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Between the line
 
It’s wrong economics
April 09, 2008
 
HOW fortunes can tumble in a fortnight is peculiar to politics. The ruling Congress was on top of the world after giving a popular budget and providing Rs 64,000 crore to farmers for waiving loans. The party had also a gleam in the eye over the hike in the salary of civil and military servants, amounting to Rs 19,000 crore. Calculators were out to count the increase in the number of voters. (The Lok Sabha elections are due in less than a year).

However, abnormal price rise has unhinged the Manmohan Singh government. There have been frantic meetings by the Cabinet and its sub-committees to take measures to bring down inflation which is around 7 per cent. Every one, particularly the Left which is supporting the government from outside, is gunning for the Congress. The party is itself looking for shelter. It is already perturbed over a pre-price rise survey showing the Congress-led coalition losing 39 seats and coming down to 177 in the 545-member Lok Sabha if elections are held now.

The Congress has itself to blame. It had made people believe that it would not allow the price of essential commodities like wheat, rice pulses and edible oil to go up. This impression got deepened on the belief that since Prime Minister Manmohan Singh and Finance Minister P. Chidambaram was among the best economists in the world, they would manage to control the price. Theirs job was, however, to convince the electorate that the Congress-led government could do what others would not be able to do.

Knowledge of economics is one thing, but adopting it in a pragmatic way is another. I recall when Lal Bahadur Shahstri became the Prime Minister he said at his first press conference that the topmost task before him was to check food prices. He succeeded in doing so. His was a pro-people approach, not theoretical.

The problem with the high-flaunting economists is their policies are pro-rich to whom the high cost of living does not matter. An increase of 20 to 25 per cent in the price of essential commodities—as has happened in India in two weeks—has broken the common man’s back, not of the affluent. But the government’s worry is not over the price rise but growth rate. Although official estimates stick to the growth rate of 8.5 per cent, financial agencies do not think it will go beyond 7 per cent. This is not to the liking of high priests of economics.

Whatever else be the conclusion, it is sheer non-governance. When the price rise is not anticipated even a fortnight earlier, the fault is that of those who are handling economic ministries. If the government’s response is banning the export of Basmati rice and threatening hoarders with dire consequences—this is what the Cabinet has decided—it appears that the government is bereft of ideas. There are routine measures like closing the stable after the horse has bolted.

The government’s policies—economic reforms—are responsible for consumerism. It has set into motion a new fashion of spending which has little consideration for those who cannot afford even food grain, much less the goodies. There is more money in the market and more and more people are chasing fewer and fewer goods. Take food grains alone. The production in the last one decade went up by 1.2 per cent per year while the population increased by 1.9 per cent. What is needed is more food production and more land under cultivation.

Yet, the government is all for Special Economic Zone (SEZ), an area where there are no taxes. Till recently, the arable land was acquired for SEZ in the “interest of pubic good” and given to industrialists. The Left too went along till the people’s agitation made the change in policy: not to give cultivable land to SEZ.

In fact, the entire agriculture policy has been wrong for some years. Our per capita food production is back to the 1970s level. According to the Home Ministry, “predisposing factors” were failure of land reforms to provide tenants with security of tenure of fair rents, or to correct inequalities of landownership through redistribution of land. This is too much of a radical approach for a government which believes in the theory of survival of the fittest.

What India needs is another green revolution. This requires meticulous planning and hard work. But the government only flaunts money which it can utilise to buy food grains from abroad. But there is no surplus available anywhere. When five million tons were imported a couple of years ago, there was no shortage. The deal was meant to make money on the side because the price at which the wheat was bought was excessively high. No inquiry has been made because the fingers are pointed at Agriculture Minister Sharad Pawar. (Most of imported wheat was uneatable).

The earlier forecasts of this year’s production were rosy. All of a sudden, the produce is short of 20 to 30 million tons. It is a huge miscalculation which should see some heads rolling. Yet, the miscalculation may have been deliberate so as to allow hoarders to charge a fancy price. The nexus of hoarders and politicians is no secret. The government has yet to explain why it allowed private players in the field. They brought the produce directly from farmers. Private players or big firms have their godowns full. Food grain is still available from there. But who can conduct a raid when top politicians give hoarders protection?

The situation is so serious that it demands a concerted approach. Yet almost all political parties are exploiting the situation. This may well be at the cost of unity which the country needs most at this time. What they do not realise is that there can be food riots if what we have is not judiciously distributed and if hoarders go scot-free.

Water is another thing which may one day cause riots. I do not know how sound is the proposition to link rivers, but water should be on the concurrent list of the Constitution. Pakistan which proposes to do away with the concurrent list altogether should think seriously about the repercussion. Common problems like river water and environment cannot be on the exclusive list of states.

India has examples of water disputes. Tamil Nadu and Karnataka are always quarreling over the water of Cauvery. Early this week, a pro-Kannada group vandalized cinema theatres screening Tamil movies and a Tamil Sangam office in Bangalore over a Tamil Nadu water project at Hogennakal. The central government is practically doing nothing. It leaves such problems to the Supreme Court. Had it been possible, the government would have even left the shortage of food grain in the domain of courts.

 
 
 
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