Recently, the Indian government made the decision to eliminate the financially burdensome Covid-era free food program and make the current NFSA program free of charge for a full year instead.
The Pradhan Mantri Garib Kalyan Ann Yojana (PMGKAY) and the political anguish that would have resulted from a rollback have both been addressed by the Prime Minister Narendra Modi-led administration in one fell stroke.
The general election will take place in 2024 after a number of state elections in 2023.
This fiscally sensible action has been applauded by economists, as New Delhi is now anticipated to save close to 0.15% of GDP in the final quarter of FY23 and assist in achieving the fiscal deficit target.
According to Bloomberg, the Centre’s food subsidy bill will now be reduced; it will double from the about Rs 1 lakh crore that was being spent on food subsidies before the Covid-19 outbreak.
The cost of free food, according to the statistics
Experts have long argued that the Modi administration has been burdened by food subsidies.
According to reports, this year’s government spending on food, fertilizer, and fuel is expected to be approximately 70% higher than what the budget anticipates.
Since April 2020, 813 million Indians have received 5 kg of wheat or rice each month through the PMGKAY program. This was in addition to the National Food Security Act’s (NFSA) allocation of highly subsided food grains, which included 35kg of grain sales to the poorest households each month and 5 kg of food grains per person per month at prices of Rs 3 per kg for rice, Rs 2 for wheat, and Rs 1 for coarse grains.
The PMGKAY, which has been extended numerous times since its commencement in April 2020, will terminate on December 31, 2022, according to Union Minister Piyush Goyal. According to Nomura’s calculation, the scheme has together cost the Centre close to Rs 4 lakh crore (about 1.4% of GDP), on top of the ordinary food subsidy bill.
The food subsidy cost is reportedly tracking at over Rs 3 lakh crore in FY23, which is more than the projected sum of Rs 2.07 lakh crore (about 0.7% of GDP).
The Center has made its current NFSA program free of charge for one year, through December 2023, as part of the reorientation. The program’s beneficiaries will receive 5 kg of food grains completely free. The program will cost the government Rs 2 lakh crore.
But fiscal consolidation is still difficult.
Repercussions for politics
Numerous states, including Karnataka (May), Chhattisgarh, Madhya Pradesh, Rajasthan, and Telangana (November), have elections scheduled for 2023. (December). General elections will take place in May 2024.
Reversing the free food program was never going to be an easy task because it gave the Centre significant political momentum. However, it is anticipated that the scheme’s restructuring will lessen some of the damage.
News Mania Desk
