Chennai, Jan 29 (IANS) Global credit rating agency Moody's Investor Service Thursday said the recommended reforms in food subsidy and distribution will reduce India's inflationary pressures and fiscal deficit.
On Jan 21, a government panel had recommended reforms in the food subsidy and distribution system.
In an article in the latest issue of Moody's credit outlook Moody's associate analyst-Sovereign Risk Group said: "We expect the recommendations to prompt policies that will improve the efficiency of India's food supply chain, a credit positive because it will reduce inflationary pressures and the government's fiscal deficit, two key constraints on the sovereign's credit quality."
The reforms include decentralising grain procurement, a process for disposing of excess food grains, delivering food and fertiliser subsidies via direct cash transfers, and reducing food subsidy coverage as mandated by the National Food Security Act to 40 percent of the population from 67 percent.
According to Moody's, India's consumer price index (CPI) inflation has averaged 9 percent over the past five years, driven largely by food inflation.
India's current food subsidy and distribution system support demand for food by lowering its costs to targeted consumers, suppresses the price signals that would prompt a supply response to India's growing food demand.
Furthermore, the loss of grain stocks through inefficiency or corruption has raised costs and lowered the socio-economic benefits of the system, Moody's said.
You may also be interested in:
RBI Norms to Affect Bank's Pricing Power: Moody's
According to the rating agency, greater transparency and efficiency will lead to both demand and supply responding more quickly to price signals, diminishing the distortions that have kept food price inflation higher in India than globally.
Food accounts for about 50 percent of the average household consumption basket, lower food inflation will dampen wage inflation, improve the interest rate environment and increase the economy's competitiveness.
India's general government fiscal deficit ratio of 7.2 percent of gross domestic product (GDP) for the fiscal year ended March 2014.
Annual spending on food subsidies grew by 20 percent on average over the past eight years, compared with 16 percent overall expenditure growth during the same period, the rating agency said.
According to Moody's, the exact reduction in subsidy costs will depend on the measures that the government eventually adopts.
A reduction in food subsidy coverage is politically sensitive in India, where annual per capita income was $1,509 in fiscal 2014.
Therefore, it will be difficult to obtain parliamentary approval to amend the National Food Security Act and reduce the percentage of the population eligible for food subsidies.
But many of the panel's other recommendations were made in consultation with state governments, suggesting a political and policy consensus that could smooth their implementation, Moody's said.
Prime Minister Narendra Modi's mother Heeraba Modi passed away on Friday. When the marriage took
A Palestinian baby girl born 17 days earlier was killed during the Gaza war. The newborn girl was
Government urges opposition to back land act amendment
Hyderabad, March 1 (IANS) Union Parliamentary Affairs Minister M. Venkaiah Naidu Sunday appeale
The House of Representatives, the lower house of the US Parliament, has accused Trump of a major
Union Minister of State (Petroleum and Natural Gas) Rameshwar Teli has blamed the tax for the ris
SC: Mukesh Ambani's family will get Z+ security even abroad, Supreme Court gave instructions
The Supreme Court has directed Reliance Industries Chairman and Managing Director Mukesh Ambani a
Salman Khan illegal arms case: Verdict deferred further
Jaipur, March 3 (IANS) The verdict in the case relating to illegal possession and use of arms b
Withdrawing money from many banks in China has been banned. The Bank of China has said that the m
India can deal with this 'enemy' of America, 'superpower' will become 'helpless'!
After the attack on Ukraine, the US and European countries imposed various sanctions on Russia. T
The consecration of Ram Lalla in the grand temple in Ayodhya on January 22 is going to be a very
