MSP for cereals has resulted in excess cultivation and unmanageable stocks, which involve huge carrying costs. This has not only discouraged the cultivation of fruit and vegetables, it has also created an artificial floor on food inflation and has led to the excessive use of scarce groundwater. Last, the government must take steps to improve supplies of milk and other animal proteins. This is vital as food habits are changing, and a growing population and rising income means demand will continue to increase.
It is not possible to reduce food inflation in a hurry but once concrete and credible steps are in place, it will begin to soften structurally, and overall inflationary expectations will also mellow. “Everything can wait, but not agriculture,” Jawaharlal Nehru had said after India attained independence. The statement is as valid 65 years later.
The writer is chief economist, Crisil