FSB: A Mere Political Announcement
Markets don’t seem to be very comfortable with the successful passage of Food Security Bill (FSB) in the Lok Sabha on 26th August, 2013.With a huge fall of about 600 points, market sentiments seem to say a different story.
Stock markets are referred to as reflectors of market sentiment and the latest fall suggests all is not well in the country. Surely, the fiscal situation is too gloomy with rupee kissing new lows each day. With the limit of 66 breached by it against the dollar today, earth’s gravity seems to be working very strong presently.
With the clearing of bill, politicians are busy patting their backs, but sick financial status of the country presents nothing to cheer about actually.
Either our ‘netas’ are too far-sighted or numbers portray a wrong picture. But, considering the doubtful and low standards of integrity possessed by our politicians, numbers must be true to say the least.
But, the question now is whether FSB will find the light of the day?
The readers must be wondering why I am even casting doubts over the bill’s implementation when all is already set up.
Well, FSB is still ambiguous in many aspects. It doesn’t clearly mention the size of hole that would be filled by it in the economy. The Union Minister for Food put forward a figure of Rs 130,000 crore. But, considering the fiscal deficit reported by our country in 2012-13 (approximately Rs 5,00,000 crore) the implementation seems difficult.
Presently, the fiscal deficit is touching around 4.9% of GDP mark. This is something in itself and a very huge figure; even if we ignore CAD for a while. And, economy is growing at 5%. If FSB is introduced and rupee keeps nose-diving and reaches 70 and stabilizes, the deficit can easily shoot up to 5.5% to 5.9%. At least, it has a potential to do so.
But, international rating agencies are constantly warning that India’s ratings would be lowered further if its fiscal deficit keeps increasing. And our obedient Finance Minster has promised them a like good school boy that red line of 4.85 of fiscal deficit wouldn’t be breached.
This is possible only if expenses involved in implementing FSB are not included in the book this time like other subsidies are being done, so as not to reflect it against economy’s domestic expenses. Or, if the bill is only used as an announcement till the time of elections without getting it implemented but portraying it to be working on ground. We all know how good our government is in carrying out such fooling tricks.
Considering the amount of time this government took in finally laying out NREGA during the last time, same methods may hit the ground this time too. Although, 100 day employment guarantee scheme did hit the track before elections that time, country is facing serious problems on the fiscal and monetary front presently.
Additionally, states implementing it would be required to identify people (75% rural residents and 50% urban residents) on their own and this is no lesser task for them either. Even if some Congress ruled states start with the implementation of plan as some states such as Haryana have vowed to do, it will still take a lot of time to convince opposition ruled states for its implementation in their region of rule.