The Hindu Business Line : After the palliative

In further restricting rice exports (by raising the minimum export price for Basmati and non-Basmati varieties) and tightening the storage limits for declaration of wheat stocks, the government has clearly hit the panic button as far as essential food items are concerned. The latest move has come on top of a series of measures over the past year — banning exports, opening up imports (in some cases, duty-free) and delisting select food commodities from the futures co unter. Despite such desperate moves, it has had little success in containing the price spiral. If anything, the price situation has worsened, be it of grains, edible oil or energy. The crude oil market is on the boil with no significant correction within sight at this point in time.

Commodity markets — domestic and global both — are on fire for reasons as varied as rising consumption, lower output, falling inventory, diversion for meeting industrial demand and, of course, rampant speculation. As too much cheap money chases investment avenues, agricultural commodities have emerged as a new asset class for speculators, euphemistically called ‘investors’. Escalating consumer discontent over unchecked food inflation has the potential to spawn serious socio-political disturbances, as is evident from instances of protest in countries as far apart as Australia and Zimbabwe. India is no exception. As the polity gets into ‘election mode’, the fire-fighting options before the government are rather limited. Most of the weapons in the policy armoury have been exhausted. No wonder, these days, policy-makers are content with tinkering with trade and tariff measures. The focus on structural issues is sorely missing; and unless time-bound structural changes are initiated, risks will continue to play havoc with agricultural markets and prices.

The farm loan waiver proposal is a classic example of providing millions of farmers a palliative without doing anything concrete to build capacity among them to continue to be honest borrowers ready to face the volatility of free markets. Clearly, the government is shirking its responsibility towards the farming community and consumers by doing genuine justice to neither. This cosmetic approach cannot work for long. No doubt, agricultural transformation is a humungous challenge that calls for the nation’s time, energy, money and, most importantly, commitment. But there are more immediate things that are doable and can at least partially alleviate the suffering of the poor. A more decisive and practical action on government’s part would have been to strengthen the public distribution system by plugging leakages and expanding the shopping list of the poor (say, by inclusion of pulses and edible oil). Instead, the Centre is distancing itself from ensuring food security for the really needy. Governments are known to do the most rational thing, even if after exploring all other possibilities. What prevents the Indian government from doing the most rational thing is unclear.

Related Stories:
More curbs on rice exports to ensure domestic availability
Minimum export price of non-basmati may be hiked
Wheat buffer stocks: States’ contribution a source of worry

More Stories on : Editorial | Foodgrains

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