67 Years after Independence, Indian farmers have disappeared from the economic radar screen -- My interview

Indian farmers continue to toll against all odds. 

(pic from web) 

On the occasion of the 67th Independence, Aug 15, 2014, the Hindi magazine Yathawat interviewed me on the state of Indian agriculture. In this short and crisp interview, I was asked to track the historical backdrop and to look at the present and future agricultural policies and approaches.  

Q: When India got its Independence in 1947, how did its agriculture look like? 

India got its Independence in 1947 in the backdrop of Bengal Famine. The famine happened in 1943 taking a massive human toll. Some estimates point to 3 million people perishing in the famine. But Nobel laureate Amartya Sen’s work tells us that there was no shortfall in food production in 1943. It was only because the private trade had diverted the food that millions of people were left starving. In 1947, when India got Independence, agriculture was in a pathetic state, a fallout of the neglect and wanton destruction of agriculture during the days of the British Raj. With more than 80 per cent population engaged in subsistence farming, Independent India was a hungry nation.

Q: What prompted Prime Minister Lal Bahadur Shashtri to give the slogan of "Jai Jawan, Jai Kisan" in 1965? Was it a reflection of the grave crisis afflicting farmers and farming, and of course the threat India faced from across the borders. 

When Lal Bahadur Shashtri took over a Prime Minister in 1964 India was a food importing country. It depended on food imports from North America under the PL-480 scheme. Not many people know that 1965, the year when India went to war with Pakistan, was also a drought year. In 1965 India had imported 10 million tonnes of wheat under PL-480. Knowing how precarious the food situation was, and knowing the extent of prevailing hunger, Lal Bahadur Shashtri had urged the nation to fast for a day. I know many people who have continued to fast on Monday’s since then. It was primarily because Lal Bahadur Shashtri understood the role that soldiers and farmers play in maintaining national security thereby preserving national sovereignty that he gave the slogan ‘Jai Jawan Jai Kisan’

Q: Green Revolution came in the late 1970s. What led to that ..

For almost 20 years after Independence in 1947 India had remained a food importing country. In fact, after the 10 million tonnes food import in 1965, the next year 1966 also turned to be a drought year in which India imported 11 million tonnes of foodgrains. That was the biggest food import at that time in history. before that, it was not that the first Prime Minister Jawaharlal Nehru did not make any serious efforts to improve food production. He launched various community development programmes but could not achieve the desired results. On Aug 15, 1955 he had shared his frustration with the nation when he said from the rampart of Red Fort: “It is very humiliating for any country to import food. So everything else can wait but not agriculture.’

After the premature death of Prime Minister Lal Bahadur Shashtri in Jan 1966, Mrs Indira Gandhi took over. But before Shashtri died he had annoyed the then American President Lyndon Johnson when he had told an American journalist, in reply to a question, that the war in Vietnam “was an act of aggression’. This sentence had annoyed Johnson who had stopped food exports to India under what is known as ‘stop-go policy’. India was then in such a precarious situation that even the Food & Agriculture Organisation of the United Nations had to make an appeal to US to allow food exports to India. Food would come directly from the ship to the hungry mouths. India was then called as a country living in a ‘ship-to-mouth’ existence.

Mrs Indira Gandhi sowed the foundation of ‘Green Revolution’ in 1966 when she allowed the seeds of dwarf and high-yielding varieties of wheat from CIMMYT in Mexico. India imported 18,000 tonnes of wheat seed from Mexico, adapted them to Indian conditions, and as per an earlier demarcated programme, distributed these seed to farmers in Punjab and western Uttar Pradesh where irrigation was available. The first wheat harvest after cultivating high-yielding seeds in 1967 was five tonnes more than the previous. This was a record increase at that time and was termed ‘wheat revolution’ by Mrs Gandhi.

Q: Green Revolution increased production in wheat and rice. Besides high-yielding varieties, there must be something else too?

The quantum jump in the wheat production was followed by rice two years later. India received high-yielding varieties of rice from the International Rice Research Institute in Manila, in 1968. These rice varieties were adapted to the Indian conditions and distributed to farmers in Punjab, western Uttar Pradesh and also in Andhra Pradesh and Tamil Nadu. Rice also recorded an increase in productivity and production. The term ‘Green Revolution’ was later coined by an American scientist, William Gaud.

Green Revolution turned the country self-sufficient in wheat and rice, and by early 1970s India stopped importing food under PL-480.

Since the days of Green Revolution, Indian agriculture has grown manifold. There has been an all around development in crop production not only in wheat and rice but also in coarse cereals, maize, cotton, sugarcane etc. Improved technology was packaged well with right policy decisions. The setting up of Food Corporation of India and Agricultural Prices Commission in 1965-66 were the two major planks of what Dr M S Swaminathan calls as the ‘famine-avoidance’ strategy.

Q: How come after Green Revolution turned the corners, farmers are committing suicide on a large scale?

By the mid-1980s, the environmental impact of intensive farming systems that used chemical fertilizers, chemical pesticides and groundwater had begun to emerge. These are called the 2^nd Generation Environmental Impacts. But instead of encouraging farmers to adopt sustainable practices to thwart the negative impact of intensive agriculture, farm scientists tried to address this by encouraging more Green Revolution. In other words they asked farmers to apply more chemicals. This deteriorated the natural resource base. At the same time, the policy support for agriculture declined. Reduction in public sector investment in agriculture, failure to encourage sustainable farming practices, and unremunerative prices for agricultural produce were among the factors that turned agriculture into a losing proposition. The damage was more pronounced in cash crops like cotton. Farm suicides began as a trickle around 1987 or so and since then have taken a toll of nearly 3 lakh farmers in the past 17 years.

Q: What is behind the terrible agrarian crisis that India faces? 

Farm suicides are the outcome of the continued neglect and apathy of the farm sector. Besides the policy makers, a significant role is also played by agriculture scientists and economists. They cannot simply absolve themselves from the terrible agrarian crisis that have prevailed for almost two decades now.

Q: Is it because India does not have a clear cut understanding and focus on how to prop up agriculture? Is it because of a wrong direction coming from international institutions? 

About 20 years after the Green Revolution began, and somewhere in the early 1990s, the global economic thinking shifted to shrinking agriculture and boosting industry. World Bank/IMF and the international financial institutions began to propose that economic growth can only take place when fewer people are left in agriculture. In 1996, the World Development Report of the World Bank suggested moving 400 million people, equally to twice the combined population of UK, France and Germany, from the rural to the urban areas in India in the next 20 years, by the year 2015.

Meanwhile, the emergence of World Trade Organisation in 1995, also shifted the focus to trade. The mainline economic thinking shifted to reducing support for agriculture and importing highly subsidized cheaper food from the developed countries. Subsequently, the World Bank and Multinational Corporations have been pushing for land acquisitions, contract farming, creation of super markets or in other words paving the way for corporate agriculture. In other words, the neglect of small scale agriculture is part of a design. It is part of a pre-planned economic strategy that is being imposed. 

