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Fiscal Sustainability of India’s National Food Security Act 2013

Author

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  • Krishanu Pradhan

    (The author is a Research Scholar at the Centre of Economics Studies and Policy, Institute for Social and Economic Change (ISEC), Bangalore, India, email: krishanup@gmail.com)

Abstract

Forward-looking approaches to fiscal sustainability generally assess the fiscal implications of future programme-specific expenditure. This article attempts to assess the future fiscal implications of the National Food Security Act (NFSA), 2013, for the Indian economy. The results, under the baseline scenario based on the projected debt–GDP ratio, indicate a modest increase till 2021–22 and then debt/GDP declines towards the current level of 70% in 2012–13, signifying fiscal sustainability. The dynamics of the projected baseline debt–GDP ratio are largely shaped by the provisions of the Act and underlying demographic factors during the projection horizon. Sensitivity analysis under different assumptions about productivity growth, the interest on government borrowing and primary deficit–GDP ratios show mixed results and hence provide necessary policy pointers towards restoring fiscal sustainability under the Act. Keeping the primary deficit–GDP ratio below 1.5 per cent through periodic upwards revisions in the issue price of food grains, as envisaged in the Act, coupled with higher productivity growth and lower interest on government debt, would ensure long-term fiscal sustainability of the Act. JEL Classification: H24, H62, H68, J11, Q18

Suggested Citation

  • Krishanu Pradhan, 2015. "Fiscal Sustainability of India’s National Food Security Act 2013," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 9(2), pages 133-156, May.
    • Handle: RePEc:sae:mareco:v:9:y:2015:i:2:p:133-156
    DOI: 10.1177/0973801014568144
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    More about this item

    Keywords

    Food Subsidy; Fiscal Deficits; Fiscal Projection; Budget Deficits; Demographic Transition; Food Security;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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