Given the high fiscal deficit (i.e. the gap between income and expenditure) that the Government of India is currently running, the wisdom of further burdening its finances needs to be questioned. The high debt burden will inevitably result in more borrowing by the Government which in turn results in pushing up the interest rates in the market. And higher rates of interest will result in...you guessed it right, higher inflation. Historically, the lower income earners have always been the ones most severely affected by inflation.
And so an initiative which is intended to provide food security for the weaker sections of society is likely to end up hurting them even more. The economic slowdown caused by higher borrowing costs is likely to result in job losses anyway. And so while on the one hand the Government is proposing to subsidise the cost of foodgrains for the poor, it is, on the other hand, creating the very circumstances that could adversely impact any opportunities for upward mobility that they have.
I would also hasten to add that I have not even touched upon the impact of a burgeoning fiscal deficit on business and consequently, the economy as a whole. Suffice it to say that a high budgetary deficit is only going to be bad news for all concerned. One can understand the deficit widening due to circumstances outside the control of the Government, but is it advisable for any Government to take a conscious decision that is going to stretch its fiscal deficit even further, at a time when it is already threatening to run out of control?
The old Hindi proverb on cutting the coat according to the cloth (जितनी लम्बी चादर हो उतने ही पैर फैलाना चाहिए) is one that India's policymakers will do well to keep in mind. The Americans, who lived on borrowed money for close to three decades are paying for it now. One only hopes that India managed to avoid going down the same path.