People & Their Problems

New Delhi, 27 January 2010

Food Inflation

CAN PRICES BE CONTROLLED?

By Dhurjati Mukherjee

There is a growing concern across the country over the spiraling food prices, especially of essential commodities including rice, wheat, pulses, sugar etc. According to reports, food inflation which had increased to around 20 per cent is now about 17 per cent. Despite signs of prices coming down a little, there is a possibility of food inflation threatening to spill over onto the wider economy. It is understood that the Agriculture Ministry is taking steps, which include import of pulses and also release of five lakh tonnes of wheat and 25 lakh tonnes of rice through NAFED.

Indeed, inflation has crossed the RBI’s forecast of 6.5 per cent by the end of the fiscal year. It has reached 7.31 per cent and the Government is rightly being attacked from all quarters for its inability to handle the crisis. Experts believe that though food inflation may not rise, general inflation is likely to rise above 8 per cent by March-end. In their pre-budget meeting with Finance Minister Pranab Mukherjee, trade union leaders have urged the Government to take immediate steps to check price rise.   

Although food inflation is not the same as general inflation, it is the former which affects the poorer sections of society. Moreover, real wages have barely increased pushing the poor and the economically weaker sections (EWS) to greater hardship. People in the unorganized sector and the daily wage earners are finding it difficult to make both ends meet. Even the lower middle-income sections of society have felt the pinch with the increasing prices of rice, pulses, onions, sugar, eggs etc.  

In such a situation, a high growth rate has no meaning. Are essentials of life being provided to the masses at a reasonable price? As per the Suresh Tendulkar Committee report around 37.2 per cent people are deemed to be poor but this food inflation is bound to have affected at least 65-70 per cent of the population, which includes the EWS and the lower income group (LIG), if not more.

While the Government appeared quite desperate to divert attention to almost non-issues like tabling the Liberhan Commission report, new plans in sectors such as higher education sector and power, etc, the Opposition failed to utilize the winter session of Parliament to focus solely on the issue of food inflation. Therefore, revealing that most of our people’s representatives have little concern for the masses, who are not only reeling under poverty and squalor but are facing the worst food situation.

While the Government appears to be interested in discharging its responsibility by increasing employees’ salary, allocating more money to the so-called developmental projects and raising the loanable funds of banks to overcome the recession, it is yet to get cracking on the phenomenal price rise issue, which directly affect the country’s poor.

All these years, Prime Minister Manmohan Singh has been affirming that economic reforms will not only boost growth and prosperity but also have the power to reach the poorest segments of the population. Even the 11th Plan has an emphasis on inclusive growth but sadly it has not become a reality. As per the estimates of the Planning Commission for 2004-05, India’s combined poverty ratio had been estimated at 27.5 per cent but this has now been found to be 37.5 per cent by the expert group chaired by Suresh Tendulkar with rural poverty as high as 42 per cent.

Obviously, food inflation has further deteriorated the situation – as though the per capita income grew by 62 per cent, poverty declined by only 22 per cent during 1993-94 and 2004-05. Again, while the urban per capita consumption expenditure was over 63 per cent higher than in rural areas, it jumped to 88 per cent in 2004-05, indicating a sharp jump in urban-rural disparity over the decade.

Poverty as is well-known is related to food insecurity. India ranks 66 among 88 countries in the ‘Global Hunger Index 2008’ prepared by the International Food Research Institute. It is estimated that around 300 million Indians live under the most trying conditions. More than 230 million are undernourished which is 27 per cent of the global total. The country also has among the highest rates of child malnourishment and female anemia. To tackle hunger, the government has passed the Food Security Act, which entitles all BPL families 25 kg of grain (wheat and rice) per month at Rs 3 per kg. But to translate such measures into reality and ensure that the beneficiaries get the requisite amount is indeed a big challenge.

The big question is what is required to be done?  The planning and development strategy has been geared to benefit largely the well-off sections of society. Some benefits have accrued to the economically weaker sections but the real poor have not benefited in any tangible manner. The condition of the farming community, who should have derived benefits from the rise in food prices, has regrettably remained the same and in some parts of the country has actually deteriorated. The beneficiaries have been the industrial class and most organized sector employees whose percentage is a small fraction of the country’s population.

The emphasis on private sector participation in the economy has again helped in boosting up the GDP but not helped in upgrading the conditions of the poor and the distressed sections of society. Clearly, the share of public investments in irrigation have not increased and irrigation potential as percentage of the gross cropped area is still around 60, which has contributed to no appreciable increase in agricultural productivity. While pulses production stagnated at around 14 million tonnes per year since 1990 with the population having increased by 360 million, per capita availability of cereals has also fallen. 

Keeping in view the long-term demands of an increasing population, especially food, it is imperative for the government to give more attention to agriculture. While research has to be geared up for productivity increase in the lagging States and explore ways of multi-cropping, there is also the need to develop a chain of cold storages to meet shortages in times of need. More government investments are needed in this direction as a priority area. A time-bound action plan for revitalization of agriculture through a second green revolution is called for to tackle future rise in prices of essential commodities.

The 10-year Cereal Systems Initiative for South Asia Programme (CSISA) which aims to increase yield by 0.5 tonne per hectare on five million hectares of four million farmers should give a push towards the second green revolution becoming a reality through the project. It is also necessary that all sorts of hoarding in food commodities must be stopped with an iron hand through strict enforcement of the Essential Commodities Act and this has recently been reiterated by Agriculture Minister Sharad Pawar. It may be added here that, if necessary, direct intervention of the Centre may be resorted to.     

The development strategy has to be so oriented not just at economic reforms for benefits to the private sector but to ensure food and employment to the lower segments of society. The budget for the Agriculture and Rural Development Ministry too has obviously to be increased. There is need for simultaneous monitoring of at least the schemes relating to food and employment of the poor to ensure there is no negligence and corruption. How soon can the Government get cracking? ---INFA

(Copyright, India News and Feature Alliance)