The Hindu Business Line : Misplaced priorities?

Pressured by its allies and the marketplace, the Government has announced a series of initiatives to rein in the soaring prices of several essential commodities. Banning exports (pulses), liberalising imports (wheat, sugar) and granting bonus for wheat procurement are all desperate measures to somehow tide over the shortages. How far they will succeed and bring genuine relief to consumers remains to be seen. The erratic South-West monsoon and its impact on the kharif harvest add to the uncertainty. In the futures segment too, measures have been announced to mop up the speculative froth. The increase in margins and the reduction in position limits reflect the Government's discomfort with current price levels on the bourses. All this has created a sense of panic in the market and sends negative signals about the stability of trade policies.

Export commitments are facing the threat of default. The Centre is also reportedly looking at introducing dual pricing for procurement of grain and engaging in futures trading; these are fraught with serious risks. Not a day passes without an announcement relating to the commodity market. It is, indeed, a fire-fighting operation. The impression sought to be conveyed through these steps is that there is something wrong with the marketplace and the participants. The Government is trying to project itself as a saviour, ready to correct anomalies in the commodity market. The reality is different. The policymakers are themselves, primarily and perhaps almost entirely, responsible for much of the commodity market's problems.

The question as far as commodity prices are concerned is not whether there is excessive speculation but who is responsible for the current state of affairs. The core issue is that fundamental and structural issues of the farm sector and the agri-commodity market have been sidelined and remain unaddressed. Whether it is fine cereals, pulses, oilseeds or even sugar, there is a serious mismatch between the rising internal demand and irregular production. In recent years, the mismatch between demand growth and output growth has worsened, necessitating large-scale imports. But the import policy itself has remained highly restrictive until now with high tariffs or canalised imports.

The Government, it seems, has got its priorities mixed up. The country is paying for the omissions and commissions of successive governments over the last five decades. As top priority now, we need committed measures — non-trade and non-price initiatives — to strengthen the agricultural production base. There is no noticeable movement in that direction. Developed economies spend huge amounts to support agriculture in the form of subsidy. In addition to direct payment to farmers, they have large outlays for improvement of extension services, quality assurance, exports and infrastructure. We have hardly any of these. Until the fundamental issue of sustainable production enhancement is adequately addressed, the Government will only continue to fire-fight.

More Stories on : Editorial | Agriculture

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Misplaced priorities?

Getting at the root

Divining the dividing line

Getting TN ready for VAT

Tax-netting a service

A tough cookie for the taxman

Every third poor person on the planet lives here

UNDP's new HDR for Asia-Pacific — For an inclusive development strategy