of education.

Indeed, low incomes, relatively higher prices, bad health care and neglect of basic education are all influential in causing and sustaining the extraordinary levels of undernutrition in India. There are also more complex connections. Recent medical research has brought out the long-run effects of maternal undernourishment, which not only ruins the health of the mothers, but can also cause serious health problems for the children who are born with low birth weight, since they are more prone to children’s diseases and – later on in life – also to adult diseases. Indeed, low birth weight substantially increases the incidence of cardiovascular diseases later in life.

What about food policy, and in particular food prices policy? Why is it the case that the large expenditure on food subsidy in India does not achieve more in reducing undernourishment? Part of the answer lies in the fact that the subsidy is mainly geared to keep food prices high for the sellers of food - farmers in general – rather than to make food prices low for the buyers of food. The high incentive to produce more food while giving little help to the poorer people to buy food has produced the massive stocks of food grains that we find in India today.

In 1998, stocks of food grains in the central government’s reserve were around 18 million tons - close to the official “buffer stock” norms needed to take care of possible fluctuations of production and supply. Since then, it has climbed and climbed, firmly surpassing the 50 million mark, and while it has had some ups and some downs, the total stock is still extraordinarily large. To take Jean Drèze’s graphic description, if all the sacks of grain were laid up in a row, this would stretch more than one million kilometres, taking us to the moon and back.

The public expense of the programme of subsidies (estimated, not long ago, at a staggering Rs. 21,000 crores a year) is mainly used to add to the market food prices to raise the incomes of the farmers. We are evidently determined to maintain, at heavy cost, India’s unenviable combination of having the worst of undernourishment in the world and the largest of unused food stocks on the globe. Indeed, a regime of high prices in general (despite a gap between procurement prices and consumers retail prices) both expands procurement and depresses the affordability of food. The bonanza for food producers and sellers is matched by the privation of the consumers. Since the biological need for food is not the same thing as the economic entitlement to food (that is, what people can afford to buy given their economic circumstances and the prices), the large stocks procured are hard to get rid of, despite rampant undernourishment across the country. The very price system that generates a massive supply keeps the hands – and the mouths – of the poorer consumers away from food.

In fact, much of the subsidy goes into the cost of maintaining a massively large stock of food grains, with a mammoth and unwieldy food administration. Also, since the cutting edge of the price subsidy is to pay farmers to produce more and earn more, rather than to sell existing stocks to consumers at lower prices (that too happens, but only to a limited extent and to restricted groups), the overall effect of food subsidy is more spectacular in transferring money to farmers than in transferring food to the undernourished Indian consumers.

Of course, those who want high producer prices of food include some who are not affluent, in particular the small farmer or peasant who sells a part of the crop. The interest of this group is mixed up with those of big farmers, and this produces a lethal confounding of food politics. While the powerful lobby of privileged farmers presses for higher procurement prices and for public funds to be spent to keep these prices high, the interests of poorer farmers, who too benefit from the high prices, are championed by political groups that represent these non-affluent beneficiaries. Stories of hardship of these people play a powerful part not only in the rhetoric in favour of high food prices, but also in the genuine conviction of many equity-oriented activists that this would help some very badly off people. And so it would, but of course it would help the rich farmers much more, and cater to their pressure groups, while the vital interests of the much larger number of people who have to buy food rather than sell it are thoroughly sacrificed.

There is need for more explicit analysis of the effects of public policies on the different classes, and in particular on the extreme underdogs of society who, along with their other deprivations (particularly low income, bad health care, inadequate opportunities of schooling), are also remarkably underfed and undernourished. For casual labourers, slum dwellers, poor urban employees, migrant workers, rural artisans, rural non-farm workers, even farm workers who are paid cash wages, high food prices bite into what they can eat. The overall effect of the high food prices is to hit many of the worst off members of the society extremely hard. And while it does help some of the farm based poor, the net effect is quite regressive on distribution. There is, of course, relentless political pressure in the direction of high food prices coming from farmers’ lobbies, and the slightly muddied picture of benefiting some farm-based poor makes the policy issues sufficiently befuddled to encourage the confused belief that high food prices constitute a pro-poor stance, when in overall effect it is very far from that.

Given our democratic system, nothing is as important as clear-headed public discussions of the causes of deprivation and the possibility of successful public intervention. Public action includes not only what is done for the public by the state, but also what is done by the public for itself. It includes what people can do by demanding remedial action and through making governments accountable. That is exactly why we are gathered here today. The lives and well-being of hundreds of millions of people will depend on the extent to which our public discussion can be broadened and be made more informed. I hope we manage to have some impact.