Thaindian News

New Delhi, Dec 20 (IANS) The food security bill, that seeks to legally entitle majority of India’s population to cheaper foodgrains, is not sustainable as it would put further pressure on fiscal deficit and worsen inflation, an Asian Development Bank (ADB) official said Tuesday.

“While the purpose of ensuring food security to the poor is laudable, the food security bill is not the right mechanism for it,” said Biswa Nath Bhattacharyay, lead professional, Asian Development Bank.

Bhattacharyay said that with already high inflation and ballooning budget deficit because of the falling rupee, expenditures on nonproductive activities like this would further aggravate the economic problems of the country which is faltering in many areas.

The union cabinet, headed by Prime Minister Manmohan Singh Sunday, approved the bill.

Bhattacharyay said the government, facing a trust deficit in the market, does not have enough money. “Still it is planning to spend on nonproductive activities. It is not at all sustainable. I can understand if the government is investing on sectors like infrastructure.”

“If you go on doing these activities which is very difficult to sustain and have pilferage and other problems, the confidence of India goes down,” said Bhattacharyay adding the the proposed legislation would lead to larger outflow and decreased inflow of money, creating money scarcity and free fall of rupee.

ADB official said the European crisis would affect the Indian economy much harder than the US financial crisis.

“Falling rupee is also partly because of the European debt crisis because the European investors, in high need of cash, are withdrawing their money from the Indian market,” he said.