Wednesday, July 31, 2013

Food Security Bill and The Global Hunger Index

jointly with Prof. Charan Singh


       The Food Security Bill (2013, FSB), promulgated recently by an ordinance is expected to be debated in the Parliament soon. The intention behind the FSB is noble, to eradicate hunger from the country but the means adopted need serious reconsideration. FSB, under the targeted public distribution system (TPDS), aims to provide door step delivery of subsidized food to nearly 75 percent of the rural and 50 per cent of the urban population. It also seeks to empower women in the households.   The thrust of criticism against FSB has been on issues like procurement, storage, transportation, distribution, identification of the beneficiaries and pricing of food grains covered under the scheme. 

Global Hunger Index

    The FSB is motivated by two significant facts. First, disturbing statistics: According to National family Health Survey 2005-06 that 43.5 percent of children under the age of five years are underweight, 33 percent of women in the age group of 15-49 years have a body mass index below normal and 78.9 percent of children in the age group of 6-35 months are anemic. Second, the influential Global Hunger Index (GHI) developed by the International Food policy Research Institute (IFPRI), which has successfully galvanized policy makers across the world. IFPRI has computed a GHI of 22.9 for India in 2012, with countries like Libya, Iran, Mexico, Brazil, Sri Lanka, Pakistan and many others recording much better performance.

Hunger: Definition

     Unfortunately, the term “Global hunger index” is a misnomer as it does not, in its construction take into account the ‘hungry’. Actually, the terminology “hunger” itself is very confusing and means different things to different organizations and policy makers. First and foremost, it evokes images of the extreme discomfort associated with lack of food. On the other hand UNDP defines it as a condition in which people lack the basic food intake to provide them with the energy and nutrients for fully productive lives.

GH Index

    GHI takes into account, in equal weights, undernourishment, child underweight and   child mortality. The indicator, undernourishment, is based on the share of population with insufficient (relative to a norm) calorie intake. Child underweight is defined in terms of wasting and stunted growth and child mortality in terms of death rates, both reflecting unhealthy environment. It is much too simplistic to assume without evidence that either underweight or mortality is due to under-nutrition (signifying deficiencies in energy, protein, essential vitamins and minerals). Child stunting and wasting, and mortality is equally if not more likely to be due to infections and illnesses due to insanitary conditions that result in inadequate absorption of nutrients. These in turn may be linked to inadequate maternal health or child care practices, inadequate access to health services, safe water and toilet facilities. Thus, supply of food may be a necessary but not a sufficient condition for improvement of a part of the hunger index.

GHI is too simplistic and does not take into account the complexities of the problem but sways the opinion makers in developing countries. GHI is already much accused and abused index which has lost respectability because of its various deficiencies, including the weighting priority and data base that is used. The index is also prone to dramatic change in case of unreliable data of even a single partial indicator. For example, the cause of such a dismal GHI for India is mainly data on child underweight in India, which is worst, just next to Timor-Leste.

Underlying Problems & Solutions

  To improve India’s ranking in the GHI, we have to identify the causes of stunting and wasting and to eliminate these causes.  Thus the solution is to improve the supply/availability of clean-safe drinking water, improved sanitation, preferably piped sewerage system, septic tanks or pit latrine with slabs, to avoid outbreak of water-borne diseases like diarrhea, dysentery and cholera; and improved personal hygiene. According to WHO, less than 30 percent of households had access to piped drinking water and nearly 60 percent of Indians still practiced open defecation in 2006. We also need better governance of medical facilities in rural areas, providing more effective primary health centers for maternal and child care. Even with respect to food, though per capita availability of cereals has improved, that of pulses has declined from 69 grams per day in 1961 to 39 grams in 2011. Pumping free cereals into a leakage prone system will not improve even calorie intake as these have a near zero price elasticity and low income elasticity.
The need is to directly address these serious issues and not the imposition of simplistic FSB that is driven more by philosophy than by pragmatic problem solving. As there is no free lunch, a huge hike in subsidy would either lead to higher taxes or higher debt or lower capital expenditure. It also detracts attention from the really “hungry” who constitute less than 2% of the population but are dispersed across the country in remote, hilly locations and need to be painstakingly identified and reached directly.

