Malnutrition is nothing new for many Indians. According to the International Food Policy Research Institute’s 2011 Global Hunger Index, the upshot of this perennial problem is that about 60 million children in India are underweight and malnourished, while 21 percent of the population as a whole general is malnourished. Unfortunately, this problem is unlikely to change anytime soon, with the recent introduction of the National Food Security Bill threatening to continue market inefficiencies in food supply and extend the problem of malnutrition far into the future.
The developmental repercussions of this situation are dramatic, not only for individuals who suffer numerous health issues resulting from malnutrition, but also for the economy at large. Malnutrition results in a loss of productivity, indirect losses from impaired cognitive development, and losses from increased longterm healthcare costs.
According to a report by the World Bank, productivity losses in India due to stunted growth, iodine deficiencies, and iron deficiencies are equivalent to almost 3 percent of GDP. While during the colonial era famine was the primary result of “food insecurity,” malnutrition has replaced it as the chief concern of legislators and economists.
The last great famine in India occurred in 1943, and served as a case study for Amartya Sen, the Nobel Prize winning Indian economist, in his groundbreaking work Poverty and Famines, in which he showed that famine was rarely the result of a lack of food, but rather the result of intervening economic factors, such as unemployment, declining wages, and, as is often the case in India, poor food distribution systems. The current problem in India is of that nature: it’s not so much a lack of nutrient-rich food, but rather a weakness in the food supply chain.
On a more positive note, India is expected to remain self-sufficient in the production of food staples until at least 2025. However, inefficiencies in the downstream segments of the food supply chain are still rampant, and threaten to undermine self-sufficiency and perpetuate malnutrition. For example, inefficiency in the tomato business, according to the editor of the Wall Street Journal Asia, results in as much as 20 percent of tomatoes rotting in transit, while the price for consumers is marked up by as much as 60 percent.
High prices for the consumer, as well as limited quantity and quality, all resulting from supply chain inefficiency, are sustaining increased malnutrition amongst the poor population.
The current Congress Party-led government is attempting to rectify the problem of malnutrition with its National Food Security Bill, which was introduced late last year. Sadly, though, the bill does little to alleviate the root cause, instead addressing only the symptoms – and in the most expensive and inefficient manner possible. Rather than correct supply chain issues, which would increase availability of food while reducing costs, the government has chosen to subsidize grain purchases. In addition, the government is doing this at a time when it can ill afford the expense associated with underwriting grain purchases for almost two thirds of the country’s population.
Despite complaints from all political parties regarding the bill, the Congress Party pushed the legislation through, as much to prove legislative power as anything else after an embarrassing bout of policy paralysis during the uproar over amendments to rules regarding foreign direct investment (FDI) in the retail sector. Even more disappointing than the politicized nature of the National Food Security Bill is the fact that revisions to FDI rules are exactly the type of legislative changes necessary to start rapid improvement in the food supply chain, negating the need for the bill in the first place.
The result of allowing increased FDI would have been to move firms such as Wal-Mart and Carrefour into the Indian market. These Western big-box retailers would have brought with them expertise in supply chain management. The influx of desperately needed fresh thinking and innovation into the agricultural and food supply business would have expedited changes downstream, helping alleviate malnutrition. Rather than an increased government intervention into the food economy, an influx of FDI and foreign expertise in supply chain modernization would be a surer route to freedom from malnutrition.
It’s likely that continued government subsidies as contained in the food bill will only lead to further market distortions. Absent legislative progress and further market liberalization, market distortions, along with vested interests by middlemen in perpetuating the existing lengthy supply chains, will continue to plague the population of India for some time. The result of this sad situation will surely be a continuation of the ongoing malnutrition epidemic, which will continue to handicap an already slowing economy.
William Thomson is a research assistant at the U.S. Naval War College and an International Relations ALM candidate at Harvard University. His articles have appeared in Small Wars Journal and e-IR.