What the budget won’t say

But what about food inflation? That will remain whether the economy grows or not, as it is caused not just by supply-side factors, but also by structural problems. Food inflation is the Achilles heel of the Indian economy. If the reports so far are to be believed, it will not be addressed in the budget, which is likely to be preoccupied with side issues like FDI in retail (and not in smaller towns, which are important aggregators in the food value chain and where, according to the census, large farming populations have moved). It is unlikely that the hard landing school would design a budget that addresses the concerns of failing agricultural initiatives.

Food inflation is high in pulses, edible oils, fruits, vegetables and milk, eggs and meat, all having high income elasticities of demand. In pulses, the short-term strategy is to give price support in backward areas where they are grown. At present, the minimum support price exists only on paper, because budgetary support is not given to the procurement agencies if the loss is more than 10 per cent. PPP initiatives are also needed to expand initiatives like I-Shakti pulses but that, too, needs budgetary support. Another pressing need is to conduct research on raising yields. Take pulses. The most we can do is around a tonne and a half with our best seeds. But Australia and Canada can get two and a half tonnes, and are able to export to India. The 12th Plan statement, which suggested that only the public sector could address this, is incorrect. We need a strategic plan led by the Indian Council of Agricultural Research, but in a PPP-mould. The private sector is willing to participate, but such projects are investment-intensive and take five or more years to come to fruition, so initial support from the government is needed. Due to the present policy stance, this is not forthcoming.

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