Food security plan to put pressure on growth, inflation: RBI

MUMBAI: The UPA Government's proposed Food Security Bill carries a slew of "economic consequences", including pressures on fiscal deficit, growth and inflation, Reserve Bank Governor D Subbarao said today.

"There are going to be lots of economic consequences of the Food Security Bill (FSB), which at the RBI, we will study further," Subbarao said at the customary post-policy interaction with journalists here.

"There will be pressure on procurement, there will be pressure of subsidy, there will be pressure of fiscal deficit that will have implications for growth and for inflation, implications for surplus income that beneficiaries of food security might have and how they might spend that and what implications they will have for inflation," he said.

However, he added that the central bank is still studying the Bill's proposals and is yet to quantify the implications of the ambitious programme.

"At the moment, the fiscal consequences and the macroeconomic backdrop that will change on account of the FSB is a bit premature to discuss because the numbers are still being worked out," RBI Deputy Governor Urijit Patel said.

Early this month, the Union Cabinet decided to take the Ordinance route to implement the FSB, which aims to give nation's two-thirds population the right to 5 kg of foodgrain every month at highly subsidised rates of Rs 1-3 per kg.

India will join a select league of countries in the world that guarantee food security to majority of its population. At Rs 1,25,000 crore of Government support, the food programme will be the largest in the world.

Analysts have said the programme will put a strain on Government finances and pointed to the excess investments required in the warehousing space.