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September 11, 2011




Page: 9/42

Home > 2011 Issues > September 11, 2011

FOOD INFLATION ANALYSED
UPA neglect of agriculture leads to persistant scarcity and price rise

By Shivaji Sarkar

IT was a lacklustre debate on price rise. Everyone was talking but none hit the nail. It is a classic example of a talkathon that the people of this country can indulge in.

The debate was expected to generate heat, interest and look for solutions. Nothing happened. The reason is not difficult to find. Nobody was looking for a solution though everyone wanted to score a point. But all missed the core issue.

In a globalised economy, a 20-year old phrase, the only gain or loss is that poverty is rising, jobs are vanishing and the crisis is deepening. Half of the developed globe is tottering and the other half still looks towards the failed western model to look for a solution. No wonder Parliament after a long debate left the nation in the lurch. The net gain was that even as the debate was continuing, Mother Dairy and Amul declared that they were raising prices of milk and milk products.

This is the issue that all miss out. The solution is not in increasing production and pining for industrial growth. For the last 65 years that has been our GDP growth model. The nation sank trillions of rupees and even dollars to pop up this model. More it did, there was more poverty, unemployment and further deficit financing – the debt economy. It has only resulted in increased borrowings by the government and the solution always eluded it.

Despite NREGA, the latest UN Conference for Trade and Development (UNCTAD) report says that rural unemployment is increasing. That means the policy planners in planning commission, North and South Blocks are ignoring the very base of the economy – agriculture for the last two decades. How could there be stabilisation of prices without emphasis on farm production and a distribution strategy?

The liberalisation and globalisation policy adopted in 1991 – this is the 20th anniversary - was considered synonymous with denigrating agriculture and the farming community. The new “liberal” policy was based on a lop-sided view that the bane of Indian economy – the balance of payment crisis of 1990 – was agriculture.

The country is paying heavily. Agriculture over the two decades reached a critical stage not only with fall in production but also with the deteriorating plight of the farmers. Farm production fell, input costs increased phenomenally, subsidies vanished and marketing structure was either monopolised by multi-nationals or their clones. Remunerative prices also eluded the farm producers. With increasing debt burden they had only one option – commit suicide from Punjab to Vidarbha to Karnataka and where not.

The problem did not and could not have been limited to the farming class. It spread and has now engulfed the entire economy. Uncertain policies decided to double the minimum support price of wheat and rice during last over six years. It did not take into account that with diminishing subsidies, the input costs on fertiliser, power, water or labour has trebled. The precious argument that higher prices to farmers would result in inflation was based on not so firm facts. In other words, the policy makers would like to tell the country that the present inflation is because of higher prices being given to farmers.

That is not the truth. The farmers do not get even enough to make up for their investments. But there is a large gap of prices in the market and the farm-gate. The beneficiaries are people who have been depriving both the farmers and the consumers and befooling the government. Nobody answers why they are allowed to create a situation that has landed the country into a morass of stagflation – inflation and stagnation in production. It has yet another fall-out – artificial food shortage in the market defined by high unrealistic prices.

What is the solution? The committee of secretaries came out with the solution to open up multi-brand retail trade to 51 per cent foreign direct investment (FDI). Is that a solution? No. But the officials believe that entry of a few large retail multi-national conglomerates would be the panacaea. They need to read the latest UNCTAD report. It portrays the condition of the world economy as also the condition of the common man – the working class, who are being ruthlessly exploited by the MNCs.

The largest number of people - an estimated 18 to 21 million – is employed worldwide on various kinds of contracts at wages that are lower than the prevailing rates in those countries. But the jobs are uncertain, shifting from country to country and does not add much of a permanent value. The licensees and the workers remain on tenterhooks. No sooner wages or cost goes up; the company looks for a newer and less expensive destination.

This has started happening in India and the problems are to aggravate. The new retail policy also threatens four crore entrepreneurs and other workers in the unroganised retail trade. One also has to remember that of these four crore there are a sizeable number of farmers, who part-time function also as either retail entrepreneurs or workers. The new retail policy would deprive these four crore families of their livelihood and turn them into slaves of MNCs.

But there is a catch all large retail chains together can never employ these four crore people.

The country does not need exploitative large retail chains. They have bled the western economies. Even as the US and European governments get into severe debt trap, profits of MNCs are rising and many of them have reserves that are larger than the budgetary projections of many big countries.

It would be wise neither to allow entry to these MNCs nor ape the failed western model. Indian market has resilience. It should be left to it and as a policy the public distribution system has to be universalised and developed as market-interventionist agencies for stabilising prices.

Similar policy myopia afflicts agriculture, which is gradually being opened up to large foreign chains. Do we really need to follow the West? Be it Europe or the US not more than two per cent people are dependent on agriculture. Their huge subsidies go to these two per cent people.

In the Indian context, the dimensions are very different. The official statistics say that 58 per cent are dependent on agriculture. It means a whopping 72 crore are employed in the farm sector. The neo-liberal policy enshrined by the planning commission wants to dislodge these 72 crore to create large conglomerates of a few western MNC investors. The FDI is being projected as a god that would solve all problems. They are ignoring that with each FDI there is a large repatriation of sums as also impoverishing of the people here.

All large conglomerates together would not be able to provide an alternate employment to the 72 crore people of this country. Yes, it would leave at least 70 crore people who would not have a livelihood.

This calls for a policy reform. A mere 14 per cent GDP from the farm sector sustains 72 crore people ! This only means that the farm sector remains the pivot of Indian economy. The country has to recognise it. The GDP growth in all other sectors – as per prime minister’s economic advisory council (PMEAC) – is falling. They have revised it to 8.2 per cent but if it goes anywhere near 7.5 per cent they should consider it to be a bonus.

There has to be stress on this sector. Production increase is possible through better research. Even now Indian farms have better yield per hectare than China. Indian farmers have the ingenuity and adapt to new technologies. It also needs a strong marketing structure and creation of a link from farm gate to the doors of consumer. The role of middle man – who rakes in the maximum profits -needs to be minimised.

The GDP in all sectors would grow in real terms if the GDP in the farm sector grows. The planning commission policy to wean away people from the farm sector needs to be scrapped. A proper mix of agriculture and industry has to be evolved for overall development and stabilisation of Indian economy.

The growth and a better lifestyle are not possible without a boost to agriculture and shifting the focus to it. What Mahatma Gandhi had said – India is an agriculture economy – remains true to this day. This has to be made the pivot for a future growth strategy.




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