Lesson from the Greek tragedy. How long will India continue to follow the flawed austerity measures?

The spillover from the Greek crisis may not hit the Indian shores. But it has grave lessons for India, which too blindly follows the never-ending austerity measures.

In India, the term austerity is not commonly used. Instead, successive Finance Ministers, policy makers, mainline economists and TV anchors harp on reducing the worrying levels of fiscal deficit, the gap between government earnings and expenditures. Among a series of measures that are often talked about to bring in fiscal consolidation, the focus remains invariably on trimming the social spending.

Every time a panel discussion opens on any aspect of the country’s economy, the ire of the panelists is on the wasteful subsidies – the burgeoning food subsidy, fertilizer subsidy, LPG subsidies – and a horde of other subsidies like cheaper train fares, and public sector investments in public health, education, agriculture etc. The task therefore is two-prone. First, to drastically cut down the so-called wasteful subsidies. Secondly, to reduce the outlays for various social sectors that directly impacts the majority population.  

The primary thrust of economic reforms is to cut down on social spending and shift the resources to corporate welfare. It is generally assumed that more financial support for corporate will lead to increased industrial output, increase in manufacturing, and growth in exports eventually leading to more job creation. Basing its flawed economic thinking on the failed concept of ‘trickle down’ the International Monetary Fund (IMF) has used the macroeconomic strategies to tie its debt restructuring plans with austerity.

Greece has shown that neither the concept of ‘trickle down’ nor the stringent austerity measures have helped. In India too, the results of the Social Economic and Caste Census 2011, which was unveiled by Finance Minister the other day, has conclusively shown that economic reforms have bypassed 70 per cent of the country’s population. With the highest income in 75 per cent rural households not exceeding Rs 5,000 per month, and 51 per cent households working as dehari mazdoor for their daily living, rural India presents a grim picture.   

As if this is not enough, the outlays for social sectors have been slashed by Rs 4.39- lakh crore in Budget 2015-16. This includes a huge cut in budgetary provisions for Women and Child Development, Panchayati Raj, Mid-day Meal and Drinking Water and Sanitation sectors. Take agriculture, which engages 60 per cent of the rural population. The total outlay for agriculture is less than that of MNREGA. No wonder agriculture is faced with a terrible agrarian crisis.

While the poor are getting the boot, the thrust of the economic reforms is to move the resources for corporate welfare. Not only in Europe, In India too massive hidden subsidies, direct grants and tax breaks for the corporate are doled out by both the Central and State governments. Since 2004-05, Corporate India has been given tax concessions to the tune of Rs 42-lakh-crore. In addition, State governments have been providing more tax rebates every year. For instance, Punjab has in the past 4 years given tax concessions to the tune of Rs 900-crore to the industry. Regardless of such massive doles to the industry, the thrust of fiscal consolidation remains on cutting social sector spending.

Some economists say Rs 48,000-crore that goes as LPG subsidy, which they term as wasteful subsidy, is enough to remove poverty from India for one year. If that is true, Rs 42-lakh-crore could have wiped out poverty from India for the next 84 years !

Such massive tax concessions (I am not counting hidden subsidies and direct grants) were expected to boost industrial output, increase exports and lead to more job creation. Nothing of the sort happened. In the past 10 years, while economic growth has remained at an average of 7.3 per cent or more, only 1.5-crore jobs were created against a requirement of at least 1.2-crore newer jobs every year. And despite such massive tax concessions, industrial debt is higher than the debt of all the State governments put together. On top of it, the non-performing assets of the industry is also zooming with Rs 3.5-lakh-crore written-off as bad debt in the past five years. Moreover, privatisation of health and education is cutting a big hole in the pocket of the average citizen.

It’s Corporate India that needs austerity. Fiscal deficit can be wiped out simply by withdrawing the tax concessions to the industry. Instead, the need is to invest more in human assets. The sooner we learn this, the quicker will we be able to avoid a Greek tragedy. #

Will India be able to avoid a Green tragedy? ABPlive.in July 9, 2015.

http://www.abplive.in/author/devindersharma/2015/07/09/article644574.ece/Will-India-be-able-to-avoid-a-Greek-tragedy?fb_ref=Default

Rural India is poor. More reforms is not the answer.

Rural poverty in India -- AFP photo

In what appears to be a damming indictment of the 5-year plans, launched in 1951, as well as the economic reforms process that began in 1991, the first-ever socio-economic survey has painted a dismal picture of rural India.

