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First fix the basic flaw

A city dweller who spends Rs2,000 a month on his food eats less cereals than the guy who spends Rs1,500. But the richer man’s diet includes an extra 10% pulses, 60% meat and eggs, 25% vegetables, 50% milk and over 100% fruits.

india Updated: Dec 24, 2010 22:40 IST

A city dweller who spends Rs2,000 a month on his food eats less cereals than the guy who spends Rs1,500. But the richer man’s diet includes an extra 10% pulses, 60% meat and eggs, 25% vegetables, 50% milk and over 100% fruits. And the man who could spend Rs1,500 a month on his food in 2004 could by 2009 spend Rs2,000. A government geared to keeping cereal prices in check has been caught on the wrong foot by India's changing diet.

And in cereals, despite decades of intervention by the State every step of the way, there is less going around per head today than there was in 1965. The continuing story in the inexorable rise of food prices is the Indian population is growing faster

than farm output. At an estimated 1.5%, the annual rate of increase in population was ahead of the 1% growth in grain production in 2008-09.

Vegetables, livestock and dairy, which are outside of the official machinery of price controls, procurement and subsidy, are persistently keeping food inflation high as a wealthier India learns to eat better. The change in tastes could explain why food prices have been stubborn in a good monsoon year. They fell from an average of 15.7% in the first quarter of 2010-11 to 12.3% in the next three months, to 10% in October and further in November before rising to 12.13% in the second week of December. The worry is they will rise faster as spikes in the prices of onions and tomatoes get captured in inflation data for subsequent weeks. Depending on how you choose to measure it, food makes up from 25% to 65% of the weight in the several price indices the government puts out.

The government cannot afford to ignore the issues that show up when vegetable prices hit the roof. Foremost is farm productivity, which has languished for a quarter of a century. India has been unable to build on the gains of the Green Revo-lution and its food security is increasingly under threat. Enhanced farm productivity is vital for keeping food prices in check on the one hand and raising rural incomes on the other. Second, India's farm supply chain remains horribly antiquated and a quarter of its vegetables rot before reaching the market. Furthermore, it costs nearly Rs7 to transfer one rupee worth of benefits to the poor through the public distribution system and just over half the total food subsidy reaches the consumer. Finally, the trade in India's agricultural output is loosely policed, resulting in prices tripling between the farm and the kitchen.