In a country where 52 per cent of the 1.27 billion people are directly or indirectly engaged in agriculture, the thrust of the economic growth paradigm is to push farmers out of agriculture. Since the younger lot among farmer’s don’t know anything except farming, the World Bank had suggested a network of training schools across the country to train them to become industrial workers. That is being done. In other words, farmers have now become a burden on the country. The common thinking is the sooner the country is able to offload farmers,  the better it will be.

Q: Every year the government announces support for agriculture in its annual budgets. You think that is enough? 

In 2013-14, farmers produced a record harvest of 264.4 million tonnes of foodgrains. Production of oilseeds reached a record high of 34.5 million tonnes, a jump of 4.8 per cent. Maize production increased by 8.52 per cent to reach a level of 24.2 million tones. Pulses production reached an all-time high of 19.6 million tones, an increase of 7.10 per cent over the previous year. Cotton production too touched a record high.

With such record production, the nation should remain indebted to the virile and hardworking farmers. But last year, in 2013-14, when farm production recorded a quantum jump, agriculture received Rs 19,307-crore from the annual budget kitty, which is less than 1 per cent of the total budget outlay. This year, only Rs 22,652-crore has been provided for agriculture and cooperation departments. Again the outlay for agriculture remains less than 1 per cent of the total budget. In all fairness, the apathy towards agriculture continues.

Q: Is the neglect continuing? 

The neglect of agriculture has become more pronounced since economic liberalization was introduced in 1991. I recall the then Finance Minister Manmohan Singh famous budget speech when he showered all the bounties on industry and in the next paragraph said that agriculture remains the mainstay of the economy. But since agriculture is a State subject, he left it to the State Governments to provide the much need impetus to farming. But what he forgot to say was that industry too is a State subject and should have been left to the State governments. The bias therefore was clearly visible.

Although agriculture grew at an impressive rate of 4.1 per cent in the Eleventh Plan period (2007-8 and 2011-12) it received a dismal financial support of Rs 1 lakh crore. For a sector which directly and indirectly employs 60-crore people, Rs 1 lakh crore outlay for five years is simply peanuts. In the 12 Plan period (2012-13 to 2017-18) agriculture is projected to receive Rs 1.5 lakh crore. Compare this with the Rs 5.73 lakh crore tax exemptions showered on the industry in 2014-15 alone. Since 2004-05, Industry has received tax concessions (computed under ‘revenue foregone’ in the budget documents) to the tune of Rs 36.5-lakh crores or Rs 1,100 crore per day for the past 9 years. It’s therefore a matter of priorities. In fact, as I have been saying for long, farmers have disappeared from the economic radar screen.

Despite the neglect, the fact remains whatever India has been able to achieve in economic and military terms is primarily because of food self-sufficiency built so assiduously over the past five decades. But the tragedy is that the country is deliberately destroying the agricultural foundations, and pushing it back to the days of 'ship-to-mouth’ existence. Over the past few years, India is busy adopted the same economic policies that were existing at the time of Bengal Famine. #

How about Smart Villages, Mr Modi

I have never understood why Indian farmers continue to be ignored. With a meager outlay every year, Indian farmers have been producing a bountiful harvest. If only agriculture was to be injected with the much need economic stimulus package, I am sure the Indian farmers can flood the country with food, fruits and vegetables. India can certainly emerge as one of the biggest exporters of agricultural commodities.

In 2013-14, farmers produced a record harvest of 264.4 million tonnes of foodgrains. Production of oilseeds reached a record high of 34.5 million tonnes, a jump of 4.8 per cent. Maize production increased by 8.52 per cent to reach a level of 24.2 million tones. Pulses production reached an all-time high of 19.6 million tones, an increase of 7.10 per cent over the previous year. Cotton production too touched a record high.

With such record production, the nation remains indebted to the virile and hardworking farmers. But last year, in 2013-14, when farm production recorded a quantum jump, agriculture received 19,307-crore from the annual budget kitty, which is less than 1 per cent of the total budget outlay. This year, Finance Minister Arun Jaitley provided only Rs 22,652-crore to agriculture and cooperation departments. 

The neglect of agriculture has become more pronounced since economic liberalization was introduced in 1991. I recall the then Finance Minister Manmohan Singh famous budget speech when he showered all the bounties on industry and in the next paragraph said that agriculture remains the mainstay of the economy. But since agriculture is a State subject, he left it to the State Governments to provide the much need impetus to farming. But what he forgot to say was that industry too is a State subject and should have been left to the State governments. The bias therefore was clearly visible.

Although agriculture grew at an impressive rate of 4.1 per cent in the Eleventh Plan period (2007-8 and 2011-12) it received a dismal financial support of Rs 1 lakh crore. For a sector which directly and indirectly employs 60-crore people, Rs 1 lakh crore outlay for five years is simply peanuts. In the 12 Plan period (2012-13 to 2017-18) agriculture is projected to receive Rs 1.5 lakh crore. Compare this with the Rs 5.73 lakh crore tax exemptions showered on the industry in 2014-15 alone. It’s therefore a matter of priorities. In fact, as I have been saying for long, farmers have disappeared from the economic radar screen.

Despite such low budgetary allocations for agriculture and knowing that the public sector investments have been drastically falling in the rural areas, there is no visible intention of resurrecting the farm sector reeling under a terrible economic distress. As if this is not enough, all the noise in TV studios is to cut down on subsidies meant for the poor – food, fertilizer, diesel, gas and MNREGA. But there is not even a whimper on the desperate need to remove the tax exemptions for the Indian industry.

Since 2004-05, Corporate India has been showered with Rs 31-lakh crore tax exemption. This was expected to boost industrial output and create jobs. But while only 1.5 crore jobs were added in the past 10 years, industrial production has not shown any significant jump. On top of it, Corporate India is sitting over a cash surplus exceeding Rs 10-lakh crores, and has also defaulted the banks (termed as non-performing assets) by another Rs 10-lakh crores or so. It clearly shows how the poor are being denied their legitimate economic support and the resources are being very conveniently diverted to the rich elite.

As I said earlier, agriculture employs 60-crore people. Nearly 82.2 per cent of those employed in agriculture are small and marginal farmers. With a meager land holding, and with virtually no financial support, this majority population has somehow managed to survive. Studies show that nearly 60 per cent farmers themselves go to bed hungry. With agriculture deliberately being turned economically unviable, more than 42 per cent farmers want to quit farming if given a choice. Mainline economists are keen to finish agriculture and move the farming population into the urban centres. But considering that temples are the biggest employer in the country, followed by security guards and the lift boys, I wonder if that is what constitutes economic growth. Nevertheless since the World Bank has prescribed rural-urban migration as the ultimate indicator of economic growth, Indian economists have been parroting the same prescription.

Economic Survey 2013-14 points to the same direction. Raghuram Rajan, the Reserve Bank governor echoes the same argument. Rising food inflation comes in handy to up the ante against Minimum Support Price (MSP) being paid to farmers. APMC mandisare to be dismantled. Farmers are being pushed to accept the market doctrine, which means that distress sale will now become a norm. In Bihar, which has no APMC since 2007, markets have failed to infuse any confidence by way of economic prosperity. But that’s what the markets like. They should be able to source cheaper farm commodities thereby adding on to their profits. What happens to farmers has never been their concern. Nor will it ever be.

