Why we need the Food Security Bill? Part 2

Another argument, seemingly less compelling but legitimate nevertheless, in favor of food security:

While much needed and absolutely commendable, it is commonly understood that hike in diesel prices will feed into food inflation; slightly dated but diesel costs were 7% of agricultural input costs in FY09.

Incorporating the current 7% hike in diesel prices, a preservation of farm incomes (agricultural GDP, Estimate 3 in table below) would require 2.3% rise in value of output i.e. farm prices: - value of output in case there were a 7% hike in diesel price and costs were passed on in full, is 2.3% higher than actual value in FY09, implying food inflation would have been higher by 2.3 pct points.

Figures in Rs crores

In Why we need the Food Security Bill? Part 1: How food inflation eats away real income.

Why we need the Food Security Bill? Part1

A more compelling argument in favor of food security bill, all in numbers:

High food inflation led to higher than proportionate increase in food expenditure (assuming constant consumption), leaving lesser income for other expenditure
Total expenditure increased by ~11%, food expenditure increased by 16% and other expenditure only by 8%:

The table shows lower increase in non-essential expenditure in FY10 due to high food prices:

* Food expenditure growth assumption: constant quantity; expenditure increased by increase in prices (Food articles inflation = 14.6%) and population increase = 1.4%

In FY10 consumption of all commodities other than food may not have necessarily fallen given fall in prices and excise cut. However, going forward, a large rise in food prices would entail a larger than proportionate increase in food expenditure rendering the poor poorer.