Friday, December 9, 2011


Food inflation figures over the last few weeks, as published by GOI reminds one of an ECG readout with swinging ups and downs. How far these figures are reliable, no one knows! But ask any consumer and sure enough they will vouchsafe for the galloping price of practically every product that is needed for leading a decent life in this country. But the political and bureaucratic class, holding a vice-like grip on the country, does not seem to be too much sensitive to the sufferings of common man and go around their favorite game of scoring political brownies with no sense of urgency to tackle inflation. There is no dearth of loud statements practically every day assuring the aam aadmi that inflation is going to come down and they must wait patiently. Is there no salvation for Indians from these miseries in the foreseeable future? Over obsession with economic issues seems to be blinding them to the real solution to the problem and using economic tools to subdue inflation has not worked so far. The real problem as illustrated recently by a dispassionate observer of Indian situation is interesting though it may not catch the eyes of the players at the Delhi Durbar.

"Heard of the man who justified looking for a lost ring under a lamp post, although the ring had probably slipped off his finger in a dark alley some way off, on the ground that he needed some light if he were to find anything? If you feel the urge to meet him, go no farther than Raisina Hill, where sit hon'ble members of the Union council of ministers. Are vegetable prices going through the roof ? Increase the minimum support price of wheat forthwith! Never mind if your stocks of grain are pushing an unmanageable 52 million tonnes. Food prices are going through the roof, so the government must be seen to be doing something. Raising the output of vegetables is a dark alley whose shadows swallow those who venture there. So potter around in the familiar, well-lit grain stockyard; someone might even credit you with some remedial action. This kind of thinking is as useless for bringing food prices down as a monetary policy squeeze. As per capita incomes rise, demand for vegetables, meat, fish, poultry and milk will rise in tandem. This is elementary. Both growth and redistribution are pushing up purchasing power but there is no coherent strategy to increase the output of the food articles in demand. The result is food inflation. There is no alternative to increasing the output of vegetables and protein foods sharply. That would mean tackling two problems. One is the paucity of essential infrastructure: motorable rural roads, electricity to run climate controlled warehouses. The other is an obsolete, inefficient supply chain in which a hierarchy of intermediaries gobble up the bulk of the gain from high retail prices, muting the production-enhancing impulse of the price signal. Funds are not the primary constraint in tackling either challenge. Making road-building funds actually build roads, instead of getting diverted into the coffers of the neta-babu nexus is a political challenge. So is upsetting the vested interests who keep the farm produce supply chain the way it is. These challenges have to be tackled head-on. It is a political battle with considerable overlap against the ongoing drive against corruption. The point is to take the lead, and not follow the fool under the lamp post".

It is sad that a problem, that ought to have been dealt with by the governments ruling the country during the last 3 decades, is being thrown at the door steps of Global Retail giants through the recent opening up of the sector to them. GOI is hoping against hope that the FDI in retail sector will bring hordes of retail chains with foreign money and expect them to invest on the badly needed infrastructure for cutting down on food losses and increase the income of the farmers! If this is not warped thinking what else it is? After showering billions of rupees on subsidizing the agriculture sector during the last so many years, all the GOI has to show is the number of farmer suicides reported all around the country year after year! Land reforms have not been attempted to consolidate the agriculture activity. Agricultural reforms are still on the back burner. APMC reforms are just limping along with no concrete results. Under such a despicable situation Indian citizen can only pray for a miracle to happen to salvage the nation from mismanagement and non-management! 


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