Economic Highlights
New Delhi, 13 August 2009
Food Insecurity
POLICY & NOT MONSOON
FAILURE
By Shivaji Sarkar
“The world
pays more for food as India
goes shopping,” screams newspaper headlines. This has not happened in a day. Over
the last few years, whenever India
reaches the international market to buy foodstuff, prices have shot up. Neither
can the monsoon be blamed for the food shortage and consequent food insecurity.
It has assiduously, or unintelligently, been built since the ushering of the
new economic era in 1991. And is a result of the skewed economic policy framed
by the top economists – a virtual world’s who’s who - of the time.
Sadly,
the economists were too concerned about the Forex shortage in 1990 that led to the
pawning of gold to the Bank of England and its balance of payment crisis. Food
prices were at their affordable best despite the so called “international”
crisis. Our economists, concerned at the nation’s global image launched the
fast track reforms process.
Some of
them found that the agriculture-based economy was the “bane”. It followed a
bashing of the “backward, retrograde looking farm-based economy”. They came out
with the simplest solution –abandon foodgrain production as it was capital intensive,
guzzled water, power and contributed ‘least’ to the economy. They also said that India needed to
produce cash crops, earn dollars and buy foodgrain from the international
market.
The nation
of a billion blindly followed the prescription, forgetting that the then 65 per
cent of its people were dependent on agriculture. Now the figure is around 60
per cent. Shockingly, it was to be followed up with a cut in agriculture and
food subsidies and in devastating the public distribution system (PDS), built
over the past four decades. The PDS not only ensured food supply to the people
but also effectively functioned as a market interventionist tool.
The
impact of the policy was felt within a short span. Food started becoming
scarce. Cultivation of BT cotton and other genetically modified crops started
playing havoc with the farmers. They started committing suicide – a phenomenon
that has not stopped since. The beneficiaries were the multi-national
corporates (MNC), who entered the foodgrain production market in a big way and are
now able to form a strong cartel, both nationally and internationally to
extract the highest price.
However,
the sober, “backward”, nationally-oriented economists had strongly opposed the
moves in the mid-90s. They predicted what we are witnessing today. But the lobbyists
of the MNCs backed by the World Bank were able to steamroll the protests and
even labeled them renegades.
Clearly,
they succeeded in devastating the base of the Indian economy, its agriculture.
Since land is the base for a prosperous agriculture, they lobbied hard to
change the Land Ceiling Act, both in urban and rural areas. This had a dual
effect. The MNCs acquired large tracts of land and became corporate zamindars
in rural areas. They backed similar large acquisitions in the urban
neighbourhood too. This deprived the farmers of prime fertile land to their large
housing projects. It also created the land mafia, who profit when someone loses
his land.
The
entire operation led to a reduction of several million hectare of arable land. By
now agriculture became a bad word. The farming community was denied all
support. Food production started falling. In 2008-09, growth originating from
agriculture and allied activities declined to 1.6 per cent. Total food
production at 230 million tonnes in 2007-08 is almost equal to that of 1980-81,
when it was about 200 million tonnes. The Population then was 80 crore and it
is about 110 crore now and in effect the per capita food availability has reduced which has
lead to the price spiral.
Moreover,
the share of agriculture in gross capital formation between 1999 and 2007 has
reduced from 10.2 per cent to 7 per cent. The decline was mainly attributed to turn
down in share of private sector (farming community) despite an increase in the
share of public sector (read large companies), according to the Department of
Economic Affairs of the Ministry of Finance. It states that private sector
share has come down from 11.9 per cent in 1999-2000 to 6.6 per cent in 2006-07.
This
speaks of a grim reality. The protagonists of privatization overlooked the
crucial fact that the Indian farm sector was always managed by private farmers
with minimal state support. These protagonists saw in the efficient farming
community a road block to corporate march. So they worked in the interest of
the corporate to monopolise agriculture in the name of high investment, which
they did not do, futures trading and linking the farms to the equity market.
It had
its effect. The oilseed and pulses programme initiated in mid-80s was
jettisoned. This did not suit the international food traders, who now also
control a large chunk of the domestic food market. They created through policy
makers an artificial shortage – by not allowing the country to increase
production, devastating the affordable PDS marketing system and feigning to
making up the shortage by importing pulses, sugar, edible oil and at times
wheat.
Indeed,
the companies are profiting both ways. They are buying products from their own
parent farms. Profits are being earned exploiting the hungry Indians. Their
repatriation to the parent companies is growing. The policy makers have turned
blind eye to this international exploitation.
No
sooner Indian firms, both public and MNCs, started the food purchase, sugar
futures for October delivery at the New York-based International Commodity
Exchange (ICE) broke a 28-year barrier reaching a 20.81 cents a pound (454
grams) in early August. In London,
the futures price rose to $ 537.2 per metric tonnes - the highest since 1983.
Sugar
trailed only petroleum and copper price in rise in prices in 12 months. Although
pulses are not traded in the futures market, their prices have been
skyrocketing in Canada, Australia, Myanmar
and Turkey, main exporters
to India.
World production of pulses has been stagnating at about 56 million tons for
several years.
What
the Prime Minister has been saying about firming of food prices is a grim
reality. The government is looking for short-term solutions. Instead, it
requires long-term policy shift. The country needs to lay emphasis on
agriculture, have a proper food production and marketing policy. Instead of
industry and stock market, agriculture has to be made the base for any growth
pattern. Unless the large segment of the people dependent on agriculture is
protected all developments are bound to be lopsided.---INFA
(Copyright, India
News and Feature Alliance)
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