What emerges clear from the survey is that for 70 per cent of India’s 125-crore population, which lives in rural areas, poverty is the way of life.   

Rural India is poorer than what was estimated all these years. With the highest income of a earning member in 75 per cent of the rural households not exceeding Rs 5,000 a month, and with 51 per cent households surviving on manual labour as the primary source of income, the socio-economic survey has exposed the dark underbelly of rural India. Whether it was Garibi hatao or Shining India, all the talk of development has not enabled rural India to emerge out of poverty.

Whether we like it or not, poverty has remained robustly sustainable.

This socio-economic survey, undertaken for the first time in the country, defies all the tall claims made by successive governments on poverty reduction. Whichever way you measure it, and whichever way you decipher the survey findings as well as the emerging social trends, the extent of rural poverty exceeds all projections. The reason is obvious. All these years, the effort of mainline economists and policy makers has been to sweep rural poverty under the carpet. In fact, we were never honest in accepting the extent of poverty that existed in the country.

It was in 2011 that Supreme Court questioned the very basis of counting the number of poor. Prior to that, no mainline economist had ever raised a finger at the artificially kept low poverty line. At that time, Planning Commission was treating those earning less than Rs 17 a day in urban areas and Rs 12 in the rural areas as living in poverty. Supreme Court’s questioning happened 60 years after Jawaharlal Nehru had launched the first Five-Year Plan in 1951. In other words, for 60 years Indian planners had drawn poverty eradication programmes, sinking in lakhs of crores of rupees, not even acknowledging the magnitude of rural poverty situation they were trying to address.

By keeping the poverty line deliberately low, planners were simply trying to ensure that the plan outlay for rural development was kept a bare minimum. I have always been saying that the unrealistic poverty line, later adjusted after a nationwide uproar to Rs 32 for urban and Rs 26 for rural areas, would not even be enough for rearing a pet dog in the cities. For the rural areas, I challenged if any farmer could domesticate a cow within a daily expenditure of Rs 26. With such an inhuman poverty line I questioned time and again the relevance and purpose of the massive plan outlays which are sure to go awry. The rope to pull poor out of a quagmire of poverty and deprivation has to be long enough to reach them.

It is primarily by keeping the rope short, which means by keeping poverty line too low, the 12 Five -Year Plans attempts to remove poverty had failed. It is therefore time to revisit the strategy and approaches that have been followed all these years. Let’s admit our mistakes, and make a fresh attempt.

Take the case of agriculture. With 52 per cent of the population engaged in farming, which means 60-crore people, the government provided just Rs 1-lakh-crore in the 11the Five Year Plan, and Rs 1.5-lakh-crore in the 12^th Five Year Plan. In other words, in 10 years, public sector investment transforming agriculture thereby impacting the livelihood of 60-crore people has been a meager Rs 2.5 lakh-crore. Whereas in the past decade, the industry has been given tax concessions to the tune of Rs 42-lakh-crore. This huge subsidy to the industry, if recovered, and invested in rural development programmes effectively could have wiped out poverty for 84 years as some estimates have suggested. If poverty can be removed for 84 years, I am sure you’ll agree that for all practical purposes poverty becomes history in India.

Now let us look at the economic reforms. It is almost 25 years since India opted for economic reforms in 1991. In these 25 years too, rural poverty has refused to recede. Against all studies and reports that pointed to a significant reduction in poverty, the socio-economic survey openly calls the bluff. Against the expectation of the percentage of population living in poverty sliding to about 21 per cent in the past decade, this survey shows that rural poverty is much higher, exceeding 30 per cent. Even this is a conservative estimate knowing that even the revised poverty line – Rs 47 a day in urban and Rs 32 in rural areas – is not enough.

In a market economy it is generally believed that poverty comes down when growth picks up. This is not true. Poverty has not come down in India in the past 10 years when the growth rate remained high at an average of 7.5 per cent. Pushing people out of agriculture, and providing job opportunities in the form of dehari mazdoor in the cities to be employed as cheaper contract labour in infrastructure projects is not employment generation. Nor is it a plausible way to pull people out of poverty. Already 51 per cent of the rural population is dependent upon daily wages. They are looking for jobs which are non-existent. Take the case of Tamil Nadu. As per MNREGA public data portal, more than 63 lakh households demanded employment under MNREGA in 2013-14. This constitutes 9 per cent of the households who are employed in manual labour. In any case, in the past 10 years, only 1.5-crore jobs have been created throughout the country against the annual turnout of 1.2-crore people who become eligible for employment.

