May be the market forces would  decide the new agri policy!

There is a mistaken view, shared by many sections, the government, the NGOs and the industry that Indian agriculture would somehow become like the US model. It won’t and it shouldn’t. This has to be understood.

There are so many reasons to worry about the Indian agri crisis. This sector fails to respond to the many pious hopes (yes, there is no visible active agri policy as such as of now) and there is a steady decline in all major crops. The outcome? An all-time high inflation rate, at 6.12%.In any other developed country such a steep rise would have created alarm. In India we have a mix of many contrary forces, the Left has its own constrains, more so now as they are caught in the W.Bengal muddle of a policy for reversing their ideological  fix and an adventure on the industrialisation drive with such disastrous consequences! So, we see the CPM blowing hot and cold in Delhi, clutching to one pet subject or other.

So, there is almost a certain higher level of confusion in policy making in Delhi. The inflation rate is a subject for the experts and also for the intelligent general public. As for the more savvy economically-oriented policy experts, inflation is a combination of monetary supply and also some economic distortions in the economy. Dr.Singh is supposed to be an economic wizard and so he can be trusted to take some urgent steps to bring down the galloping inflation rate?  Let us see.
As we can see from the statistics, it is the year to year rise in food prices that are the major causes. Foodgrains prices have risen 12.5% in one year. Wheat 17.4%.Oil seeds 18.6%.Other food articles 16.6%.Spices and condiments 33.8%.Black pepper 46.8%.Chillies 61.3%. The impact of the inflation is widespread. It covers almost all the food articles, more particularly the pulses and other cereals eaten by the poor.

There are so many specific technical issues that contribute to the runaway inflation; the present rise is in fact a sort of runaway inflation. The gross fiscal deficit (GFD) rose from 5.9 per cent to 9.9 per cent in 1986-87, to 9.4 per cent in 1991.Fiscal consolidation was a major item in the economic reform agenda of 1991. But this was not achieved as a conscious policy and we find that in 2000-07, it is budgeted at a high 6.5 per cent. The result? The debt of the Central and state governments stood at 88 per cent of the GDP at end March 2006, with its ratio to current government revenues at an extremely 440 per cent. Fiscal Reform and Budget Management (FRBM) legislation was meant to bring down the govt. debts both at the Centre and in the states in a phased manner. But then the Finance Minister’s fli-flop”pause button” on its targets had completely eroded the credibility of the FRMB. What this means in common man’s language? Just mere populism was the politicians’ act and populism means that you spend without an income. You can see this profligacy at the Centre and in the states today’s is making a killing of it but merely become a government of the daily freebies!

The Centre too has announced so many populist schemes, employment guarantee etc and these schemes obviously don’t work in the way expected. Huge leakage of funds only adds to the inflationary spiral and this is what we are seeing today.  There are so many basic issues about the Indian economy. One, it is still a highly protected economy; India’s share of world merchandise exports is only 0.9 per cent, compared to China’s 7.5 per cent. India is doing better in exports of commercial service where we are having a 2.9 per cent share vs. China’s 3.1 per cent.

Land reforms today have come to acquire a new meaning. It is not to protect the small farmers; it is to ensure that big investments flow into the agri sector. This can happen only when big corporates enter the field, this means there must be a very transparent contract farming legislation to protect the small farmers, to ensure that corporate don’t exploit them, ensure them fair prices, and also bring in investments and technology, use of IT tools to ensure efficient use of resources and labour of the farmers.

Much more serious than the nuclear deal is the livelihood of the millions of the poor farmers of India. So, we have to articulate and be more active to define our agricultural goals: food self-sufficiency, food security as a vital strategy for our geo-political sovereignty, our own role in the world. India is a large economy, with a large population and therefore our agriculture has to mean something more than production and exports.

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