The dragon of inflation

Amar Singh


Prices of essential commodities such as pulses, rice, sugar and vegetables keep going up, but income for common man hasn't risen. Photo:Mohammed Yousuf
The citizens cannot be befooled. The farmer is getting less than Rs. 30 a kg for arhar daal, while the sale price in the market is Rs.100. The pertinent question is: who corners the profit of Rs. 60 to Rs. 70? The government should come out of Mission America and look into the affairs of the common masses.

Life for the aam aadmi, or the common person, is becoming increasingly difficult owing to the all-round price rise across the country. It bites into the real incomes of the people. The situation has worsened owing to the several rounds of price increases effected for petroleum products, which has had an alarming impact on the prices of several commodities.

Another aspect of the price rise phenomenon is that people are paying more for basic services such as health, education and transport. One of the reasons for the rising indebtedness among families is the increasing cost of health care, which is linked to the escalating cost of drugs. Inflation, combined with policies of privatisation, has caused a complete deterioration in living standards. The large majority of the working people in India are in the unorganised sector. Their incomes fluctuate, and they have no protection against rising prices. Prices have risen, but not incomes. We know about the acute agrarian distress and the incidence of suicide among farmers in many parts of India. Some international agencies have pointed to a most disturbing trend of increasing malnutrition in India, particularly among children and women.

India has witnessed periods of inflation even earlier, but over the last two years there has been no end to this trend, and the situation is going from bad to worse. The government remains a mute spectator. According to figures released by the Commerce Ministry, as on November 28, 2009, the food price index had risen at the rate of 19.05 per cent, the highest rate in the last 11 years. Prices of essential commodities such as pulses, rice, sugar and vegetables keep going up. If this trend of inflation continues for a prolonged period, the possibility of food riots occurring in India cannot be ignored.

Over a period of time, the Central government has been providing various excuses for this menacing situation. In 2007, when inflation intensified, it was said to be a seasonal phenomenon that would pass in a matter of a few days. After some time the Finance Minister said that inflation was an outcome of economic growth. Subsequently, when the country witnessed a period of drought it was stated that because of low production the supply side had become weak.

In November 2009, the Prime Minister said during one of his televised interactions that because of the price rise our farmers would get more for their produce. He said that would benefit 75 per cent of the farmers: for that, 25 per cent of the people would have to manage accordingly. The same was the opinion expressed by one of the Ministers of State (of Home Affairs) who belongs to Uttar Pradesh. The government-determined procurement rate of pulses was raised to Rs. 3,000 a quintal (Rs.30 a kg), while a kg of daal in the open market costs Rs. 90 to Rs. 100. The government should come out of the ivory tower and examine the real statistics. The citizens cannot be befooled. The farmer is getting less than Rs. 30 a kg for arhar daal, while the sale price in the market is Rs.100. The pertinent question is: who corners the profit of Rs. 60 to Rs. 70? The government should come out of Mission America and look into the affairs of the common masses.

A while ago, the Union Food Minister put the blame for the rise in prices on the State governments. Everyone knows that the Central government is accountable for agriculture-related laws, such as those concerning the public distribution system, the procurement of produce, the minimum support price of commodities, and so on, which are linked to inflation. If the State governments are to be blamed for inflation, the prices of essential commodities should vary from State to State, and particularly the Congress-ruled States should not have any inflation. But that is not the case: the price of arhar daal is Rs. 80 in Lucknow, and the same is the case in Delhi and Mumbai. If the price of onion rises in Hyderabad, it does so in Jaipur, too. It seems the Food Minister has lost confidence in himself and in his government to prices under check. Probably that is the reason he is putting the blame on the State governments. Why are farmers committing suicide in Congress-governed States such as Maharashtra and Andhra Pradesh, although these States are actually richer in comparison to other States. Where the Union Agriculture Minister comes from, there are more suicides than in other areas.

Now the Congress is also getting sceptical and trying to put all the blame on Sharad Pawar. The entire government has to take joint responsibility for good and bad work. The responsibility for the price rise goes back to the Cabinet, including the Prime Minister. But we cannot entirely blame the Congress for this because it has the old diabolical policy of gulping sugary stuff and spitting out bitter material. The Congress took all the credit for the benefits of the policies of economic liberalisation that were initiated by the Narasimha Rao government. But when it came to the demolition of the Babri Masjid, the onus lay only on P.V. Narasimha Rao. The Congress remains a Holy Cow.

This year India will import a large quantity of rice. I fail to understand the rationale behind the export and import policies of the government. For years we have had good monsoons and our farmers have produced enough to meet the country’s needs. The question is: where are the reserve stocks? The government should not entirely blame the monsoon; instead, its mismanagement of the situation is to blame. In 2008, when the price of sugar was low in the international market it was high in India and India imported. In 2008, the government framed the relevant policy in such a manner that the sugarcane farmers cultivated less in 2009. This ultimately resulted in the manifold rise of the price of sugar. In 2008 the government imported wheat at a high rate because it failed to manage properly procurements from farmers. The middlemen-hoarders bought wheat at low prices from farmers and manipulated the market.

The root cause for inflation is ‘commodity exchange’. The prices of produce escalate three-fold as they pass from the farmer to the consumer. Faulty procurement policies lead farmers to sell their produce to middlemen or through the ‘commodity exchange’ process. The hoarders release or sell the produce as they wish, particularly when the market is up. The farmer should be enabled to sell in States other than his own, avoiding the nuisance of the middleman.

I do not understand the complex jargon of the economists, but one thing I know: an increase in food subsidy and an effective public distribution system ensure low prices for the common man. The United Progressive Alliance government has failed on both these counts. It is well understood that in order to meet the people’s needs, we have to produce more, foil the hoarders and confiscate what they hoard. In India, the per hectare production is less than that in China, Bangladesh and Indonesia. This means that after the Green Revolution phase we have ignored the agriculture sector. Our farmers suffer for the lack of a viable credit facility, a poor procurement mechanism, and expensive farm inputs such as seed, fertilizer and diesel. Today the situation facing agrarian India is so pathetic that more than 80 per cent of the farmers want to leave farming.

The government’s polices are going horribly wrong and these are totally anti-farmer. Without thinking of the farmer’s plight, the government has allowed multinational companies to do business in the retail sector. It has signed a free trade agreement with countries of the Association of South East Asian Nations (ASEAN) without thinking about its repercussions. I feel that the government is now more keen to help farmers and industrial houses in other countries at the cost of domestic farmers.

Only governmental encouragement of farmers and the procurement of their produce can change the dynamics of cultivation and the position of farmers. Boosting the incomes of small and big farmers will not only enhance their means of livelihood but safeguard them from the anguish of suicides. When there is no shortage of capital in the country, priority should be accorded to the development of farmers and agriculture.

At a Cabinet Sub-Committee meeting on October 21, 2009, the Commerce Minister said the government would provide enough food materials to the people at appropriate prices. We understand that everything is available in the market, but they are two to three times more expensive than was the case earlier — which puts them beyond the reach of the common people.

( Amar Singh is the general secretary of the Samajwadi Party.)