I expect Prime Minister Narendra Modi to reverse the trend and thereby make an historic correction. He has repeatedly been emphasizing during his election campaign on the dire need to make farming economically viable. He has also been talking of providing modern amenities right in the villages. Taking development to the villages has been the hallmark of his political thinking. A beginning can be made by revitalizing agriculture in a manner that it brings back the smile of the face of the farmers. In addition to creating 100 smart cities, Mr Modi should also focus on creating smart villages.

A smart village will automatically link local production with local procurement and local distribution. A smart village will not only bring internet connection into the rural hinterland but also provide support to sustainable agriculture practices. A network of small scale industries linked to agriculture, and a strong network of rail and road corridor, with civic amenities like education and health will transform the face of real India. That’s the kind of change India expects. That’s the big ticket reform the country has been waiting endlessly for 67 years. Smart villages will not only reduce the growing inequality but also bring acche din for the last person in each and every corner of the country. It will at the same time reduce the burden of influx on the cities, and help reduce global warming. #

An abridged version of this article appeared in Deccan Herald, July 16, 2014.
Why this apathy? 
http://www.deccanherald.com/content/419924/why-apathy.html

Smart villages, Mr Modi
Orissa Post, July 15, 2014.
http://www.orissapost.com/epaper/150714/p8.htm

Prime Minister ignores the facts. Openly bats for dangerously risky GM crop technology.

In the 20 years since the first GM crops was introduced in US, there is a spurt in diseases. There is certainly no evidence of a direct link but there is also no evidence that this may not be somehow linked. Why not have a scientific investigation? 

Prime Minister Manmohan Singh stirred a hornet's nest when he warned against succumbing to ‘unscientific prejudices’ against genetically modified (GM) crops. Speaking at the 101^st Indian Science Congress at Jammu. He claimed that biotechnology has great potential to improve yields and his government remains committed ‘to promoting the use of these new technologies for agricultural development’.

Prime Minister’s statement lauding the controversial GM technology has not come as any surprise. Two environment ministers – Jairam Ramesh and Jayanthi Natarajan – have been eased out in the recent past essentially because of their opposition to GM crops. Jairam Ramesh was responsible for imposing a moratorium on Bt brinjal which if approved for cultivation would have opened up flood gates for the introduction of many more GM food crops; and his successor Jayanthi Natarajan who is generally believed to have resisted industry pressures to allow field trials of GM crops.

The day after Prime Minister openly came out in support of the dangerously risky GM technology, Monsanto stocks rose by 5.45 per cent. 

The stakes are therefore very high. For the multi-billion dollar industry, India’s refusal to accept GM crops can spell a death knell. Considering that many State governments have refused permission for holding field trials of GM crops, and the swelling opposition from Parliamentary Standing Committee on Agriculture and subsequently the Supreme Court appointed Technical Expert Committee (TEC) the industry has been mounting pressure through the back channels. But let's first understand how true the so-called ‘scientific’ claims of the industry are; and whether GM crops are actually safe for human health and environment.

Prime Minister says that GM technology has great potential to improve yields. This has been claimed by the industry too. But the fact is that it is now 20 years since the first GM crop was introduced in the United States, and there is still no GM crop that increases crop productivity. US Department of Agriculture’s own studies show that the yields of GM corn and Soybean are less than that of conventional varieties.  Even in India, the Central Institute for Cotton Research (CICR) Nagpur, which monitors the cotton crop, has admitted: “No significant yield advantage has been observed between 2004-2011 when area under Bt cotton increased from 5.4 to 96 per cent.”

The argument that the world needs to produce more for the growing population by the year 2050, and therefore it needs GM crops therefore does not hold true. But let’s look at it. Is there a shortage of food in the world? According to the USDA estimate for 2013, the world produced food good enough to feed 14 billion people. In other words, the world produces food for twice the existing population. The real problem lies in food wastage. Nearly 40 per cent of the food produced is wasted. In the US alone $ 165 billion worth of food is wasted, enough to meet the food requirement of the entire sub-Saharan Africa.

In India, which has close to 250 million people going to bed empty stomach, appalling hunger is not because of any shortfall in food production. In June 2013, India had a record food surplus of 82.3 million tones. It has already exported 20 million tonnes out if it, and there are plans to export another 20 million tones so as to reduce the carrying cost of stored food. Instead of increasing food production, the Food Ministry is planning to reduce food procurement and also use the huge stocks with the Food Corporation of India for commodity trading.

The promise of reduction in pesticides usage has also fallen flat. According to Washington State University researcher Charles Benbrook, between 1996 and 2011, farmers in US are applying an additional 181million litres of chemical pesticides. In 2012, on an average 20 per cent more pesticides were applied by GM farmers. This is now expected to go up by 25 per cent with the introduction of the next range of GM crops which will use a cocktail of herbicides including the deadly broad-spectrum chemicals.

In Argentina, the application of chemical pesticides has risen from 34 million litres in the mid-1990s when the GM soybean crops were first introduced to more than 317 million litres in 2012, roughly a ten times increase. On an average, Argentine farmers use twice the quantity of pesticides per acre than their American counterparts. In Brazil, which has recently taken over Argentina as far as the spread of GM crops is concerned, pesticides use has gone up by 190 per cent in the past decade. 

The Chinese farmers are spraying 20 times more pesticides to control pests. In India, the story is no different. Regardless of what the industry claims, the fact remains that the usage of pesticides too has gone up in India. In 2005, Rs 649-crore worth of chemical pesticides was used on cotton in India. In 2010, when roughly 92 per cent area under cotton shifted to Bt cotton varieties, the pesticides usage in terms of value increased to Rs 880.40 crore. 

Equally more worrisome is the emergence of hard-to-kill weeds, called ‘super weeds’. Estimates show that in US over 100 million acres is now infested with super weeds. Besides using a cocktail of chemical pesticides to control it, some US States are going in for hand weeding since chemicals are no longer effective. In neighbouring Canada, more than 1 million acre is infested with super weeds. Studies show that 21 weeds have now developed resistance after GM crops came. Insects too are now developing immunity against GM crops. In India, Monsanto has already accepted that bollworm pest is becoming resistant.

With no benefits accruing as far as increasing crop yields is concerned or reducing pesticides applications and thereby protecting the human health and environment, I don’t know what promise the Prime Minister sees in GM crops. In fact, all evidence now points to an end of the era in industrial agriculture. With soils poisoned, underground water mined ruthlessly, and with the entire food chain contaminated by chemical pesticides and fertilizers leading to more greenhouse gas emissions, the focus is now shifting to ecological agriculture. 

In Andhra Pradesh, nearly 3.5 million acres today is being cultivated without the use of any chemical pesticides. Out of which, farmers do not use even fertilisers in 2.0 million acres. Production is steadily rising, pollution has come down, soil fertility is rising, farmer’s income has gone up and there are no suicides. Isn’t it a model of farming that the Prime Minister should be advocating? If it can be done in 3.5 million acres I see no reason why it cannot be practiced in 35.0 million acres? That’s where the future lies. #

Further reading: 

1. Time to sow the seeds of sustainable farming. Hindustan Times, Feb 10, 2014. http://bit.ly/1bDlyG8

2. Shifting to organic breeding. Deccan Herald. Feb 7, 2014. http://www.deccanherald.com/content/385133/shifting-organic-breeding.html

India a major destination for global land sharks.