This article appeared under the banner, “A Misnomer Called Food Security,” in the Op Ed page of the Indian Express, on Thursday 1st August, 1913.  or

Monday, July 29, 2013

Government Failure: The Problem Many Academics Ignore

Old Paradigm

The old paradigm is characterized by approaches and polices that have two underlying problems.  These are, distorted incentives and the corruption of power. Existing systems have distorted the incentives for working efficiently & productively and for investment & entrepreneurship.  In the case of Public servants (bureaucrats & politicians) the dis-incentive is compounded by the imbalance of Power between the State and the Public:  Power corrupts and absolute power corrupts absolutely.[1]  As the systems of governance deteriorated under rent seeking, rent creation and corruption, the power to do good fell relative to the power to harm.  The result is that today, the latter is much greater than the former, so that the rare employee wanting to do good has the dice loaded against him/her. We are now faced with comprehensive failure of governance.

Government Failure

There are four related and interconnected dimensions of this government failure that are important in determining a new approach to development policy.  These are monopolisation of power, employee privatisation of public services, Over-extension of government and Fiscal mismanagement.

Monopolisation of Power

                        Though the monopolisation of economic power started from the 2nd Plan, the peak period of monopolisation was from the mid-sixties to the mid-seventies.  By the eighties it covered every area of economic activity as well as the related institutions and social activity.  It involved excessive and oppressive interference in all areas of private activity including for instance ‘co-operatives’ that were supposed to be an alternative form of private activity. As a consequence the innovative potential and productive genius of the people has been stifled.

Employee ‘Privatisation’

                        Employee Privatisation of Public Services is an extreme form of the principle-agent problem that has been known to economics for some time but has been largely ignored in India.  This is the problem of how large institutions, including the political system and government bureaucracies, can ensure that the workers in these institutions follow the goals of the institution.  This problem has reached epidemic proportion with perhaps 80% of ‘public servants’ maximising their own personal interests,[2] rather than working for the professed goals of the organisation in which they are employed.[3]  The proportion of such people in the upper bureaucracy, which generally constitutes about 2% of the total, may be around one-third and perhaps fall even further in the top most reaches which are much more in the media spot light.

Leviathan Spread Thin

Buchanan’s analysis of government warned us that the government was a Leviathan whose interest was in expanding and spreading over more and more areas.  The Indian government is over extended & spread thin over too many areas and doing things that are beyond its capabilities.   While extending itself to newer areas of activity, the government took the basic functions of government for granted, giving progressively less attention to them.  In a country that invented planning in a market economy in the fifties, this is best illustrated by the absence of even the most elementary planning in digging & re-surfacing of municipal roads. As a result the provision of public goods & services has suffered and their quality has deteriorated.  The untreated sewage pouring into lakes in Nainital & Srinagar and the rivers in Himachal Pradesh and other tourist havens, open sewers running along the roads in towns across the nation, the pathetic state of the sewerage system in the cities (even Delhi slums) are only a few examples.

Fiscal Crisis

Occasional largesse is Populism, continuing largesse is Fiscal crisis. 

Corporate Failure?

Our arguments about government failure should not be taken to mean that those who run and work in the government are morally inferior in any respect to those who run private companies or work in the private sector.  By the same token corporate malfeasance and siphoning of investor’s funds cannot be used to justify misuse of public power and money for personal ends.  These arguments buttressed by examples of fraud by Indian tycoons are particularly ironic in the Indian context, where the Department of Company affairs (DCA), the Controller of Capital Issues (CCI) and Government owned/managed monopoly financial institutions (UTI, IDBI, IFCI, SBI, Nationalised Banks) had complete and absolute control over private (public limited) companies till the early nineties.  Any indictment of the private sector managers under these conditions is an even stronger indictment of the pervasive and smothering system of government controls that cocooned them.
The government and its regulatory agencies can and must act as a direct check on corporate fraud, private corporations cannot act as a check on government malfeasance.  Thus there is a basic asymmetry: The State has absolute power to control and coarse private business, while the latter has none vis-à-vis the State.  Such awesome power is best kept in reserve as a check on private behaviour rather than used for muscling in on the production and supply of goods and services that the private sector is equally (even if not more) competent to produce/supply. Government should focus on good policy and effective law enforcement a much more effective & efficient method of reducing corporate fraud.

