Opinion Why your veggies cost more

investment prospects. In contemporary policy there is also concern,dating especially since the classic paper by Atul Sarma and Radhakrishna (now Statistics Commission Chief) on the redistributive impact of inflation on the poor. These days the problem is complicated by a great and growing capability to obfuscate facts. Major food price trends are explained by policies,but it is easier for modern-day Chanakyas to blame the rain gods,and if that doesn’t work,“speculators” come in handy.

First the facts. As the Economic Survey points out,from March 2008 to March 2009,wholesale prices rose by 8.4 per cent,but food prices by 6.8 per cent. Food articles contributed 13 per cent of the year’s total inflation and manufactured goods four times as much at 50-53 per cent. But we don’t talk of industrial inflation. What are called farm-gate prices for the farmer are closer to wholesale prices; but the consumer may pay more,and in this period,food inflation for the industrial worker as a consumer was 50 per cent higher than in wholesale prices — and that is pretty high. Once upon a time the two series would move together but that doesn’t happen regularly now; statisticians are yet to tell us why. Trends for the last three months are somewhat tentative,since the numbers get revised and there is always seasonality in them. But an increase in food prices is evident and undeniable.

There is food and there is food. Interestingly,the larger increase has been in grains and edible oils — and this will get worse this year. Vegetable and eggs,meat and fish prices rose by half rises in food prices as a whole. But end-July numbers will probably reverse the June scare. The grain price is determined by government policy; young economists and econometricians make a killing by showing time and again that markets don’t work in grain supply fluctuations — but they do in non-grain sectors.

Price rises in edible oil are almost entirely import-determined; more than three-quarters of our edible oil is imported. Thus the supply price from exporters elsewhere in the world determines the price for us; that’s what reliable market reports tell us is happening now,too,though the official numbers are not yet in. In the beginning they subsidise you,but once you are that dependent they know you have no choice. Don’t think of these as competitive markets abroad,either; they are highly interventionist. The Economic Survey explains differences in world and Indian wholesale food prices nicely,but doesn’t tell us the trends in import prices.

Where do we end up? It is certainly not a question of “fixing” the vegetable and oilseed grower. It was not wrong for the government to set a fair minimum price for the grower of grains — although sometimes fairness gets a little stretched by political

pressure. It is wrong not to have that incentive in backward regions which are the rice bowls of India,and where the great potential is for supply. This would definitely help supply. But let’s not panic about it; doing it the right way is much more important,especially in a bad rainfall year.

Meanwhile,the regions where the grain price is supported are getting frankly obese — and anyway are not doing their share in terms of supply growth,even if they manage to be very politically articulate. No,what we need is a real price/ interest rate stability macro plan,one with agriculture as a part.

In pulses and oilseeds we do need to tell the farmer that if he produces them at home,we will stand by him. In each legume crop yield can be at least a quarter higher if we replicate conditions from the best-performance areas. But the obstacles to those who try are amazing. A company which had set up producer companies couldn’t get working capital because they are neither farmers nor cooperatives.  

Whatever the overall support to agriculture,it is relative profitability which matters. The Economic Survey repeats what is now generally understood: for agriculture,we need variable tariffs within set boundaries. This has even been said in a government report — for which we,interestingly,got an

unexpected rap on the knuckles: the Sarkar went out of its way to say,in an official PIB press release,as recently as in January this year,that the cabinet agrees with the

objectives we stated of making Indian farming competitive and efficient,but will absolutely not follow the policies advocated.

The PIB is a great set of people — but they have never been very successful in controlling the spread of ideas.

The writer,a former Union minister,is chairman,Institute of Rural Management,Anand express@expressindia.com