Following Prime Minister Manmohan Singh invitation to China to set up special economic zones and industrial parks in India, a high-level official delegation from Haryana organised a seminar at the 5th China Overseas Investment Fair held in Beijing in early December, offering land, power and other necessary infrastructure for setting up industrial parks. 

While the prime minister is expecting Chinese foreign direct investment to boost manufacturing output, already sluggish because of surging cheaper imports from China, Haryana is going all out to woo Chinese companies to buy farmland. It has already taken around some potential Chinese investors and shown them sites extending to as much as 6,000 acres in Gohana. Not only Haryana, Chinese investors have also visited Uttar Pradesh, Gujarat, Maharashtra and Tamil Nadu looking for probable sites.

Haryana already has signed an agreement with the Japanese major Mitsui to set up an industrial park in the national capital region. Haryana is no exception. Foreign companies from Britain, US, Austria and Thailand have concluded 36 deals to buy agricultural land in India in the states of Gujarat, Orissa, West Bengal and Andhra Pradesh. Seven of these deals have already been completed allowing 13,105 hectares to be acquired. This much land acquisition is only for seven deals. Imagine the extent of productive and fertile land that needs to be acquired for all the 36 deals in the pipeline.

These figures are based on an excellent detailed insight provided by the website, Land Matrix. Interestingly, the Chinese investors are being offered land for ‘purchase’ and they will have the right to re-sell the land. With more and more Chinese investments pouring in, it is time to also revisit strategic ties with China. After all, with lakhs of soldiers deployed in harsh terrain to guard the 3,380 km long Line of Control with China, of which Arunachal Pradesh alone has a common border extending to 1,463 km, the thrust is to protect every inch of land against Chinese intrusion. This policy of protecting national borders certainly needs a review considering that the Chinese are being allowed to purchase land within the country. But will Beijing ever allow Indian companies to buy such huge tracts of farmland in China?

Nevertheless, coming back to the contentious issue of farmland grab, I remember some years ago, the deputy chairman of the Planning Commission, Montek Singh Ahluwalia, had on a visit to Oman, invited Omani firms to farm in India to produce crops that can be exported. At a time when food prices have hit the roof and any measure to limit domestic production should raise concerns considering the growing food requirement for feeding the nation in the years to come, the public policy priorities seem out of tune.

So far you had read that Indian companies were buying land in Africa, Asia and South America. Of the 848 land grab deals concluded globally since 2008, 80 involve Indian companies that have invested in 65 deals to grow foodgrains, sugarcane, oilseeds, tea and flowers. And as a news report computed, India has already bought land abroad nine times the size of Delhi.

While Indian companies are buying land abroad, foreign companies are buying land in India. That India has now turned a major destination for global land sharks has to be viewed with concern. At this rate the day is not far off when increasingly more and more people will become landless in their own country. The US National Academy of Science calls it ‘a new form of colonialism’ while mainline economists term it as a model of economic growth. However, the fact remains that land grab has become a major investment activity over the past few years. This is frightening as it has grave human rights implications, and will impact global food security to say the least. It calls for a national debate. 

Source: Dangerous trend: India a major destination for global land sharks.        

Hindustan Times, Dec 23, 2013.  bit.ly/1dx6JGC 

Source

What went wrong with Indian economy

Addressing the UN General assembly in Sept 2011, Prime Minister Manmohan Singh had said: “Till a few years ago the world had taken for granted the benefits of globalisation and global interdependence. Today, we are being called upon to cope with the negative dimensions of those very phenomena.”

“The shoots of recovery which were visible after the economic crisis of 2008 have yet to blossom,” he said, adding:” In many respects the crisis has deepened further.” If the Prime Minister knew what was coming, the question that needs to be asked is then why did he allow the Indian economy to take the same route towards self-destruction? The rupee has been on a free fall, the current account deficit – the difference between export and imports – have surged to the pre-1991 levels, and the fiscal deficit shows no visible signs of reduction.

Prime Minister should have known it much better. Even at the peak of the economic growth period, between 2005 and 2009 when economy grew at 8 to 9 per cent, the high economic growth did not result in job creation. According to a Planning Commission study, 14 million people were pushed out of agriculture, and another 5.3 million jobs were lost in the manufacturing sector in the same period. If growth was not translating into additional jobs, and instead was leading to increased joblessness, there was something going wrong.

In the 9 years since Manmohan Singh took over, India has been flooded with cheaper manufactured goods, the imports touching $ 50 billion (Rs 3 lakh crore). Nearly 54 of the imports have come in from China alone. Much of the imports were of consumer goods that could have been easily manufactured within the country. As if this is not enough, India is now having talks with China to sign a free trade agreement. In any case, India has been on a fast-track mode to sign bilateral trade agreements with some 34 countries. The result: imports have far exceeded the exports from India, which means the trade agreements had not benefited the country. 

Prime Minister cannot blame anyone. He himself has been pushing for bilateral trade agreements despite the warnings that the imports are surging.

Take the case of the proposed India-European Union trade agreement in the offing. The EU is insisting that India opens up by reducing import duties on wines and spirits, and also drastically cut back import tariffs on milk imports, from the present level of 60 per cent to 10 per cent. This will bring a flood of milk imports into India which ironically is the biggest producer of milk in the world. Importing cheap and highly subsidised agricultural commodities as well as manufactured goods is like importing unemployment. Because of the reduction in import duties of edible oil from 300 per cent to zero percent, for instance, India is now importing edible oils worth Rs 60,000-crores every year.

While economists are hammering the Rs 1.25-lakh-crore food security bill saying that such massive public outgo will add on to the fiscal deficit, no mention is ever made of the Rs 30-lakh-crore that has been doled out the industry since 2005-06 in the form of tax concessions. But despite the huge subsidy, the industrial output had been steadily on a decline. In May 2013 it stood at minus 1.6 per cent, exports have remained subdued, manufacturing has been almost killed. So wasn’t the tax exemptions a wasteful expenditure? If recovered, the tax exemption alone could have wiped out the country’s entire fiscal deficit.

Had the massive tax concessions to India Inc., which is clubbed under the category of ‘revenue foregone’, were instead invested within the country, it could have created millions of jobs. While industrial production remained dipped, equally shocking is the massive hoarding of cash that the private sector has been stacking. By Mar 2012, India Inc was sitting over cash reserves of Rs 10-lakh-crore. There is no need for India to bend backwards to attract foreign direct investments when its own corporate were sitting over a mountain of cash. Forking it out could have created investor’s confidence and improved the business sentiments.

