Natural Security Blog: Post

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 interests 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 yesterday.

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 percent 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.  

Food, India

4 comments

This is a worthy part of

This is a worthy part of their budget. I'm not sure, though, that it really is attuned to the short-term, as you say. I wonder how open the Indian government would be to imports from food surplus countries, like the US or Canada? This is the one thing that would reduce prices in the short-term. It seems that these investments are geared to increasing internal production of food- very important for long term food security- but the best way to reduce prices in the short term would be to allow free trade in wheat and rice.

So, there is a tension between long-term and short-term. These investments will do little for prices in the short term, but could increase security in the long term. On the other hand, increases food imports would reduce prices in the short term, but could harm long-term domestic food production.

All good points. That end

All good points. That end part was referring to the fact that the budget seemed to focus more on the short term concerns of their constituents, i.e. food shortages and oil subsides, instead of long term interests such as clean energy. But your point about food surplus is especially interesting, in my opinion. I believe that State and USAID should explore ways to use food diplomacy to allay concerns over a food crisis in Asia. This could potentially be good for our strategic interests in Asia, especially as the drought in China makes it less likely they will be able to do the same, as well as demonstrate to domestic audiences (i.e. Congress) that food aid is worthy of funding.

Thanks for the comment...

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