x Abu Dhabi, UAEThursday 27 July 2017

India needs to modernise food supply chains

The death of schoolchildren in Bihar reflects the shambles that is India's food supply system. As in other aspects of the economy, modernisation can begin with foreign investment.

Across India, 120 million children, many of them from very poor families, receive free lunches every school day. The programme rarely makes headlines, but did so on Wednesday after 23 children died, and more became ill, in Bihar. Their school meal - potato curry, rice, beans, soy balls - had been cooked with oil from a container formerly used for insecticide, and came from a shop owned by the husband of the principal, who has now absconded.

Far away, meanwhile, in the better-fed precincts of New Delhi's bureaucratic districts, cabinet ministers approved new measures that should in time improve many aspects of India's economy - including much-needed streamlining of the country's sadly amateur food supply chain.

The cabinet eased restrictions on foreign direct investment, and promised more such measures to follow. Stock markets climbed on news of the cabinet decision, and the rupee strengthened. But the issue is a touchy one, especially in retail trade.

Foreign retailers, in particular, have the capacity with their efficient supply chains and sophisticated marketing to undercut the prices charged by India's countless small retailers, who are generally supplied through many layers of inefficient middlemen. Consumers would benefit from the arrival of foreign supermarket chains - not least from their professionalism in product safety standards - but today's merchants may not.

Economists agree that in many fields, foreign know-how is vital to the modernisation India's economy must undergo. Nowhere is this more true than in the food sector. India has a fast-growing middle-class, but also has hundreds of millions of people for whom starvation is still far too close. Just this month the same government, with an eye on upcoming elections, decreed a "right to food", guaranteeing subsidised grain to three-quarters of rural Indians and half of city-dwellers. The move will raise India's total annual food-subsidy bill to $21 billion (Dh77bn) from the current $15 billion. How to pay for this remains an open question.

Subsidies could be reduced, food prices would still be lower, and tragedies like the Bihar food poisoning might well be fewer, if India's food supply system were not such a shambles. Poor infrastructure, antiquated methods, bad organisation, ignorance and corruption at all levels mean that countless tonnes of food are lost to vermin and rot every year, while further amounts are stolen, misallocated - or stored in old pesticide containers.

Modernising the economy of a vast and disparate democracy is an intimidating challenge but an obvious necessity. Changing antiquated methods creates in the short term both winners and losers, but in the longer term the whole of society will be more prosperous.