UPA's deafening silence

Negative Inflation And Price Rise


For a government assuming office on the plank of putting the concerns of the ‘aam aadmi’ as their foremost priority, the silence of Raisina Hill on the grave price situation affecting availability and affordability of the same ‘aam aadmi’ is deafening. It is a sinister joke on negative inflation figures that is adding salt to the injury. Week after week, the divergence between the wholesale price index and the consumer price index for industrial workers and agricultural workers is growing by leaps and bounds.

Why is the price situation so grave? With the ominous drought, there is a discernible effort to blame the situation on the rain gods. The prime minister has observed: “A difficult situation. A deficit of more than six million hectares has been reported in paddy, which is the worst affected crop”. The increasing note of alarm on the drought situation may not be misplaced. But in the din, implicitly, if the concern over the skyrocketing of prices of essential commodities gets downplayed, then the tragedy of the common man will become absolutely unbearable. Because the impact of the drought on agricultural production in general and food production in particular will be felt on the demand-supply chain only by the beginning of next year when the kharif crop normally comes to the market. Therefore, the specifics of this southward movement of prices have to be understood and corrective measures urgently undertaken.

Neglected area

It is true that the overall context of acute food insecurity of the years immediately after independence does not exist. Particularly the green revolution technology had brought about a major incremental change in food production. But, unfortunately, the momentum of the green revolution seems to have plateaued. This can be seen from the comparatively low figures of per hectare yield of food crop with reference to not only developed countries but even China. The expansion of irrigation and agriculture are the essential features of the green revolution technology. 

Unfortunately, large tracts of agricultural land are not irrigated. Further, there has been very little investment and effort in the development of agriculture in rain-fed and dry land areas. Therefore, food production has fluctuated between 180 million tonnes and 210 million tonnes.

This situation on the production front is one part of the problem. Here the difficulty is only expected to compound with the emerging crisis of climate change. Perhaps, the more critical question is how do we manage our food stocks and ensure right to food and food security. The Food and Agricultural Organisation has laid down “Food security for a household means access by all members at all times to enough food for an active, healthy life”. From this standpoint, not only are millions of Indians food insecure, but according to a recent study by the International Food Policy Research Institute, in terms of Global Hunger Index, India ranks 66 among 88 developing countries. India’s hungry are more vulnerable than many of the sub-Saharan countries.

The reasons are not difficult to understand — absence of a universal and efficient public distribution system. This again is the result of a policy paradigm which has its roots in the structural adjustment programme (SAP) and the growing financialisation of our food economy. The SAP, forced by the IMF, and the overall global neo-liberal regime have ensured that the subsidy on food is drastically cut. This has led to an overall slow down of procurement and building up of public stocks. On the other hand, such a policy paradigm has also led to increasing exclusion of a large section of of vulnerable population from the PDS and access to subsidised food. This has been made possible through the definition of poverty line which is not only inadequate but also, in real terms, a destitution line. A large number of people who are above such a poverty line are, in reality, grossly food insecure.

Speculation market

The shrinkage of the PDS and the adverse impact on access to food for vast millions have exposed these people to the vicissitudes of the market. The market is not where foodgrains are physically traded. To give a clue to the sharply accelerated process of financialisation of food economy, one can refer to figures put out by the Forward Markets Commission of India. According to the commission, the cumulative value of trading in commodity exchanges in June 2009 stood at a staggering Rs 15,64,114.96 crore. This denotes a 14-fold increase over Rs 2,21,888.06 crore in June 2007. This gigantic growth implies only one thing: Speculation over these financial instruments, which include food stocks, is yielding huge profit. And this in turn is leading to very sharp increases in food prices.

Therefore, the government, if it really means business on the price front and acts to urgently secure access to food and nutritional requirements of the ‘aam aadmi’, will have to decisively reverse the current trend of dismantling the PDS and exclude vast numbers. The answer to the current crisis lies in creating a truly universal PDS and do away with misplaced computation of the poverty line which has no consonance with the ground reality. This will have a double benefit: Ensuring food security for the vulnerable and bringing down the price line in the open market. There is enough empirical evidence to suggest that such government intervention, insulating large numbers from the whims of the market, will have a sobering effect on the price line.
On the other hand, the government has to also stop forward trading in food based commodity derivatives and deny reaping of super profits by financial market players. The prime minister has spoken about taking ‘hard decisions’ and stopping people from going hungry at any cost. If he is true to his promise, the current neo-liberal prescriptions will have to be abandoned. This is the minimum that the prime minister owes to the mandate-2009.

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