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Parliament passes three key bills
India will hold general elections in the first half of 2014. The incumbent government has been slammed for lack of reforms. The Parliament too has seen lots of disruptions over scams and social issues, not allowing it to clear pending bills that could usher significant economic reforms.
However, with an eye on the elections ahead, the government has pushed three key bills. But the uproar continues as opinion remains divided over the impact of these bills.
Here is a look at the bills and their implications:
Food Security Bill
Touted to be the biggest welfare programme in the world, the Food Security Bill aims to provide food grains to the poor - or 67% of India's population - at a subsidized rate. The bill adds on to the existing Public Distribution Scheme (PDS) under which a significant portion of people below poverty line (BPL) did not have access to subsidized wheat or rice on account of a lack of ration card. However, the bill is widely disputed as it is seen to be inflationary, and more of a political gimmick. There are also doubts about the actual success of the scheme.
DIRECT IMPACT: The bill will utilize Rs. 1.3 lakh crore of the tax-payer's money. This could push India's subsidy bill higher and widen the already large fiscal deficit - the difference between the government's revenues and expenses. We need to note that, several of the existing schemes, for which subsidies have been allocated in the budget will be subsumed under this scheme and to that extent the increase in subsidy will not be to the extent of Rs.1.3 lakh cr.
Land Acquisition Bill
First introduced in 2011, the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Bill, 2012, was finally passed in August. Replacing a British law dating 1894, the bill aims to make land acquisition more transparent and help provide sufficient compensation and rehabilitation to land owners.
DIRECT IMPACT: While the bill will help farmers get higher compensation for their land, it is perceived to be anti-business because it is likely to increase the cost of land acquisition by 3-3.5 times, according to the industry body Confederation of Indian Industry (CII).
When we retire, we all receive a fixed sum every month. For private-sector employees, this is basically a portion of your salary that was saved over time. The Pension Fund Regulatory and Development Authority Bill 2011, essentially aims to create a regulator for the pension sector. The National Pension Scheme, which is mandatory for all government employees, will also come under the purview of the new regulator.
DIRECT IMPACT: The bill will also allow 26% foreign direct investment in the pension sector. These pension funds can invest in long-term assets. By opening up the sector, the government wants to channelize funds into the infrastructure sector, which needs nearly $1 trillion in investment.
The actual cost of the Food Security Bill is thoroughly debated. The government expects it to amount to Rs. 1,24,723 crore per year. It aims to earn revenues of Rs. 11,22,799 crore in FY14, according to a First Post report. This means, 11.1% of its earnings will be spent on food security. And this is just a comfortable estimate of the bill's cost. The Commission for Agricultural Costs and Prices (CACP) of the Ministry of Agriculture expects the total expenditure to rise to Rs. 2,41,263 crore or 21.5% of the government's receipts.