NEW DELHI: The Economic Survey 2020 tabled in Parliament has argued against government interventions like debt waiver and food subsidies, saying that full-waiver beneficiaries consume less, save less, invest less and are less productive after the waiver, when compared to the partial beneficiaries.
The Survey noted that the government intervention did not even help much in curbing the spiralling onion prices.
Talking about the National Food Security Act under which subsidised foodgrains are distributed to the poor in the country, the Survey noted, “The coverage of NFSA needs to be restricted to the bottom 20 per cent and the issue prices for others could be linked to the procurement prices.”
Raising questions on policies concerning foodgrain markets, it said, “Government policies in the foodgrain markets have led to the emergence of government as the largest procurer and hoarder of rice and wheat crowding out. This has led to burgeoning food subsidy burden and inefficiencies in the markets, which is affecting the long run growth of agricultural sector.”
Recommending alternatives to food distribution system, the survey said, “The foodgrains policy needs to be dynamic and allow switching from physical handling and distribution of foodgrains to cash transfers/ food coupons/smart cards.”
The NFSA was implemented in July 2013 and since then, the food subsidy bill has increased from Rs 1.13 lakh crore in 2014-15 to Rs 1.71 lakh crore in 2018-19.
Under the Act, the government supplies 5 kg of subsidised foodgrains to each person per month through more than 5 lakh ration shops, known as public distribution system.
On farm debt waiver, the Survey noted, “It is clear from the above studies that an unconditional and blanket debt waiver is a bad idea. It does not achieve any meaningful real outcomes for the intended beneficiaries while the costs to the exchequer are significant. Most importantly, debt waivers disrupt the credit culture and end up reducing the formal credit flow to the very same farmers it intends to help.”