Cereal basket case

Food prices are on the rise again. In addition to reducing real income of people,since food constitutes a large share of the consumption basket of the poor,food price inflation also has the risk of feeding into higher wages and continuing the wage-price spiral that India has started facing in recent months. Higher inflation is bad for growth and investment as uncertainty makes investment decisions more risky. Improving the policy framework for agriculture and moving away from a pro-cereal policy have become essential not only to make the lives of the common person comfortable,but also to keep up Indias growth and investment momentum.With rapid economic growth and rising incomes in India,the total percentage of income spent on food has declined. Along with this,there has been an increase in the share of high-value products within food expenditure. Cereals are being replaced with fruits,vegetables,milk,eggs and poultry. The per capita monthly consumption of cereals in the period from 1983 to 2004-05 came down from 14.3 kg to 12.1 kg in rural areas and from 11.6 kg to 9.9 kg in urban areas,and the corresponding consumption of high-value commodities has increased. This means theres a higher demand for non-cereal food.Why is supply not adjusting to keep up with the increase in demand? Higher prices should mean farmers are incentivised to produce more of the items in shortage. The answer lies in the governments policy on food,which is still centred around foodgrains. Through subsidies on inputs,irrigation and power,the government has steered farmers towards producing cereal crops. However,in recent years,there has been surplus production of cereal. The governments policy of encouraging production of cereals has diverted production away from fruits and vegetables. A shift in public policy away from cereals needs political leadership as it will hurt the interests of mechanised rich farmers with large land holdings,who are profiting from the existing cereal-oriented policy. However,itll benefit hundreds of millions of small farmers and landless workers. Road networks,cold storages and access to markets have been seen to have a very significant impact on the shift towards production of high-value agricultural products. Milk,fish,meat,fruit and vegetables are more perishable and require more infrastructural facilities like cold storage chains and good roads than do cereals.

The government cannot keep addressing the issue by short-term responses any more.