Budget 2007, says Finance Minister P Chidambaram, is the government's way to fix these problems so that growth is inclusive. But will the words and allocated funds add up to coherence and content?
I suspect not. The problem is primarily conceptual. For instance, while everybody agrees that agriculture in India is in a mess and that it needs reform desperately, the prescriptions are widely divergent. Till we understand this, change will be meaningless. Currently, the dialogue on agriculture is both deaf as it is dumb.
On one side are people who write economic policies. Their accent is on opening up the market. They are also concerned about the inefficiency of present-day agriculture, attributing poor productivity to small landholders and marginal farmers. They are also concerned about the land on which farming is practised since, in their view, it can be put to much more valuable and efficient uses. As far as food to eat is concerned, their worldview is global. The vast foreign exchange reserves we have can be used to buy food, already subsidised and made cheaper by rich countries.
But this cold logic of efficiency and growth is poor on substance. Take just one instance: wheat. Last year, the logic of the market meant we allowed private procurement by large companies. But my colleagues who visited Punjab and Haryana reported that farmers big and small did not benefit. The large traders paid marginally more than the government's minimum support price.
In fact, in most cases, all they did was to evade the mandi (market) tax and pay it to the farmers instead. This meant that government had a smaller stock of wheat. Prices then went up. We started importing food. But prices in the international market had also hardened, partly because of droughts and partly because rich governments are now subsidising crops that will be used to produce biofuel for cars.
We even permitted private traders to import wheat without paying duties and slackened quarantine regulations because we needed to import at any cost. The bottomline is we ended up paying more for foreign wheat than we paid our own farmers.
By waiving import duties we lost more money. Moreover, our farmers had to comply with food safety regulations, foreign traders did not. But we still have inflation, widely attributed to the rising prices of wheat and pulses.
Again, we also import large quantities of oilseeds, palm, soya, sunflower and different pulses. As agricultural scientist and chairperson of the National Commission on Farmers, M S Swaminathan, will tell you, our neglect of the drylands has seriously undermined the crops and people of rainfed areas, which constitutes the bulk of our agriculture.
His prescription is to invest in these lands; to do land and water management with a difference; to include these neglected crops of neglected lands in our food procurement system. Most importantly, he says, we need to give farmers the price they need, not the price the government thinks they should get. His commission has asked for food procurement to be based on the market price, not at an arbitrary minimum support price.
Let's speak of divergence. In this Budget, even as the finance minister has called for investment in oilseeds, he has also announced further duty reductions on crude and refined edible oils, "to make them more affordable".
In other words, farmers are being asked to compete with the distorted and much subsidised markets of the rich world. They obviously cannot and so they lose again. This is exactly the case with cotton, the killer crop of Vidarbha. The problem is that input costs for farmers are increasing from the cost of new-fangled seeds to pesticides to fertilisers and water but the price of cotton is `fixed' or falling.
This is the economics that the finance minister discounts in his prescription. This is why we are hungrier today and will be famished tomorrow. It's a pity we cannot eat words.
