Does India Need Food Subsidies Essay

Does India really need food subsidies?

INTRODUCTION:
Subsidies are basically negative taxations, meaning that it reduces the price of the subsidized good and also the income of the government (opposite of taxes). The reason for subsidization could be to correct imperfections in the market or even to attain equity. Whatever may be the reasons, almost every industrialized nation in the world subsidizes agriculture to some extent. In this respect, India has one of the largest food subsidy programmes in the world. On the other hand it is the second most populous country in the world, also home to the most number of poor. Therefore ‘food security’ still looms menacingly over the head of the government of India. Keeping these factors in mind subsidizing food seems like the most rational choice in order to ensure the welfare of the masses, but the increasing food subsidies in India do not contribute as

The following reasons make the extent of food subsidies in India unfeasible for the economy:
1) ECONOMIC DISTORTIONS:
Some economists believe that subsidies cause economic distortions. This means that subsidies divert the resources from more productive to less productive uses. Public finance economist Ronald Gerriste warned that” subsidies could have externalities that we did not bargain for.”
Let us take the example of India; subsidies serve as an incentive for farmers to produce food grains desired by the government (rice and Wheat) and not other goods like vegetables or fruits. This results in the less production and high prices of other goods. Thus the overall efficiency of the economy is reduced in this manner.
2) DISTRIBUTION OF BENEFITS:
The conduit between the government and the intended recipient is more like a fountain than a pipeline, with opportunity for others to dip in along the way. There are both inclusion and exclusion errors, and large-scale diversion of food grains from the PDS/TPDS