The Hindu Business Line : Agflation alert

The Eleventh Plan’s catch phrases “growth with equity” and “inclusive growth” would sound empty if the emerging threat to food security from high global food prices is ignored.

Across the world — from Australia to Zimbabwe, from major economies such as the US and the European Union to emerging markets such as China, India and Russia — there is serious concern over rising food prices. Be it wheat, corn, vegetable oil, milk or meat, prices have spiked, setting new records or reaching multi-year highs.

There is growing consensus that the world is now at the end of the cheap food era; and food will constitute a larger share of every family’s budget. At the macro level, while food producers have never had it so good in terms of prices and incomes, consumers are worse off. Food import-dependent countries are the worst affected by ‘agflation’ — inflation driven by high prices of agriculture or food products. Clearly, the global food market is now undergoing structural changes: In addition to the burgeoning demand for food, especially in some of the growing, but under-consuming/underfed major Asian countries (China, India), there is large-scale diversion of what were traditionally regarded as food products for fuel purposes in the developed world (the US, EU). Huge investments have already been made and continue to flow into the production of ethanol (from sugar, corn, wheat) and biodiesel (from vegetable oils). State support for the production of biofuels (green, renewable energy) is a key driver of this sector.

India cannot remain insulated from these global developments; indeed, the country could be facing a double whammy. Escalating food inflation can combine with global warming to affect farm production. Countries close to the tropics face a greater risk from weather aberrations than those in temperate latitudes. Recurring droughts and floods due to climate change are sure to make the country’s farming a lot more vulnerable to downside risks. The Eleventh Plan’s catch phrases “growth with equity” and “inclusive growth” would sound empty if the emerging threat to food security as also high global and domestic food prices is ignored. Efforts so far to drought-proof the economy have met but with limited success.

It is time to take a serious look at the status of the agriculture sector. The Central and State governments can, perhaps, devise a common national policy, with some regional variants, keeping in mind the imperatives of economic growth, employment, incomes and investment. Investments in the farm sector must be stepped up and a transparent system of monitoring and evaluating programmes put in place.

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