Friday, March 26, 2010


Recent trends in food prices are posing unprecedented challenges to the government regarding the approach it has to take to rein in the galloping cost of food to the common man. In spite of massive subsidies to the growers and distribution of food grains at heavily subsidized cost to families of the so called "below poverty line" (BPL) segment, there does not seem to be any respite from food inflation. Here is a treatise on what has gone wrong in this great country.

"Indian agriculture has performed so poorly largely because governments have treated it as a source of votes rather than as an engine of growth. The contrast with China is telling. China's epochal reforms began on the farms. The growing efficiency of agriculture liberated labour and capital, spawning non-agricultural firms which eventually challenged state-owned enterprises. India freed industry first, and has barely reformed agriculture at all. Its policymakers remain stuck in the mindset of the 1960s, when India relied on food aid from America. They are more anxious to avoid such humiliation than to exploit fresh opportunities: they regard a state warehouse bursting with grain as a sign of success, and imports of wheat as a mark of defeat. Politicians' outbursts against hoarders and speculators have stymied the development of storage facilities and commodity markets. And their concern to protect farmers from exploitative merchants has slowed the development of contract farming".

"India's government still fixes prices and subsidises inputs, when public money would be far better spent on infrastructure and research. It sets a floor under the prices of 25 commodities including rice, wheat, sugarcane and cotton, which discourages farmers from diversifying. Ashok Gulati of the International Food Policy Research Institute points out that an additional rupee spent on agricultural research yields 9.5 rupees of output. An extra rupee subsidising fertilisers, by contrast, returns just 0.85 rupees. Better storage and transport facilities would also allow farmers to profit from growing fruit, vegetables and flowers. These offer better prospects than staple cereals, like wheat and rice, which preoccupy policymakers. According to the World Bank, transporting grapes to the Netherlands from India costs more than twice as much as transporting them from Chile, even though Chile is twice as far".

Of course it not easy to make any prescription for curing the ills that confront the country. But the neglect of perishable commodities for so long is not excusable from either export angle or nutritional consideration. Shifting the multi culture agricultural system to mono culture practices progressively through use of intensive inputs does not help either the farmer or the consumer. Unless a national holistic agricultural policy vis-à-vis viable crop mixes and production strategies, is drawn up on a long term basis India is bound to face these uncertainties perpetually.


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