Middle class India must pay higher food prices

It’s the biggest issue in the country at this moment. Yet instead of discussing ways and means to restrain spiralling price indices in a calm, rational and constructive way, Parliament has (as usual) been reduced to an unruly brawling arena with opposition members storming the well of the house shouting street-style slogans, preventing reasoned debate and prompting prolonged adjournments. Well aware that rising prices, particularly of food items, within an economy in which the great majority of the population endures a hand-to-mouth existence - according to World Bank data over 700 million Indians subsist on less than $2 (Rs.80) per day - can topple it from its high and mighty pedestal, the Congress-led UPA coalition government at the Centre has announced a slew of measures to control inflation which for the first time in four years has crossed the 5 percent threshold of the WPI (wholesale price index) to close at 7.33 percent on April 25. Thus exports of wheat and rice have been banned; raids and searches under the Essential Commodities Act, 1955 have been conducted against suspected hoarders and black marketers; alleged steel and cement manufacturers’ cartels are being threatened condign punishment, and the decks are being cleared for foodgrain and edible oil imports. Yet all these belated initiatives are likely to prove to be mere short-term palliatives - if at all – because the current inflationary spiral is being fuelled by basic supply-demand imbalances stemming from structural iniquities of the Indian economy which have remained unaddressed for far too long. The plain truth is that none of post-independence India’s governments at the Centre and in the states have done anything significant to improve the terms of trade between rural and urban India. Under the perniciously unjust and inequitable Soviet-influenced economic development model engineered by the country’s central planners, agriculture produce prices continue to be artificially depressed while prices of agriculture inputs - seeds, fertilisers, pesticides, water and transport (petrol/diesel) – have been permitted to rise vertiginously. Now the time has come for urban, middle class India to come to terms with paying substantially higher prices for foodgrains and farm produce. This will require middle class India, which has grabbed most of the gains of economic liberalisation and deregulation since 1991, to readjust its expenditure priorities to pay fair prices for agriculture produce. Higher farm-gate prices will automatically improve the abysmal productivity of Indian farmers and set in motion a new virtuous circle of rural-led anti-inflationary growth and development. Inevitably a hue and cry will be raised about the fate of the urban poor and landless labour in rural India in an era of sharply higher food prices. Such concerns are justified. But they need to be directed at tightening the country’s moribund and corruption-ridden public distribution system (PDS) to reform and enable it to provide subsidised foodgrains and farm produce to carefully targeted poor households in urban and rural India.  Facebook Twitter LinkedIn WhatsApp