The rough meaning of subsidy is ‘money granted by the state or a public body to keep down prices of commodities’. The current Indian debate is not on what subsidy is but on whether we need it at all. The subsidy debate has never been as intense as it is now. A section of Indians blame the Centre’s ‘heavy economic dole-outs’ as a cause behind the larger economic malaise plaguing the nation. Others believe that the Centre's economic generosity aids only the larger industrial houses and their interests. And that the rights of the underprivileged section are often overlooked in the name of fiscal consolidation

With fiscal deficit rising every year, there is now a growing demand from a particularly vocal section of Indians to bring down subsidies—because it has failed to reach its target group and has become a source of aggrandisement for those privileged. If this demand grows, the proposed National Food Security Bill, which depends on heavy subsidisation of commodities for its implementation, will be under threat. The Cabinet cleared the Bill at a specially-convened meeting on December 19, 2011. The Bill, brought before the Cabinet by Food and Public Distribution minister K.V. Thomas, would be implemented among 75 per cent of the rural population and 50 per cent of the urban population, and cost the government approximately `1 lakh crore. It will require 61 million tonnes of grain to be implemented. The Bill divides its target group into two—the priority group consisting of those living below the poverty line. Such citizens would be provided 7 kilograms of grain per month per person, plus rice at `3 per kilogram, wheat at `2 per kilogram and coarse grain at `1 a kilogram. For the general group each person will receive 3 kilograms of grains per month at half of the minimum support price given to farmers. Pro-subsidy groups counter the ‘stop subsidies’ debate by pointing out that aid for the downtrodden has always been questioned, while for industrial houses, making profit due to government’s largesse, has been ignored. They also add that during down-time (read now) far from tightening purse-strings, the government must spend more. They point out that those talking about ‘fiscal prudence’ are not concerned with inequalities, want the government to spend less and balance what it spends by taxing the poor. It has to be admitted that in a developing country like India, where the underprivileged predominantly depend on subsidy for their daily lives, poor implementation of a workable idea cannot be the ground for scrapping an idea altogether. There is general consensus that the solution lies within the implementation process. Debating the issue are two experts who hold strong views on the issue. One of them, Surjit S. Bhalla is the Managing Director of Oxus Research and Investments, a New Delhi-based economic research, asset management, and emerging-markets advisory firm. On the other side is Devinder Sharma, a food and trade policy analyst, columnist and activist.

SURJIT S. BHALLA// The role of subsidy in any economy—including India—is to redistribute wealth among the bottom-rung of the society. All civil societies have schemes which enable subsidisation of either expenditure, food or purchases made by the underprivileged. The problem in India is not with subsidy per se, but with implementation, which has been poor at best. The main issue lies with leakages—programmes such as the Mahatma Gandhi National Rural Employment Guarantee Act (NREGA) or Public Distribution System (PDS) are accessible to people who are below the poverty line. I do not believe that there is anything called an ‘over subsidisation’. Having said that, an advocate should keep in mind that subsidies in India never reach their intended target. Despite continuously implementing food subsidies, hunger and malnutrition prevail in our county and I will squarely blame the government and the distribution system for keeping the underprivileged out. Subsidies are not growing into productive investments, and are becoming more like expenditures not reaching the intended beneficiaries. The money which should have been used to boost the country’s is instead getting drained due to an overemphasis on subsidy. As a result the nation's growth is taking a beating. There is a need to control fiscal deficit if we want our economy to grow. In such a state, the Food Security Bill will prove to be an added disadvantage. It is one of the most ill-conceived, highly-flawed bills, unlikely to be passed in the Parliament. It is a Bill that is playing on populist sentiments of the aam aadmi. It would prove to be a great burden on the economy if it is passed. If the government really wishes to aid the poor then why is it not emphasising on cash transfer schemes? Give states that requisite money to get food or transport. Subsidies are to redistribute wealth among the bottom-rungs, so unless it is done efficiently there is no reason to re-distribute at all. And so far India has done a shoddy job as far as redistribution is concerned; one only needs to look at the success rate of every subsidy scheme to gauge whether the job was well done or not. Again, personally transparent, direct cash transfers seem to be the way out of this conundrum. However, such a move will not happen in the immediate future because the concept of subsidy, however flawed in this country, actually translate into votes—so it cannot be taken out of the political context. Politicians lack the courage to privatise lossmaking public sector units because they are afraid of losing the organised labour-class vote. The same sentiment makes them resist dismantling subsidies for power, fertiliser and water, even though it puts a strain on the economy and does not reach the target group. Most politicians would rather jump off a building than question food subsidy—because the underprivileged vote bank is sadly the largest in the country. As long as politicians in this country continue to create election agenda out of subsidies, the bulging fiscal deficit will continue to grow. Why is there a subsidy on petroleum prices—which rung uses it? Not the poor, so why subsidise the rich? Therefore, I see a huge problem the way subsidy programmes are handled in India. As long as we cannot seem to manage the tasks at hand, should we add more?

