I’m not convinced by the official figures for the subsidy that is required for the food security bill. According to my calculations (shown below), it is likely to be a whopping 11% of the budget, and this is excluding administrative cost.

I bought rice this morning from the kirana store close to my house. I paid Rs. 48 per kg, and it was not the most premium quality. Assuming that the food security act will provide rice that is of slightly inferior quality, and taking out the retailer’s margin, I think assuming Rs. 40 per kg is a fair estimate for market price of rice.

I’m pasting a screenshot of my spreadsheet here:


As you can see, the proposed bill intends a subsidy of 11% of India’s budget this year (to put that in context, the Fiscal Deficit is 5%). Also note that the calculation above doesn’t take into account the administrative cost of implementing this scheme.

Errata: The sixth line in the spreadsheet should read “subsidy per person per year’”. The numbers, though, remain the same

DISCLAIMER: This is an archived post from the Indian National Interest blogroll. Views expressed are those of the blogger's and do not represent The Takshashila Institution’s view.