On top of it, a Credit Swiss report shows that the top ten big corporate groups in India have shown a six-fold increase in external commercial borrowings to reach a staggering Rs 6,30,000-crore. But these massive borrowings did not result in adequate returns thereby increasing the external debt. With so much of external borrowings and with cash reserves growing, what prompted the Govt to provide hefty tax concessions year after year needs to be investigated. In the last two years alone, Rs 11-lakh-crore has been doled out. 

  

Sadly, all this was allowed to happen when the Prime Minster knew that free market policies and deregulation were behind the economic woes. Instead of taking appropriate corrective steps he allowed the Indian economy to dither and slide. This is where he faltered. In fact, the solutions that are being proposed to prop up the ailing economy are the same that initially led to the economic downturn. More of the same, will only add to the crisis. 

India's economic crisis: Bottom of the pyramid has the answers

At a time when the Indian economy is in doldrums, Prime Minister Manmohan Singh has time and again reassured investors that there will be no going back on economic reforms. As usual, he has blamed the external factors for the slump. The internationally respected weekly The Economist has gone a step ahead. To ensure that the Prime Minister does not retract from the promise of delivering more reforms, it has tried to create a fear psychosis among the policy makers so that they don't budge an inch from the faulty economic track the country has been made to follow for the 9-year period of the UPA Government.

Like the cover story in the Time magazine sometimes back that called Manmohan Singh an 'underachiever' (the underlying idea was to provoke him to open up to FDI in retail and other sectors), The Economist has in a frightening analysis titled "Made outside India" (Aug 10, 2013. econ.st/164nUNE ) tried bravely to build up the argument that if India does not accelerate the growth pace, what ever remains in India (in terms of industrial base) will also move out. It was not only amusing to read the biased argument (biased is a soft expression, it is actually a flawed analysis) but makes me wonder how can a reputed magazine support the frauds in trade and business in the name of economic growth. I am shocked that it sings praises for tax havens like Mauritius, and is also praising the decision by Finance Minister P Chidambaram to defer the General Anti-Avoidance Rules (GAAR) which could have brought curbs on the flow of black money and corruption. (Read my earlier blog: Celebrating the induction of black money: http://devinder-sharma.blogspot.in/2013/01/gaar-deferred-investors-stock-markets.html).

It is true that gambling is illegal in India, except a few places. If Sri Lanka is planning to develop a casino industry to attract weekend travelers (like Nepal has done), does it mean that India should also allow gambling to be developed as an industry? This is like saying that India should allow sex tourism to develop on the lines of Bangkok under the proposed India-Thailand Free Trade Agreement that is being renegotiated. I think there can be nothing more stupid as well as dangerous than this argument.

What is amusing of course is the example of Bollywood films that are being shot abroad. The Economist says: "In 1985 Yash Chopra, an Indian film-maker, led a trend of shooting Bollywood "dream sequences" -- in which the hero and heroine sing amidst meadows and snowy crags -- in Switzerland. The Alps were easier, safer than the more familiar location of Kashmir." This is true. But what is wrong in this? Doesn't the Hollywood industry do the same? It has for late done many a films in India or with Indian participation. Does it mean that the Hollywood industry is moving offshore? In any case what the magazine does not perhaps know is that even that trend of filming abroad has come down lately. Film goers love the films that are shot in countryside locales in India. The latest release Chennai Express shot within the country's lesser known locales has been a record earner.

In essence, The Economist is indirectly trying to tell India to strengthen its service industry, cut down on red tape, and allow dirty and corrupt practices to prevail. This is exactly what India has been trying to focus on since 2004-05, and look at where the economy has plummeted to? I will not try to go into the finer details, but I would surely like to draw the attention of The Economist to an excellent analysis by S Gurumurthy that has been published in the New Indian Express. Titled: Reckless imports put Rupee on a ventilator, Aug 19, 2013. http://www.http://www.readwhere.com/read/c/1505436 ). The article brings out how a flood of imports because of the deliberate destruction of the domestic manufacturing sector has put the Indian Rupee in a crisis. "The 9-year UPA period saw manufactured goods import of $ 50 billion against just $2.3 billion during the NDA regime." 

It was primarily because of destruction of the domestic manufacturing sector that some of the Indian industry has moved out. It is not because of red tape and bureaucratic hurdles but because the Reserve Bank of India changed the rules that allowed companies to take out money to invest abroad. I see no merit in this. If foreign companies bringing Foreign Direct Investment (FDI) in India can do business and still make profits (despite the hurdles), how come the Indians companies are not? Again, it is The Economist all these years that has been drumming up the need to open up the economy to foreign investors. More the FDI more has been the imports of manufactured goods. More the signing of unreasonable FTAs, more has been the deluge of unwanted imports that further destroyed the domestic manufacturing sector.

It didn't only end up with massive imports but also destroyed jobs. A Planning Commission sponsored study says that between 2004-05, when Indian economy grew anything between 8.5 to 9.3 per cent, manufacturing sector witnessed a massive job loss. More than 5.3 million people lost jobs in manufacturing. Wrong advise by economists (and also The Economist) had forced the government to bypass manufacturing and follow services in its quest for growth. Remove all the hurdles, and let the markets operate freely is what we have been repeatedly told. But when markets crash, the same set of corporate media advises the government to step in and provide bailout packages.

Markets are always manipulated. There is no such thing as free markets. Whether it is the World Trade organisation (WTO) or the Wall Street, manipulation is the core ability of free trade as well as open markets. So don't get unnecessarily alarmed when the stocks tumble. Just wait and watch. Heavens are not going to fall if the Wall Street crashes completely. This is gambling. Let the gambling rules prevail for those who have willingly put their surplus money in.

I am not sure whether The Economist will ever take my advice. But it will good if they step down from their high pedestal and look at the ground realities more carefully. All that it has been suggesting so far is aimed at creating more wealth. Whether it is through the unhindered capital flows, hedge funds, stock markets, farm land grab,  foreign direct investments etc etc the basic premise is to create more high-net worth individuals. The poor will get the advantage of trickle down. Knowing the economic, environmental and social crisis the world has been pushed into, it is high time to move away from this terribly flawed economic approach. Take the simple case of Hiware bazar village in Maharashtra. Without indulging in all the spoils that neoliberal economists have been tirelessly suggesting and manipulating, this village alone has created 60 millionaires. Imagine if each of the 6.5 lakh villages in India can produce 10 (and not 60 millionaires to begin with), wouldn't the face of India change for ever? And what if the same principle of self-reliance is applied everywhere else in the world?

The solution to the economic ills can be provided by the bottom of the pyramid. Read this: One village, 60 Millionaires. The miracle of Hiware Bazar. bit.ly/15NdWMU 

Is "inclusive growth" a meaningless phrase? World Bank thinks so. Is "food buffer" a useless policy? Well, who else but the World Bank can think so

A man is known by the company he keeps. Similarly, an institution is known by the people it employs. I have never understood why does the World Bank continue to employ stupid economists. If you appoint economists who are simply going by the textbooks, and have rarely spent some time in the villages or interacting with the poor and marginalised, you will continue to produce faulty recommendations. Since the World Bank does not only make recommendations but turns them into conditionality's that the country receiving the finances must adhere to, it ends up doing more damage than can be envisaged.

