The Food Security Bill in India is a step towards changing this—at least in effect, if not in amendment. The Bill, which has been pushed tirelessly by the current government and by a council of advisors, will grant 67% of the nation's population the right to receive a monthly quota of 5kg of foodgrains at highly subsidised rates of Rs1-3 (US$0.02-0.06) per kilo. In addition, the poorest of the poor will continue to get 35kg of grains per month.
On the face of it, this bill sounds like a knock to food and beverage makers who have been banking on the large untapped potential of the rural and urban poor segments of India’s population. Indeed, many players have invested heavily in developing products suited to these segments, with smaller packaging, lower price points and different formulations.
So putting cheaper food in bulk in the hands of this segment is understandably not considered a great move by some of the more engaged experts—if the poor can access such cheap basic foods, will they really spend money on more expensive food brands, the ask.
Well, I think they will.
To say that access to cheaper grains would deter this segment from shopping for other foods is a gross misreading of poor households in India. While they may languish in the class pile of Indian society, there is no doubt that due to a number of factors—cable television, mobile phones and education—are no longer content with their position. Aspiration is alive and kicking within this segment, and being able to eat and drink, if even only slightly better than before, is part of that trend.
Putting cheaper grains in the hands of the lady of the poor household would mean that there will be more money left for other purposes. This bill has the potential to buoy rural demand for a number of other articles of need and desire—and up there in the list are food and beverage items.
My belief is that once in force, and if applied without the middlemen who have ravaged India’s public distribution system (PDS), the bill will most definitely boost rural demand, along with the new cash subsidy transfer scheme. At a time when real wages in rural India grew at only 8% in the first nine months of FY13, compared to 10.6% growth during the previous fiscal year, how can the bill be bad for the food industry—or any other industry, for that matter?
I also do not buy the argument that the Bill would be a burden on the country’s exchequer. My reading is that the Bill only legalises the entitlements under other pre-existing food security schemes, such as the PDS and the Integrated Child Development Services Scheme, and adds a little more of the poor populace under the new bill.
If there were to be a referendum, my vote would be for the Bill. It’s about time that the country’s largest workforce—the rural poor in agriculture and the urban poor in menial jobs in the cities—get a break from the government.
Have your say: Do you agree with Ankush? Will the Bill really benefit food companies while also helping the poor? Let us know in the box below.