In an era of jobless growth, the findings of the socio-economic survey needs a proper assessment and an honest appraisal. To use it to justify the push for a higher economic growth as the way forward would be a grave mistake, a historic blunder. #

Moody's is wrong: Reforms is not the solution to raise rural incomes

Ratings agency Moody’s has at least got the first part right. Farm distress is pulling down economic growth. “India’s farm sector expanded only 0.2 per cent in 2014-15, data released by the government in May showed, and thereby depressing rural income growth.”

This is absolutely right. But where Moody’s has gone completely wrong is its effort to link rural slowdown with the slow pace of economic reforms. In a report ‘Inside India’ which is based on a poll conducted by Moody’s global credit research, the rating agency pointed to “sluggish reform momentum”. Harping again and again on “disappointing pace of reforms’’ has therefore become a usual but overused expression, which is turning out to be a nothing but a cliché.  

The problem with creditors (and credit ratings agency are supposed to operate on their behalf) is that they cannot look beyond reforms, which means cutting down on social security in the name of containing fiscal deficit. Such austerity measures have already created a socio-economic upheaval in Europe, and the crisis in Greece emanates from such faulty prescriptions. Even the IMF has reluctantly begun to accept that the ‘trickle down’ theory, the hallmark of global economic reforms, does not work anymore.

“Rural income growth has been struck in the mid-to-low single digits in 2015 to date, well off the 20 per cent plus rates clocked in 2011. Given the rural consumer price inflation came in at 5.5 per cent year-over-year in May, this means that rural wages are actually contracting in real terms,” the Moody’s report said. This certainly is a correct assessment. The lower the rural incomes, the less would be the capacity of the rural people to increase consumption as a result of which the demand for industrial as well as FMCG products decline. The wheels of economy come to a halt when rural wages decline.

Instead of pushing what is generally meant by reforms, what is urgently needed are measures that raise farm incomes to a higher level and at the same time attract more public investments in rural areas. The best way to do so is to raise the minimum support price (MSP) for farmers. The subdued hike in procurement price of rice by a mere Rs 50 per quintal, an increase of 3.67 per cent, is less than the 5.5 per cent rural consumer price inflation that Moody’s report point to. Similarly, the hike in wheat MSP is by Rs 50/quintal, a jump of 3.27 per cent, shows how deliberately farm incomes are being kept low. With such low farm incomes how does Moody’s expect a revival in rural incomes to the levels achieved in 2011? I would have therefore expected Moody’s to make a strong plea for raising the MSP for farm produce. But perhaps I was expecting too much.

This assumes significance in the light of a recent studiy highlighting the mounting rural indebtedness over the years. In his book Rural Credit and Financial Penetration in Punjab, Dr Satish Verma, RBI Professor at the Centre for Research in Rural and Industrial Development (CRRID) in Chandigarh, clearly shown how rural debt has been multiplying. In Punjab, the food bowl, the average cash loan per cultivator household has risen by a whopping 22 times in a decade. In just 10 years, the average debt per farmer has risen from Rs 0.25 lakh to Rs 5.6 lakh.

Incidentally, Punjab, ranks third in the country as far as farm debt is concerned. Chhattisgarh tops the chart with Rs 7.54 lakh, followed by Kerala at Rs 6.48 lakh.

Loading the farmer with more credit would surely help the sale of farm machines and equipment, which would add to the country’s growth, but is no reflection of the extent of agrarian distress that prevails. It is easy to say that “a sustained soft patch or India’s rural economy would weigh on private consumption and non-performing assets in the agriculture sector, a credit negative for the sovereign and banks,” but difficult to spell out an economic gateway from where the indebted farmer can exit. Moody’s reforms (like other rating agencies) have only pushed 600 million farmers deeper and deeper into a vicious cycle of credit, indebtedness and suicides.

Moody’s report also includes highlights from the first annual Moody’s and ICRA Credit Conference held in Mumbai in May. Well, if you invite only the creditors/investors to such conferences you certainly will not get a complete picture. #

* Moody's report is disappointing: Reforms is not the solution to raise rural incomes. ABPLive.in July 2, 2015. 

http://www.abplive.in/author/devindersharma/2015/07/02/article637033.ece/Moody%E2%80%99s-report-is-disappointing-Reforms-is-not-the-solution-to-raise-rural-incomes

Why Punjab is exporting wheat and importing wheat flour?