I thought the ex-chief economist Nicholas Stern was the last of the breed. Travelling through India sometimes back, he had said: "I agree it is a sin to provide the kind of subsidies the US provides to its farmers .. but developing countries must remove their trade barriers regardless of what is happening in the developed countries." Look at the brazenness with which he approved the wrong being perpetuated by the rich countries. Just because he was on the payroll of the World Bank (in which US holds the majority share), he defended the great injustice in the name of economics. When one country (or a group of countries) bullies its way through, how can it be termed as market economics?

Interestingly, Nicholas Stern has now co-edited a book with NK Singh: "The New Bihar"

Kaushik Basu is the new chief economist for the World Bank. He was earlier the chief economic adviser to India's Prime Minister Manmohan Singh. He is on leave from the Cornell University where he is the C.Marks Professor of International Studies and a Professor of Economics. Influenced probably more by the column he used to write for India Today magazine, Manmohan Singh invited him to be his chief adviser. Well, the crisis that the Indian economy is faced with certainly has surely something to do with the advise the chief economic adviser must be rendering to the government.

One of the radical suggestions he made in his individual capacity was to legalise bribe giving (Kaushik Basu says make bribe giving legal. WSJ http://blogs.wsj.com/indiarealtime/2011/03/30/kaushik-basu-says-make-bribe-giving-legal/). I think this speaks volumes of the kind of thinking the economist has. Some called it a radical thought, but I always thought nothing could have been more stupid. And coming from an economist from the Cornell University, I wonder why do we continue to rate these university so high?

While he was advising the Indian Prime Minister he always talked of 'inclusive growth'. In fact, Prime Minister Manmohan Singh has time and again stressed on the need to make economic reforms more inclusive. The Indian media continues to chant the mantra of 'inclusive growth'. Now that he has moved on to the World Bank, he probably realised the futility of using 'inclusive growth' as the hallmark of development. On July 31st, he tweeted: Sustainable growth, inclusive growth, and growth have all had their time in the sun. I propose we make way now for "intelligent growth."

Look at this statement. Does it not mean that the World Bank (or the mainline economists who work for it, or who espouse the cause) do not know what actually works for development? He says that the time is up for inclusive growth or sustainable growth. So he is now looking for another catchy phrase. The best that he can think of it is: "intelligent growth". If the only objective is to delude the educated class with yet another phrase, I suggest the World bank employ a better copy writer. And that brings me to another question. Why does the World Bank need the services of economists when the job can be better done by a copy writer?

If there is no such thing as sustainable growth and inclusive growth, isn't it time to have an urgent re-look at the entire economic growth model? The International Panel on Climate Change has been telling us for several years now that the world has reached a tripping point, and since the growth paradigm is not sustainable, does it not require a complete overhaul? Bringing a new phrase of "intelligent growth" will not address the monumental crisis of survival that the Earth finds itself in.

He has come out with another gem. His tweet today says: "For a nation to have a minimum food buffer stock requirement for all times is useless policy. An inviolable buffer is as good as no buffer." He is obviously referring to India's huge buffer stocks. In the light of the proposed Food Security Act, Kaushik Basu has now made public his displeasure. Reading what his fellow colleagues from the Columbia University -- Jagdish Bhagwati and Arvind Panagariya -- have been relentlessly harping, I am not the least surprised. Such stupid and dangerous statements can only come from mainline economists who are pushing for commercial interests of the multinationals. 

India's food buffer is one of the best policy initiatives that have come up in the recent past. If India has survived the spate of famines it used to face before the British left the shores, food buffer has played an important role. If India has never experienced the kind of food inflation that many countries across the globe have witnessed (Brazil was faced with 440 per cent food inflation in early 1980s) it is because of the food buffer that was created. If India escaped the 2007 Global Food Crisis that resulted in food riots in 37 countries across the globe, it is because of the food buffer. If India has escaped the likes of Arab Spring and also the disintegration and collapse that Soviet Union suffered, it is primarily because of the comforts of food security ensured through a sizable and operative food buffer. 

To suggest the dismantling or dissolution of the food buffer can be the outcome of an unintelligent and insane mind. World Bank is full of them. 

When Nature strikes back, does it leave behind some harsh lessons? Yes, but who wants to listen??

Thousands of people stranded in Uttarakhand being guided to safety 

When I was in the college I remember watching a film about angry birds and animals. It was not a suspense/horror film nor an animation but depicted what can happen some day when angry birds hit back. After all, how long can the birds (and animals) take it lying down? How long will they continue to suffer and tolerate all the torture that mankind has been inflicting upon them with utmost ease?

I don't think we took it seriously.

Last week's disaster that struck the Himalayan region of Uttarakhand in India -- some call it the Himalayan 'tsunami' -- left thousands missing and several times over stranded when nature hit back in all its fury. Within minutes, several parts of Uttarakhand were left devastated. Till the time of writing this, the rescue operations were on, and reports said the death toll may be in multiple of thousands. Swathes of metalled roads had been washed away, massive landslides taking place all along, a large number of villages swept away from the face of the earth leaving behind almost 10-12 ft of accumulated silt. Reports talked of dogs and vultures feeding on the dead bodies. You have all read it. I don't want to re-write those horrific stories of what appears to be clearly a man-made disaster.

It is not that warnings had not been sounded earlier. But a political class -- along with a dominant section of Indian media -- were so swayed by the magic of economic growth that they went on hammering on the need to bring in more investments into the Himalayan region. Any move by saner voices to raise the issue of environmental consequences of lop-sided development were run down as obstacles to growth. Not only for Uttarakhand, they also heckled down a miniscule of TV panelists who would talk of balancing growth with environment. So when Prime Minister Manmohan Singh decided to override Ministry of Environment & Forests right to view environmental cost of financial investments being made in the country, he set up the National Investment Board. The TV channels had backed the wrong move saying that it was required for country's development. I am sure when a disaster strikes these projects, for which fast-track investment clearances are now being made, the same media will never question its own nefarious role.

Policy paralysis is another term that has been coined to explain the obstacles been thrown at industrial growth in the name of environment protection. Investment worth thousands of crores was struck because environmental clearance was not coming. In fact, many a time idiotic questions like why do we need environmental clearance were being also asked. The same media -- perhaps to overcome its own guilt -- is now shrieking and shouting asking why the politicians ignored the warnings on the environment front. The same experts, who kept quiet all these years, are being invited to explain how and why environment protection was ignored. But the bigger question is -- what were they doing when the Himalayas were being ruthlessly raped by the mining, timber and construction mafia?

It is all because not only the political leaders and the mafias, we, the people, too are at fault. We have always preferred to remain a mute spectator when ecological devastation is underway. Not many of us dare to step out, and do whatever he/she can do. While the local communities have been on the forefront of raising their voice, its the educated and the elite who try to run down the ecocide saying its a collateral damage and is inevitable. Even those in public limelight, more often than not, remain quiet hoping that their opposition would block their own chances of being on a State or Central committee. Sad but true of the ways the educated are part of the compromise. By keeping quiet, we only lend support to the mafias.

