Financial Daily from THE HINDU group of publications
Wednesday, Dec 31, 2003
Agri-Biz & Commodities - Insight
Towards 2004: Nothing much to feel good about
It did not shock the nation. No one was outraged. None of the newspapers commented editorially on what was clearly a national disgrace. Not even one Member of Parliament, including those who swear in the name of one-third reservation for women, stood up to draw the nation's attention to the hall of shame.
Instead, the media gloated over the "feel-good" factor, a pointer to the historic peak of $100 billion in foreign exchange reserves. There was jubilation all around, with the corporate captains leading the cheer.
Meanwhile, news reports said that in December, three other families grappling with hunger in Angul, Puri and Keonjhar in Orissa had reportedly sold their children.
Sale of children and body organs is not restricted to western Orissa or neighbouring Jharkhand and Bihar. West Bengal is the largest supplier of girls, Andhra Pradesh is second. The rest of the country is no better.
Look at Madhya Pradesh, for instance. A few months ago, by the time Jai Lal, a landless agricultural worker of Bandali village, in Sheopur district, in the heartland of India, returned to share the good news with his wife that he had finally managed to get a petty job with a shopkeeper, she had succumbed to hunger. A week later, graves were dug for his two children, both unable to continue with the prolonged fight against hunger.
Call it by any name, acute hunger and malnutrition forces unlucky parents to either sell off their children or silently dig graves for them. Those who survive undergo the ordeal of being sex workers; they are also exploited as labourers, drug peddlers and even made to sell their organs.
Despite all the talk and programmes, hunger has withstood the best and worst of times, only to emerge as robustly sustainable.
Only a month back, in November, 7.5 million people had applied for a mere 38,000 vacancies in the Indian Railways. Thousands of those who applied for the post of "gangman," one of the lowly jobs in the railways, were post-graduates and had even done their management degrees.
The number of applicants had, in fact, exceeded the total population of Switzerland, was twice the population of Ireland, and a third more than the populations of Norway, Finland and New Zealand.
The numbers say it all. After 56 died in the riots that followed, and 38,000 eventually got employment, more than 7.45 million of those who applied are still jobless.
Notwithstanding the exuberance over the "unprecedented" growth of the software industry, the fact remains that India's famed IT industry has only created 0.5 million jobs. In the name of software exports, the IT industry continues to milk the state exchequer by way of tax exemptions and "incentives for improving efficiency," a sophisticated term for the much-abused subsidy.
The telecom sector, too, continues to be a recipient of the Government's largesse. The Government doled out a Christmas bonanza of Rs 9,600-million to a handful of telecom majors essentially to compensate them for the preference it has shown one company. A year earlier, the government passed on the benefit of Rs 700 crore to a telecom giant, thereby angering others.
No wonder, the Confederation of Indian Industry (CII) and the Federation of Indian Chambers of Commerce and Industry (FICCI) are excited at the rising foreign exchange reserves. They surely have enough reasons to "feel good." For the rest of the country, there is hardly anything bright on the horizon.
The paradox of plenty acute and widespread hunger amidst overflowing foodstocks exists at a time when the country is poised towards a high-growth trajectory. At the beginning of the millennium, India boasted of a food surplus of 65 million tonnes while 320 million people went to bed starving.
Strange are the ways of the political masters, that while the country incurred Rs 6,200 crore to keep the foodgrains stacked in the open, it had no money to distribute it to the needy. Mainline economists, in fact, suggested food exports as a viable way out. Some parliamentarians even talked of throwing the food into the sea to make way for the next harvest.
Policy makers, planners and economists have been telling us that even if poverty increases in the short term, this is the price that has to be paid for long-term stability and growth. Hunger is the outcome of increasing poverty and deprivation, and so should not be a cause for fear. And yet, with every passing year, India has been sinking deeper into a quagmire of deprivation and despair.
At the national level, more than 135 million people have no access to basic health facilities; 226 million lack access to safe drinking water; about half of India's adult population is illiterate; and about 70 per cent lacks basic sanitation facilities.
We have the world's largest population of diseased and disabled. Their number continues to multiply. With nearly 52 per cent of the population earning less than two dollars a day, the economic models of growth have only succeeded to extend the poverty line to bring in every year a sizeable percentage of the population within its deadly grip.
It is widely accepted that one of the surest ways to remove poverty is to make agriculture more profitable and, of course, productive. With nearly 70 per cent of the country's population directly or indirectly involved with farming, agriculture should have received top priority in policy planning.
Instead, all efforts are directed at depriving agriculture of its due share, thereby resulting in the further marginalisation of farming communities.
At a time when agricultural subsidies are being gradually withdrawn under pressure from the World Bank/IMF, the government is also toying with the idea of dismantling the food procurement system; this will push the gullible farmers into facing the vagaries of the markets.
The minimum support price that is provided for a select number of staple crops is, therefore, being projected to have reached the "maximum" limits, as a result of which agricultural commodities are priced out in the international market. The support price for wheat and rice has, therefore, been frozen at last year's level. There is no economic rationale for freezing the farm support prices. The Government has been misled to believe that the higher procurement prices are the culprit when it comes to farm commodity exports. The international prices for agricultural commodities are low because of the huge agricultural subsidies that North America, European Union and, for that matter, the other OECD countries provide their farmers. The more the subsidies, the more the price slump in the international market. Artificially low global prices, therefore, are not the real criteria to measure the competitiveness of Indian produce.
The competitiveness of Indian agriculture has to be seen in the context of its cost of cultivation. This too is being wrongly measured, comparing with the subsidised prices that western farmers are being given. The flaw is clearly evident.
Let us work out the cost of producing one kilo of wheat in North America with that in India. Even with the huge farm size that North America is known for, the cost of production is several times more than what the Indian farmer on an average has.
There is, therefore, no justification in depriving the Indian farmers of their legitimate source of income. Not paying the farmers a higher price does have a negative impact on the rural economy, which does get transferred as more food insecurity.
In reality, the government has been taking refuge under the garb of increasing fiscal deficit so as to deprive the farmers of a higher crop price. Last year, the Ministry of Agriculture proposed a hike of Rs 30 per quintal for wheat. The Finance Ministry turned down the proposal saying that the price hike would bring an additional burden of Rs 300 crore on the state exchequer.
Ironically, fiscal deficit has never been the consideration when the government doles out massive funds for the telecom industry, the IT industry or the new sunrise industry biotechnology.
Agriculture, the mainstay of the Indian economy, which essentially is responsible for the higher economic trajectory, is the most neglected. Neglecting agriculture has resulted in increasing joblessness and, thereby, greater food insecurity.
The negative terms of trade against agriculture have to be turned around if the country is keen to emerge from the hunger and poverty trap. It is time the 600 million farmers too begin to "feel good". The resulting domino effect will be electrifying.
(The author is a New Delhi-based food and trade policy analyst. Responses can be sent to email@example.com)
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