Punjab, the food bowl of the country, is a net importer of wheat flour (atta). With wheat procurement touching 100 lakh tonnes this year, and with wheat stocks lying in the open for want of adequate covered storage, reports of atta being imported defies any economic logic. Punjab is the biggest contributor of surplus food in the country to the Food Corporation of India (FCI).

Reading a news report in the Hindustan Times: "Remove existing disconnect between farmers and markets’ (July 3), what caught my eye was a statement by the Financial Commissioner Development, Suresh Kumar, wherein he said that “despite being the food bowl of the country, we are a net importer of wheat flour (atta).” He was addressing an outreach programme for agro and food processing industry at Chandigarh.

I had always feared this. Knowing that most urban households in Punjab opt for atta from Madhya Pradesh, which is generally perceived to be devoid of chemical pesticides and fertilizers, there were enough reasons to believe that Punjabis were relying more on atta imports. The MP wheat at your nearest chakki is priced around Rs 32 a kg against Rs 23 a kg for the Punjab wheat and yet the market for MP’s Sharbati wheat is growing. There is also a huge demand for packaged and branded attawhich too is largely coming from outside.  

Whatever the reasons, the fact that Punjab had relied more on import of atta to meet the basic food needs of its people points to a lop-sided industrial development policy. Forty-five years have passed since Punjab took the lead to usher in the Green Revolution, and still failed to provide incentives to create adequate processing facilities. There used to be more than 400 flour mills, of which hardly 60 to 62 are operational now.

If only Punjab had created adequate processing facilities, both in small and large scale, it could have not only reduced the burden of carrying excess stocks year after year but also cut on resulting environmental costs besides generating employment. The unnecessary transportation of food adds on to food miles, a term that denotes the distance food travels before it reaches your table. Some years back, FCI had estimated that food travels roughly 1,500 kms before it reaches a distant household. By allowing wheat unnecessarily criss-cross across borders only adds to unwanted food miles and thereby multiplies costs.

Well-known economist Dr S S Johl had sometimes back calculated that the by exporting 18 million tonnes of wheat and rice from Punjab in 2003-04, the State actually exported 55.5 trillion litres of water. On an average 3,000 litres of water is required to produce 1 kilo of wheat. Localisation of environmental costs therefore is very important especially at a time when all studies point to a bleak water future for the grain bowl. Also, food processing industry as a policy imperative must be set up in and around the production areas.

At the national level, most of the wheat processing mills are situated in southern India whereas wheat cultivation is confined to northern and central regions. It is primarily for this reason that there is a growing demand from food processing industry to import wheat from Australia and Europe. The landed price of imported wheat in Chennai for instance is much cheaper than the wheat transported all the way from Punjab.

This year, the food processing industry has already contracted for imports of 500,000 tonnes of wheat from abroad. The proposed ITC wheat processing unit in Punjab having a capacity of one million tonnes is therefore a welcome initiative. More such wheat processing units are required.

Since consumer demand is gradually shifting towards safe food, if the increasing demand for MP atta is any indication, Punjab also needs to redirect its policy focus. Not only urban consumers, even farmers are known to keep aside a patch of their land for their own consumption in which they don’t douse the standing crops with chemical pesticides and fertilizers.  By encouraging people to buy chemical free wheat grown within the State, Punjab will considerably lessen its burden of carrying stocks. I have two suggestions:

1.   1. Punjab must identify and encourage farmers to shift to non-chemical farming. This should be considered as part of the crop diversification strategy. Like a compensatory package of Rs 4,000 per acre to those who volunteered to shift from paddy to maize, Punjab should provide Rs 4,000 per acre to those farmers who shift from chemicals to non-chemical farming systems.