Extract from, "A New Development Paradigm: Employment, Entitlement and Empowerment,"  Economic and Political Weekly, Vol. XXXVII No. 22, June 1-7, 2002, pp. 2145-2154. [  NewParadigm4nf ]

[1] These are a modification of the famous remark by Lord Acton that, “power tends to corrupt..”
[2] This is a guess based on conversations with knowledgeable people including IB officers.
[3] ‘Public servants’ covers the entire government system including the police & the semi-autonomous agencies of the govt.

Saturday, July 27, 2013

Employment, Entitlement and Empowerment I

Employment, Entitlement, and Empowerment

  India, a highly populated country, is characterised by “hidden” or “disguised” unemployment.  Woefully poor people cannot afford to be unemployed.  They therefore end up doing low productivity jobs in Agriculture or informal service sector. The problem of poverty is closely linked to this problem of disguised unemployment.  At least for able-bodied adults they are two sides of the same coin and the elimination of “surplus labour” is almost synonymous with the elimination of poverty.  Productive employment generates income that allows workers to buy private goods. 
  All citizens, including the poor, are also entitled to an equitable share of basic public resources.  The most important are Public Goods & Services that by definition cannot be bought separately by and/or sold separately to individuals.  They have to be supplied publicly by the government.   The classic public goods are (local) roads, police & public security, judiciary and national defence.  Public health services are perhaps equally if not more important to the poor.  These include control of communicable diseases, clean drinking water, sanitation & sewerage.
   Entitlements also include a basic level of social security for the old, disabled and infirm, for children and those who are unable to get any work.  A 21st century society cannot let its citizens starve or suffer from chronic hunger and government must provide food to the destitute.
    A 21st century democracy must in fact go further and empower the poor who cannot to afford to pay for their education.  Government must ensure that all its citizens are literate and all children attain some basic level of education, which we currently define as primary/elementary level.  Education not only empowers the public but also ensures that the employed and can do the productive jobs that open up and helps to sustain economic growth over the long term.
    Access to information is an important element of empowerment.  The poor and their well wishers must have the right to information about expenditures that are routinely justified in their name.  The Internet and Internet telephony can play a role in breaking the rural areas’ informational isolation. Excessive taxation, in the form of revenue sharing and charges for surplus (free) spectrum, hinder such a development.


The basic goals of economic development have remained unchanged for decades though their expression may have varied over time.  We can restate them in the context of 21st century democratic society & economy, as,
  Eliminate Poverty
o  Over the next 15 years or so. Under the current definition that is similar to the 2001, $1 a day definition of the World Bank. 
o  Poverty is closely linked with, “under-employment” or “disguised un-employment” and therefore to “higher productivity” jobs (rather than to make-work jobs)
   Human Development
o  100% literacy & primary education.
   Public Goods
o   Basic public goods of reasonable quality and adequate quantity.
o   Democratic access to pubic goods & services is a right of the Public
   Empowerment of the Poor
o   All citizens must get basic human rights
o  They must also fulfil their civic responsibility, for instance public cleanliness (not spitting, throwing trash)


The concrete objectives that must be fulfilled for achieving these goals include,
  High growth between 7% and 7.5% for the next two decades.
  Efficient, self-sustaining labour intensive growth.
o   This focus must continue as long as there is ‘surplus labour’ or ‘disguised employment.’
o   To be self-sustaining, these jobs must be ‘productive’ & ‘value creating’ in contrast to make work government employment.
   Supply of basic public goods & services.
o   Basic, un-glamorous items like clean drinking water, roads, sanitation, sewerage & waste processing/disposal, communicable disease control, personal safety & security, rule of law.
   Government must also deal with positive (e.g. literacy) & negative externalities.
o   Population stabilisation & environmental sustainability. Population takes a heavy toll on environmental resources (quality of water, air, forests, natural vegetation).
o   Pollution of water sources by industrial effluents & sewage in scenic areas and future availability of water.

Achievement of these objectives requires a new economic policy framework based on a new development paradigm.

Extract from, "A New Development Paradigm: Employment, Entitlement and Empowerment,"  Economic and Political Weekly, Vol. XXXVII No. 22, June 1-7, 2002, pp. 2145-2154. [  NewParadigm4nf ]