So when Prime Minister Manmohan Singh approved the Amritsar-Kolkata industrial corridor along the Grand Trunk Road, no questions were asked. earlier, all opposition to the New Delhi-Mumbai industrial corridor had been brushed aside. All environmental norms and the resulting socio-economic cost of a faulty development model were simply ignored. I am illustrating with these two examples to show that the probable damage that can happen is not confined to the Himalayas. It can also happen in these very industrial corridors. Does anyone care? When was the last time you saw Indian TV channels asking the right questions about the completely flawed and environmentally catastrophic industrial growth model that is being aggressively pushed?

Nature has its own ways. It can tolerate to an extent the havoc that is being played around. But when you stretch the extremes, it has its ways of striking back. Uttarakhand just witnessed the nature's backlash. But will we draw any lessons? I seriously doubt. After the relief is operations are over, the weather returning back to normal, and when another match fixing scandal breaks out, the great Himalayan tragedy will be all but forgotten. We will once again return back to our wayward ways of exploiting the hills, make our money and leave the poor hapless millions to face the fury of nature whenever it decides to strike back. Till then we can continue to bask and soak in the glory of rising GDP numbers.

For those who have forgotten the massive destruction Tsunami caused along the coast of South India, here is what I wrote at that time: Tsunami, mangroves and Market Economy (http://www.inmotionmagazine.com/opin/devsh_tsunami.html)  Although this essay was reproduced/printed very widely across the globe, I don't know whether we got the message right. With the passage of time, we will also forget the underlying message from the great Himalayan Tragedy. We have always refused to learn from our past mistakes.

India buckles before European Union. Is ready to sign a 'no-win' free trade agreement that benefits EU mainly

Some years back, a top Indian negotiator for the Indo-Asean Free Trade Agreement (FTA) shared with me an interesting insight. As is the normal practice, the negotiating team went to meet Prime Minister Manmohan Singh, before leaving for the talks. The underlying idea being to get the final limit -- where to draw the Lakshman Rekha -- to which India can agree to on several tricky issues during the negotiations.

The Prime Minister listened to them, and finally said: "Just go and sign."

The negotiators were shocked. But I wasn't even surprised. The little that I know of Manmohan Singh, our ever obliging Prime Minister has been too ignorant (or is it deliberate?) about the dangers of acceding India's interests at international trade negotiations. At the time of the Uruguay Round discussions of the World Trade Organisation (WTO), I recall his statement in Parliament (as the country's Finance Minister) that those who are concerned about the negative fallout of WTO have actually not read the WTO documents. 

I bet if Manmohan Singh had ever read the WTO papers. I doubt if he even knows what is being negotiated at the FTAs. All he knows for sure is which Head of the State has been wanting what kind of concessions from India. And he has been more than willing to oblige.

We are now in 2013, and the Doha Development Round has failed. Even now, there is so much of mistrust in what is going on at the WTO talks, where the rich industrialized countries have still not given up on the grip, that many believe the talks have reached a dead end. In any case, the United States and European Union, the two prime pushers for an unjust and unequal trade regime, have meanwhile shifted gears to focus on bilateral and regional trade agreements. Free Trade Agreements therefore are part of the Plan B and are being pursued aggressively.

While India is in an undue haste in signing an FTA with European Union, reports have now started appearing that most of the signed FTAs have turned out to be a win-lose proposition -- win for the trading partner, and loss for India. The Economic Survey 2013 observes: "Trade deficit (on customs basis) reached a peak of US$ 184.6 billion in 2011-12 from US$ 118.6 billion in 2010-11 with the highest growth of 55.6 per cent since 1950-51." (Page 156 para 7.18). This itself should be a cause for greater worry. 

In a report entitled: Foreign trading partners getting more out of free trade agreements (Times of India, April 15, 2013. http://bit.ly/129rTqO): "Experience with half-a-dozen pacts that India has signed since 2004-05 shows that usually, it is the trading partner that ends up being the winner. Be it Thailand, Asean, South Korea, Japan, Singapore or Malaysia, in almost all cases, imports have grown at a faster pace than exports after the government agreed to slash tariffs. In case of Singapore, where the spurt did not take place in the first year, the growth in imports from the island nation in the second and third years more than made up for the absence of the trend at the start." 

The EU-India free trade agreement is no exception. The trade agreement is being signed to boost employment and prosperity in both the EU and in India. But the way the negotiations are going about, with the EU making it abundantly clear that the hiking of FDI in insurance from 26 to 49 per cent is an absolute must, and with the concerns being expressed by the domestic auto industry in India, the Gujarat Cooperative Milk Marketing Federation (GCMMF) and the Indian Pharma Alliance, it is quite clear as to whose interests the EU-India FTA will serve. 

In reply to a question (E-009465/12 and E-009466/12) in EU Parliament, the European Commission's response was: "A comprehensive coverage for the EU would imply a meaningful package on tariffs (industrial and agricultural goods), high level of ambition in services, public procurement, sustainable development etc. India has an average applied tariff rate of 14.1% (wines & spirits: 150% and cars: 60% to 75%) and a substantial reduction in these tariffs would be necessary. In services, India will need to take commitments in sectors of EU interest such as retail banking and insurance. Legal certainty for EU companies is invaluable as they contemplate investments in these sectors which are just opening in India. As regards public procurement and sustainable development, this is the first time India is including these issues in a Free Trade Agreement. Public procurement could be a significant opportunity as India has forecast an expenditure of 1 trillion USD in the next five years, a significant portion of which will be spent by public authorities."

The Indian Pharma industry is therefore rightly worried about the introduction of an IPR clause that leads to seizure of a generic manufacturer's bank accounts and immovable property on mere suspicion of a patent infringement. Such a step can imperil local industry. At the same time, imports of highly subsidised and cheaper dairy and poultry products from EU, the Indian dairy industry, employing 3.2 million farmers, will be hurt. India is the biggest producer and consumer of milk and dairy products. So far India has been protecting its dairy industry. But with pressure mounting from European Union, Australia and New Zealand for opening up the dairy sector, India is giving in. Similarly, the sharp cut in import duties for cars will impact job creation in the automobile sector. These are just broad three concerns that India cannot afford to overlook. 

India: Direct cash transfers is aimed at dismantling food procurement, and moving away from food self-sufficiency.

Some weeks back, I was participating in a panel discussion on cash transfers on a national TV channel. While the discussion wheeled around the merits and demerits of cash transfer, I think the anchor was taken by surprise when I said that cash transfers is in effect a ‘cash-for-vote’ programme. Supporting my argument with a World Bank study for Latin America, I found the entire focus of the discussion thereafter shifting to whether the real intention behind the aggressive push for cash transfers is aimed at the 2014 elections.

While the media as well as most panellists who frequent the TV channels, for some strange reasons, were and are still reluctant to talk about the political ramifications of cash transfers, it was Rahul Gandhi who made it abundantly clear when he told his party men that cash transfer could win them not only 2014 but also the 2019 general elections. The entire academic euphoria over the proposed aggressive roll out of Aadhar-based (UID-lined) cash therefore is simply overbearing and needs to be seen in the light of political bias. In fact, the visible trend in the ongoing national debate is more towards being seen as politically correct.

