The Hindu Business Line : Piecemeal solutions

The ban on edible oil exports is a typical knee-jerk policy response that may not have much effect on prices for the simple reason that the volume is too small to change the overall availability in the country. Admittedly, New Delhi’s biggest challenge today is to control inflation. Inflation can play spoilsport and dampen the feel-good ambience generated by robust economic growth. The Left allies and the Opposition spare no opportunity to mount pressure on the government over the issue of high food prices. The Finance Minister’s recent statements do reflect concerns within the policymaking circles. Yet, most of the action on the price front is piecemeal.

Integration of the domestic with the global market means that the country has to bear internal and external price shocks. However, given the lop-sided nature of growth so far, close to two-thirds of the population simply does not have the ability to cope with the high prices, especially those of essential food items. Currently, the food economy is buffeted by global price cues and domestic shortages. Efforts to ring fence the economy have been of little avail. Many of the decisions such as banning exports, freeing imports and prohibiting futures trading have failed to deliver tangible results. The explosive price situation on the commodities front — especially fuel and food — is not an overnight phenomenon, but has been brewing for some time. Instead of taking anticipatory action to augment supplies and contain prices, there have been reactive (read, restrictive) measures at random. High energy and food prices continue to eat into the already fragile purchasing power of a large mass of the population. No marked respite from food inflation is anticipated anytime soon. Given the configuration of the global energy market and our growing dependence on crude imports to fuel growth, we have neither any influence over high mineral oil prices nor can we afford to stay away from the market.

Food, however, is different. We had a choice, and have it even now. The high internal food prices are not so much the result of international factors as much as the continued poor performance of the agricultural sector. The entire farm sector has received but perfunctory attention. The mantra of total or near self-sufficiency (to ensure food security and stable prices) appears to have been given up. In the name of trade liberalisation, we have simply opened up our borders, without endeavouring to strengthen our resource base and enlarge production base. If only we had stitched in time, we could have saved nine. In the absence of an attitudinal change within the policy-making circles, agricultural resurgence and, in turn, rural transformation will remain a chimera.

Policy-makers must assume moral responsibility for letting the critical sector down in recent years. The fragmented nature of agribusinesses in the country means there is little pressure on the government from trade and industry for a stable policy. Until supply-side constraints are addressed and demand-supply mismatch narrows, trade and industry would continue to encounter restrictive changes in trade policies to overcome politically inconvenient situations. Meanwhile, the poor would continue to suffer in the absence of a functional nationwide welfare programme to meet their food needs.

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