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Some unpalatable truths

india Updated: May 05, 2008 21:26 IST

Hindustan Times
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Political India has predictably gone ballistic over US President George W. Bush’s remarks that India’s prosperous middle-class is responsible for the global food prices. The matter cuts both ways. If the UPA government can claim that rising inflation at home is a global phenomenon, it can also be argued that India is responsible for global inflation. As the number crunchers are fond of saying, correlation or a one-to-one association does not imply causality. Actually, both positions do not tell the whole picture of why global food prices have been spiralling upwards. As the government controls the spot prices of wheat and rice, there is no way that they reflect global food prices.

Moreover, as India is only a marginal importer of food, its demand is unlikely to cause global prices to zoom upwards.

Rather than reflecting the influence of any single factor, the global food crisis, including inflation, is actually the result of a combination of factors: drought conditions in Australia; the growing diversion of US cropland for bio-fuel production; low global stocks of wheat and rice; speculative capital inflows into commodity futures, among others. In other words, the global food inflation reflects an “evolving constellation of adverse international developments”, to borrow an expression from RBI Governor Y.V. Reddy. As all these adverse developments have coalesced into a full-blown crisis, there is an element of truth to the view that global developments have cast their shadow over India and vice-versa. Instead of wasting time criticising Mr Bush, more attention can be usefully devoted to evolving ideas on what to do about the global food crisis.

Prime Minister Manmohan Singh’s address to the CII AGM offers food for thought. According to him, the world community has not done enough to address this challenge: “We need a new global compact between the developed and the developing countries, between the land surplus and labour surplus economies, between food exporters and food importers, to stabilise global food prices.” The upshot is that instead of finger-pointing over who is responsible for this problem, it will be more worthwhile to work towards a global concord to tackle the crisis and ensure greater food security.