2.    2. Since it takes 3-4 years and even more for any chemically farmed land to get the status of organic, the need is to market the produce as pesticides-free in the initial years. Much of the MP wheat that is sold in Punjab is just on faith and goes by the claims of chakki owners. People are not looking for organic certificates. The task therefore is to begin rather than debate on how to provide for certification.  Newspaper ads inviting consumers who want pesticides free wheat to pay an advance fee is another way that has been successfully tried at a number of places. # 

     Exporting wheat, importing wheat flour. Hindustan Times Chandigarh, July 4, 2015.

     read.ht/sh5 

What needs to be done in boosting domestic production of pulses

As dal prices go on an upswing, a harried government is trying to focus on increasing domestic production. When Prime Minister Narendra Modi called upon farmers to grow more pulses to reduce the dependence on imports, he was not only voicing concern over the rising import bill, but also wanting the country to become self-sufficient in pulses production.

Prime Minister is right. All efforts to increase production of pulses in the past few years have not borne fruit to the extent desired. Although domestic production had reached a high of 19.25 million tonnes in 2013-14, falling to 17.38 million tonnes the next year in 2014-15, but still India’s import of pulses continues to hover around 4 million tonnes. This is primarily the reason why the trade finds it convenient to raise prices at every given opportunity.

In the past one year, a 64 per cent hike in the prices of pulses has been observed with most common pulses available at a price exceeding Rs 100/kg in the retail market. Much of this jump in prices has been seen in the past 3-4 weeks after reports of an impending drought in kharifbecame more pronounced. To add fuel to the fire, the statement by Road Transport Minister Nitin Gadkari, assuring the nation that the government will import large quantities of pulses to meet any shortfall expected in the markets, is expected to send international prices soaring.

The same mistake was earlier committed by the former Agriculture Minister Sharad Pawar.  Some years back when he publicly stated that India will import sugar to offset domestic shortfall in production, international prices had swung to a record high. Consequently, the import bill on sugar grew. This is also true for India’s import of chemical fertilizers. India’s demand for fertilizer is instrumental in keeping international prices high on an expectation of increased imports. In fact, how much will be India’s fertilizer import is something that has been monitored by the global trade very meticulously.

Ever since the weather forecast indicated an overall fall of 12 per cent in monsoon rains, prices of pulses – both nationally and internationally – have gone up drastically. According to reports, the future prices of tur from Myanmar had gone up from $ 800/tonne to $ 1150/tonne. Similarly, the futures prices for chanain Australia swung from $ 550/tonne in March t $ 775 tonne in June. Much of India’s imports are from Canada, Australia, Myanmar, Russia and Ukraine.

Although the government has raised the Minimum Support Price (MSP) of some of the important kharif pulses, price alone may not be enough to raise production in the long run. While the price of tur and urad have been raised by Rs 275 and of moong by Rs 250 per quintal, the idea being to give a message to farmers to shift more area towards pulses, I have always felt that unless the government launches an assured procurement programme for pulses, there is little hope. What has been achieved in wheat and rice is what exactly needs to be done in case of pulses.

Augmenting production of oilseeds and pulses in 60,000 villages, with the Indian Council of Agricultural Research (ICAR) holding 6,000 crop demonstrations over the years, is certainly welcome. But what is required is a two-pronged approach if the government is anywhere serious in boosting domestic production of pulses:  

1.   1.  Pulses attract zero per cent import duty at present. As long as import tariffs are not raised substantially, imports will continue to act a dampener against any move to raise production. The Commission for Agricultural Costs and Prices had recommended raising the import tariffs to 10 per cent, and the Ministry of Agriculture had been toying to hike it to 20-30 per cent. It is high time the import tariffs are raised substantially.

2.    2. The hike in import tariffs has to be accompanied by a nationwide programme to ensure procurement of pulses by the State agencies. What deters farmers from undertaking cultivation of pulses is the volatility in market prices and the lack of an assured market. If only the State governments were to step in and purchase every grain of legume that flows into the markets, India will witness an unprecedented jump in pulses production. #

      *What needs to be done in boosting domestic production of pulses. ABPNewsTV. June 29, 2015

      https://twitter.com/abpnewstv/status/615482660715016192/photo/1

Why India does not need GM Mustard

A child in a mustard field - pic from web

Comes winter, and I crave for sarson ka saag. As far as I can remember, even when I got my first job, my mother would send me a container full of saag that would last me for a week or so. I could eat saagwith every meal, or at least once a day, a habit that I have not given up since I was a child. But why am I sharing this insight into my culinary taste and preference is because I fear I may soon have to give up on one of my favourite foods.

