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Eating into the growth story

There are viable solutions to the agrarian crisis. But politicians must grasp the nettle.

india Updated: Jan 02, 2011 22:40 IST

Inflation makes all of us poor. But rising food prices make the poor poorer faster than they make the rich poorer. Indians living in cities spend Rs46.20 of every Rs100 on food. Villagers spend Rs69.15. If food prices rise by 10% — food inflation captured in the cost of living indices for both rural and urban workers has rarely dipped below 10% over the past two years — the city dweller is Rs4.62 poorer while his country cousin loses Rs6.91. By hurting the vulnerable, food inflation renders itself unacceptable ethically, economically and politically. Hunger is not price sensitive and dearer food tends to squeeze out consumption elsewhere. Demand in the countryside for goods rolling out of our factories is being crimped. And by making the villager pay an inflation 'tax' half as much again as the townsman, millions in Bharat are at risk of being excluded from India's growth.

Since India began liberalising its economy, prices of farm produce have climbed by a fifth in relation to prices of manufactured goods. The first 10% occurred over 13 years from 1994-95. The other 10% happened in the 20 months to December 2009. The government is grappling with the spurt in farm prices after rains played truant with harvests in two successive years. However, attention to the longer-term trend would have softened the blows of crop failures and supply bottlenecks. Rising farm prices are a reflection of productivity gains in manufacturing and services that have completely sidestepped Indian agriculture. Capital and technology have transformed the non-farm economy; farming needs its share of both. Unless food production manages to convincingly overtake our population growth we are staring at a secular — and accelerating — rise in prices.

Have we reached the end of the road in the way we farm? Obviously not, since our governments choose to lurch from crisis to agrarian crisis, paying a political price in the bargain. The alternative — modern and efficient agriculture — would require economic reorganisation that carries an even higher price tag. But the gap is shrinking. There is scope to introduce capital and technology at the periphery in, say, how food travels from the farm to the plate and in how farmers contract to sell their harvests. These can be achieved without doing too much violence to the basic structure of Indian agriculture. Solutions have been around as long as the problems dogging our farm economy, it is up to our politicians to weigh the costs.