DEVINDER SHARMA// There is nothing essentially ‘evil’ in the idea of subsidy— even if we consider the way it is handled here. Eighty per cent of our citizens survive on `20 a day—we are essentially a malnourished nation. Yes, there should be a modicum of rationalisation of subsidy, and of course, it should reach the right people. But should we question its very existence? Whether be fertilisers or food, there should be heavy subsidisation of every commodity. Why is it that we become sensitive to the question of ‘waste’ only when it comes to the subsidies for the poor? If the spotlight is turned towards the industries, the corporate world thrives on subsidy. The difference— in case of industries people label them as ‘investment’ while real investment in the underprivileged section is seen as ‘dole’. From 2004-2012, approximately `26,00,000 crore worth of investment has gone into the corporate sector. However, if we look at sectors such as manufacturing, investment and export, they have taken a heavy beating despite investments. Another example—the NREGA—requires `40,000 crore for its implementation. The corporate sector—by way of revenue forgone—requires subsidies worth `5,29,000 crore. Why is it that no one talks of wasted money that went into these sectors? On the Global Hunger Index Report, produced by International Food Research Institute, Washington, India figures 68th among 84 countries. We figured poorer than Rwanda and Sudan with more than 320 million people living in hunger that is nearly the number of citizens in the US. In my understanding, it is a crime to mutely witness death due to hunger and malnutrition especially when a nation goes through a growth trajectory with rising per capita income. And it is the greatest insult to the democratic system of a country. Why should some 320 million people live in poverty or die of it? It is the farmers who produce real food, not the corporates. It is those who are privileged who worry about subsidy for the poor; because they want it all for themselves. Of course people want an end to the Indian welfare state, especially when the trend has been the opposite in western nations. Take the US for instance. Every one of its seven citizens suffers from hunger. Thus, in the past 24 years, the US has been raising its subsidies to ensure supplement nutrition programmes. And the US is a developed nation. How then, does a developing nation like ours imagine any alternative to subsidies? I believe the call to lessen subsidies is a clever move by the corporates to ensure that they get more. Having said that there is no denying that programmes are not working the way we want them to. There is always room for improvement and loopholes need to be blocked. In fact, we need to provide more income to the farmer and direct money to the landless labourer. If I had been in some position of political power, I would have ensured that the Food Security Act was implemented. In fact, if the Act is implemented then the manipulation of the poor masses by political classes would have stopped. It is true that India's fiscal deficit is more than 5.2 per cent of the GDP. The Union Finance Minister believes that he will bring down the FD to 2 per cent of the GDP. But that won't be done by taking back the cash from the poor or by withdrawing subsidy meant for those who live below the poverty line. What is the use of 8 per cent economic growth, if 320 million people live in hunger? GDP ideally does not reflect India's reality. Especially when 1 billion people out of 1.2 billion, live below poverty line (Arjun Sengupta Report). The irony is that the middle-class has been the main beneficiary of economic reforms. It is they who want food items and petroleum products at a cheaper price. Today, 200 districts of India are affected by Maoist insurgence. If the government does not stop giving away people’s resources at a throwaway price to the governments in these regions, then the problems would be aggravated