With the Ministry of Environment & Forests reportedly considering granting a commercial approval to genetically-modified (GM) mustard, I certainly wouldn’t like to take a risk anymore. Knowing the health risks associated with GM foods, I would like to keep away. I am sure millions of north Indians, who are known to have a taste for makki ki roti and sarson ka saag, too would be greatly disappointed. After all, there is no desperate reason to genetically modify a food crop that has traditionally been a part of the daily cousine. Moreover, there is no way to segregate the GM mustard from normal mustard that I can be sure what I am eating is not genetically modified.

Five years after the Ministry of Environment & Forests had in 2010 imposed a moratorium on Bt brinjal, which if approved would have been the first food crop in India to be genetically modified, the Genetic Engineering Appraisal Committee (GEAC), the nodal agency that grants approvals, is getting ready to give a green signal to Delhi University’s GM Mustard variety DMH-11. The claim is that this GM Mustard gives 20-25 per cent higher yield, and also improves the quality of mustard oil. It is time to examine the veracity of these claims.

Claims notwithstanding, it is also time to first understand how easily our food is being tampered in the name of increasing crop productivity. The fact of the matter is that there is no GM crop so far across the globe that increases productivity. Even in GM Mustard, the increase in yield that is being claimed, is simply because of the hybrid variety in which the three alien genes have been inserted. Which means if you grow one of the popular mustard hybrids already available in the market, you will hardly have any yield advantage.

It is being repeatedly said that India imports edible oils worth Rs 60,000-crore every year, and therefore with an increased productivity of GM Mustard, the import bill will be reduced. For those who do not know the real situation, this looks to be a worthwhile proposition. But what is not known is that the huge imports are not because of any shortage of technology or because farmers are unable to produce more. It is simply because successive governments have allowed import duties to be drastically cut from the applicable rate of 300 per cent to almost zero now. As a result, India has been inundated with cheaper imports.

It was in 1985 that the then Prime Minister Rajiv Gandhi decided to launch an Oilseeds Technology Mission to raise the productivity of oilseed crops, including mustard, so as to reduce the import bill. In 1985, India was importing approximately Rs 15,000-crore of edible oils, which was roughly 50 per cent of our domestic requirement. This was the third biggest import bill –after petrol and fertilizers – that Rajiv Gandhi was keen to curb. The result was that ten years after the launch of the Oilseeds Mission, in 1993-94, India became almost self-sufficient in edible oils. With only 3 per cent imports, 97 per cent of edible oils began to be produced within the country.

The cut in import tariffs was not as much from WTO directive but more because of autonomous liberalisation. As per WTO norms, India’s import tariffs for edible oils are bound at 300 per cent. But for reasons that do not kmake any economic sense, India’s import tariffs have been gradually brought down to almost zero. With cheaper imports coming in, farmers stopped cultivating oilseeds and also much of the processing infrastructure for oilseeds lies redundant. The best way to increase oilseeds production therefore is to raise the import tariffs and provide enabling environment to farmers. They will do the rest.

Mustard is one of the many oilseeds crops that are grown in India. Over the years, its productivity and production has been on an upswing. In 2010-11, a record mustard production of 81.8 lakh tonnes was harvested.  From 9.04 quintals per hectare in 1990-91, average mustard yield has increased to 12.62 quintals in 2013-14, with Gujarat recording 16.95 quintals per hectare. There is no shortage of mustard in the country. Mustard yields can still be increased further if farmers are paid a remunerative price and an adequate mandi infrastructure is created to procure the harvest every year. Since almost 70 per cent of the mustard crop is cultivated in Rajasthan, Madhya Pradesh and Haryana, the problem farmer’s face is that of over-production and lack of buyers. In Rajasthan particularly, the central agency Nafed has been pressed into service time and again to procure mustard when prices crash at times of an unmanageable glut. 

Mustard oil is one of the healthiest of the edible oils available. It contains one of the lowest levels of saturated fatty acids. But the problem mustard oil faces as far as quality is concerned is its large scale contamination with cheaper cottonseed and palm oils. To provide pungency, some popular brands, add a solution of red chilies. Improving the quality of mustard oil therefore does not require genetic modification but a clean-up in the processing industry and checking unethical trade practices. It needs a crackdown on the oilseeds trade to ensure that quality oil is made available. 