A World Bank working paper, entitled: “Conditional Cash Transfers, Political Participation and Voting Behaviour,” studied the voting behaviour for a conditional cash transfer programme launched in Colombia just before the 2010 elections. Subsequently, a 2011 study of an unconditional cash transfer programme in Uruguay clearly established that cash transfers did help the ruling party get a large share of the votes, and thereby helped the party to romp home at the back of cash transfers. In India, the political urgency and the aggressiveness with which the massive cash transfers are expected to cover the entire country by April 2014 is therefore quite obviously aimed at bringing electoral benefit to the ruling party.

The unconditional direct cash transfer programme that is proposed to be launched from Jan 1 in three phases will start with 43 districts involving a cash provision of Rs 20,000-crore. Eventually, all forms of subsidies to the poor, including food and fertiliser, will be in the form of cash flow, and would add up to Rs 3 lakh crore annually. I fail to understand how and why such a massive cash outflow pipeline will reach the beneficiaries without first putting up a fool-proof delivery system in place. The Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) too was envisioned with a lot of expectations but has failed miserably to deliver. Several studies have pointed to nearly 70-80 per cent leakages, and yet somehow the impression is that MNREGA has transformed the rural economics.

With only 40 per cent of the population having access to banks, and with an over ambitious target of reaching the remaining population through banking correspondents – who will be operating like the village postmen except they will now be equipped with portable handheld machines acting like micro-ATMs – we are perhaps expecting too much from the most important human link between the technology and the money delivery. So far, there are only 70,000 banking correspondents and the experience has not been very encouraging. In the next one year, the number of banking correspondents will have to increase ten-fold to reach a staggering figure of 7 lakh.

Knowing that the entire rural and agricultural banking operations are rooted in corruption, I wonder how we have accepted that the banking correspondents will not be swayed by corrupt practices. If 60 per cent of the beneficiaries have to be reached through an army of banking correspondent, who will be handling over Rs 1.5 lakh crore by any conservative estimate, the delivery mechanism is certainly fraught with over-confidence stemming from political urgency. This is where I think the policy makers and bureaucrats have failed to rise above assumptions. This is where I think the aadhar-based cash-for-vote will end up being no different than the hype generated at the time of launching MNREGA.

Nevertheless, what worries me more is when cash transfers move to the next phase, and that means meeting food entitlements directly with cash. Thanks to the concerns raised by the civil society, the government has deferred cash-for-food for the time being. It was more because of the fear that the cash-for-food programme could go completely out of control, and therefore could negate the political advantage that the ruling party is hoping to garner, that it has been kept in abeyance. At a time when the proposed National Food Security bill is pending introduction before the 2014 elections, any tampering without a proper evaluation could backfire.

It is true that close to 60 per cent of the food that is channelized through the public distribution system is either wasted or siphoned off in transit, and that the entire system is mired in corruption. What reaches the poor beneficiaries is often not even fit for consumption. The answer however does not lie in dismantling the PDS system, but reforming the world-largest food delivery system to riddle it of corruption, and make it more effective. This is certainly possible, but given the extent of political meddling in the allotment of ration shops to transportation of grains, it has never been attempted in right earnest.

For several decades now, the international emphasis has been to force India to dismantle the PDS. The first attempt was made at the time of the infamous Dunkel draft during the primitive years of world trade negotiations. WTO aimed at curtailing the PDS role, and wanted markets to ensure food security. Strong opposition from India, cutting across political lines, forced the WTO to eventually withdraw that clause.Subsequently, in the name of decentralisation of food procurement and storage system, an attempt was made during the tenure of Atal Bihari Vajpayee to divest the Centre of its onerous responsibility of procuring foods for the central pool, and leave it to the States to manage grain procurement, storage and distribution.

Several chief ministers had opposed the decentralisation move thereby forcing the government to retreat. 

For several years now, the emphasis has once again been on discarding food procurement. Allowing Food Corporation of India (FCI) to increasingly take on a commercial role by shifting focus from its sovereign role of ensuring domestic food security to looking for opportunities for grain exports, and finally to engage in future trading in wheat so as to offload and earn profits from the mounting surplus it carries. This has also to be seen in conjunction with the proposal to cap food procurement to the country’s buffer stock needs, and thereby deprive farmers of getting benefit of the assured price of wheat and rice. At present, FCI is under an obligation to purchase the surplus grains flowing in to the mandisat the Minimum Support Price. Once this role is withdrawn, farmers would be left at the mercy of trade.

Providing cash in the hands of poor beneficiaries means less emphasis on the PDS ration shops. The idea is to provide coupons or provide food entitlements in the form of cash, and leaving it to the people to buy their quota from the market. Whether the money provided would be used primarily to buy liquor, junk foods or other consumer goods is an important issue, but what is more important is to understand how it is aimed at dismantling the food procurement system. This subtle way, very cleverly designed, would undo the gains of food self-sufficiency so assiduously achieved after the advent of Green Revolution.

The underlying objective is very clear. Once the direct cash transfers begin, the ration shops would be gradually phased out. Once the PDS shops are removed, the cap in food procurement that is being suggested for FCI will come into play. With food procurement limited to meet the buffer requirements, which is somewhere between 14 to 22 million tonnes a year (against 82.3 million tonnes stocked with the FCI in June 2012), wheat and rice farmers would no longer get the benefit of the minimum support price. Farmers would be left to face the vagaries of the trade, and as has been the experience in those States which do not have a robust system of mandisand thereby unable to provide farmers with assured prices, distress sale will become a norm. 

Withdrawal of food procurement system will have an impact on food production. This would help farmers to abandon farming, and migrate to the urban centres. This is exactly what the World Bank has been proposing for several years now. The 2008 World Development Report had called for land rentals and providing farmers with training opportunities so that they can be absorbed in the industry. The government, as directed, made budgetary provisions for setting up 1000 industrial training institutes across the country. It is therefore obvious that the government had wanted to withdraw from food procurement and distribution for quite long now, following the dictates of the World Bank/IMF. Cash-for-food will facilitate the process and make it easy. Food requirement will then have to be met from imports, and there is already a dominant thinking within the government which advocates importing subsidised food off-the-shelf from the western countries rather than spending more on growing food within the country.

FDI in retail comes at a time when contract farming is receiving greater attention. The idea is to link the farmers growing cash crops with the supermarkets. This will help the government from doing away with the system of announcing the minimum support price and thereby reduce the subsidy outgo. This is exactly what the World Trade Organisation (WTO) had wanted several decades ago. The process to dismantle food procurement, a highly emotive issue in India, actually began in mid 1990s. It is now receiving the final touches.

Prime Minister Manmohan Singh had repeatedly said that the country has 70 per cent more farmers than what is required. Cash-for-food will provide the smokescreen needed to accomplish what the WTO/World Bank/IMF have been telling India for long. It is only when of the farming population is moved out of the villages that the agribusiness can find a stronghold in India. The predominant economic thinking is that the population in agriculture has to be cut back drastically for any country to grow economically. Cash transfers will then be part of the bigger promise of igniting country’s economic growth. #