March 02, 2011

India’s New Budget: Fighting Food Insecurity

As the attention of the world turns towards the East over
the coming decades, India will become an increasingly important power. As a recent CNAS report began, “The
emergence of India as a new major global power is transforming the world’s
geopolitical landscape, with profound implications for the future trajectory of
our century and for America’s own global interests.” Other CNAS working papers
have demonstrated the extensive mutual
India and the United States will continue to share in the areas of defense, the global commons, and private sector trade. Natural security
is another potential area for cooperation between Washington and New Delhi, and
we therefore felt it would be worthwhile to highlight some of the natural
security aspects of the India’s
new budget that was released

One of the largest priorities of the new budget is reducing
the price of food. India has recently struggled with food price inflation,
which reached a one-year high in December. Food prices rose 11
through the month of January and 11.49
percent by mid-February
. It was therefore not surprising when, in his
address to Parliament Monday unveiling the budget, Finance Minister Pranab
Mukherjee said
, “Our
principal concern this year has been the continued high food prices.”

The new budget proposes a number of steps to combat the rise
in food prices. Most of these involve agricultural reform. For instance, the
Singh administration proposed increasing funding for the Rashtriya
Krishi Vikas Yojana
(RKVY) a
development program launched by the Indian government in 2007/2008. It aims to
achieve 4% greater agricultural growth through providing incentives for
holistic approaches to farming. Funding for RKVY in the new budget has been pegged
at 78.6 billion rupees, a substantial increase
from the 67.6 billion rupees it received last year.


The National Food Security Mission (NFSM) will also receive more funding if the
Parliament approves the budget as it was proposed. The NFSM is another initiative
the government launched in 2007 to meet the growing food demand of the country.
This program seeks to increase the production and productivity of wheat, rice,
and pulses. The NFSM will receive 12.5 billion rupees compared to the 11.5 billion
rupees of funding from last year. During his speech on Monday, the Finance
Minister also promised that a national food security bill will soon be introduced to the Parliament.

Additionally, some
more minor steps were proposed. For instance, 4 billion rupees will be invested into green technology for rice farms in the Eastern part of the country. Subsidy payments to
farmers who pay their loans on time also increase 1 percent in the new budget, from 2 to 3 percent.
The food subsidy in this budget is slightly lower than it was last year, but the government will begin a trial program where it will distribute food and oil
subsidies directly to people below the poverty line through cash payments. This
is in part an attempt to make the subsidy program more efficient as subsidies now consume around 3 percent of GDP.    

Beyond agricultural
programs, the new budget gives cold storage facilities infrastructure status, which
is a means used to attract more private investment through offering beneficial tax
incentives. Increasing the country’s cold storage capacity is imperative for solving
the food crisis. According to Reuters India, “As much as 40 percent of India's
fruit and vegetable production goes to waste because of inefficient networks
and a lack of cold storage facilities.”

While investing heavily
in food security, the new budget devoted scant attention to environmental
issues and the clean energy sector. In his speech yesterday, Finance Minister
Mukherjee did say, “Protection
and regeneration of forests has great ecological, economic and social value”
and “Environmental pollution has emerged as a serious public health concern
across the country.” This rhetoric was not backed up this much action besides
the 2 billion rupees the budget proposes for the National
Clean Energy Fund
. Overall, however, the investment in clean energy fell well
below what some had been expecting

In sum, the natural security parts of the budget followed the
basic themes of the entire budget: a slightly populist approach that was attune
to the short term needs of the populace.