Increasing production of oilseed crops like mustard therefore requires adequate policy initiatives. Raising import tariffs to ensure that cheaper edible oil does not flood the market, and providing an economic price for the produce can bring back self-sufficiency in edible oils. There is no reason why India should be spending Rs 60,000-crores on importing edible oils that can be produced within the country. Since oilseeds are a crop of the drylands, encouraging oilseeds production will benefit the domestic farmers living in the harsh environs. Even the Shanta Kumar committee has in its report on ‘Restructuring FCI’ dwelt on this issue and recommended trade policies to be in tune with country’s food self-sufficiency. There appears to be no plausible reason why GEAC should be so keen to push another unwanted, unhealthy and environmentally damaging GM crop. #

1. Conspiracy Against Mustard. DNA Mumbai, June 26, 2015

http://www.dnaindia.com/analysis/column-conspiracy-against-mustard-2098894

2. सेहत पर एक और खतरा, Dainik Jagran, June 27, 2015

http://www.jagran.com/editorial/apnibaat-another-threat-to-health-12526858.html

Impending drought: farmers too need an economic bailout package

It has been a bad year for agriculture. Deficient monsoon in Kharif 2014, followed by unseasonal rains, hailstorms and strong winds in the months of March-April 2015 had left the farmers battered. Accompanied by a crash in global prices of wheat, rice, cotton, soybean and maize and the refusal by the government to provide a higher domestic price to farmers had left the farmers in a lurch.

As if this is not enough, ominous signs stare ahead. With the Indian Meteorological Department (IMD) predicting a significant shortfall of 12 per cent in monsoon rains for the second year in a row, stopping short of pointing to a drought year ahead, the misery, suffering and the severe blow it is likely to inflict on the livelihood security of over 600 million farmers is in itself frightening.

The Third Advance Estimates of Production of Foodgrains for the Agricultural year 2014-15 shows a drastic fall of 13.92 million tonnes in foodgrains production, slumping from a high of 265.04 million tonnes harvested a year earlier in 2013/14 to an expected 251.52 million tonnes. This surely is a significant decline in production pulling down the agricultural growth rate in the bargain to a low of 0.2 per cent. Statistics apart, what is often ignored is the hit the farmers’ household economy receives in the process.

With comfortable stocks of wheat, rice and sugar in the kitty there is no undue reason for alarm. Food inflation in staple foods can easily be kept under check with strategic food management. It’s only in the case of vegetables that the government will have to ensure that market sentiments are not able to exploit the crisis situation.

Erratic weather is one part of the story. What is often glossed over is the fact that farmers have suffered a double whammy with not only the weather gods playing truant but also the crop prices declining sharply. First, the global crash in prices of agricultural commodities had resulted in a sharp fall in the prices of cotton, basmati rice, soybean and milk. This was followed by the refusal of the government to pay a higher minimum support price (MSP) to farmers, keeping the hike to Rs 50 per quintal only, and at the same time withdrawing the bonus of Rs 150 or more that was being paid in Madhya Pradesh, Chhattisgarh and Rajasthan. 

In an affidavit before the Supreme Court, the government has acknowledged that it is not possible to pay a higher price since it will distort the markets. RBI Governor Raghuram Rajan too had warned against a rise in food inflation shifting the blame on the expected hike in MSP for rice and wheat in the months to come. In other words, farmers are being penalized for keeping food inflation under control.

The bigger challenge therefore is to rescue farmers. If you recall, in the aftermath of 2008-09 global economic meltdown, the government was quick to provide an economic bailout package of Rs 3 lakh crore to the industry. I see no reason why at a time when international agricultural commodity prices have crashed, followed by an autonomous regime of maintaining artificially low domestic prices, the burden of keeping food cheaper for the consumers has to be borne entirely by the hapless farming community.

It is high time the government provides an economic bailout package of at least Rs 1.5 lakh crore to farmers. This should be relatively easy now considering that almost all farmers have a bank account now under the jan dhan yojna. This has to be accompanied by more public sector investments in agriculture. In the 12^thFive year Plan, the total investment for agriculture, which benefits 600 million farmers, was a paltry Rs 1.5 lakh crore. Compare this with the subsidy for the new and swanky T-3 airport terminal in New Delhi, which stood at Rs 1.62 lakh crore. The budget for MNREGA is higher than the total outlay for agriculture.  

Somehow it is not being understood by policy makers that if the farmers have more money in their hands, they drive faster the wheels of the economy. Effectively, this also translates into what the Prime Minister Narendra Modi often calls for: Sabka Saath, Sabka Vikas.