Saturday, July 07, 2018

The problem is easy to solve, but not easy to let go.

"The big jump in minimum support prices (MSPs) for kharif crops announced by the Modi government is its biggest economic blunder," wrote SA Aiyer. "It gives a fixed margin of 50% over their input cost and imputed labour cost, ignoring demand, supply and international competitiveness. This makes no economic sense for any activity, let alone farming." This shows that economists have no sense. This is not being done for the benefit of farmers, the economy or the country, this is being done to persuade farmers to vote for the BJP, the Prime Minister's party, at next year's general election. This will increase inflation by increasing food prices, forcing the Reserve Bank to increase interest rates, and harm farmers by cutting down exports. "India's farm sector restrictions and subsidies end up distorting incentives. This has led to insufficient use of modern technology, low volatile agricultural productivity growth, excessive ground water withdrawal, poor soil fertility and declining agro-biodiversity. In the end government interventions end up sustaining, not reducing, rural poverty," wrote S Sabhlok. Farmer's leaders have been arguing for freedom for farmers, to allow them to compete at home and abroad and the infrastructure to make it easy for them to market their produce. Procuring certain crops at increased prices leads to water-guzzling crops in areas with deficient rainfall. This is leading to depletion of groundwater all over India. Free electricity in some states is leading to excessive pumping of groundwater leading to increasing drought. Over 200,000 people die every year due to shortage of clean drinking water and this is set to get worse. Pattern of crops must be changed and investment in irrigation will reduce the need for groundwater. Milk prices have fallen by 20-30% in several states with surplus production of milk and 70% of those earning livelihood from milk are women. Export is not an option because global prices of skimmed milk have fallen. The government bans import of milk and milk products, including confectionery, from China. Apparently because Chinese milk is contaminated with melamine. But, if we have so much milk why should there be any need to import anything? Farmers are agitating because their income has fallen compared to the rest of India, wrote Prof A Gulati. There is a crisis in agriculture, wrote an editorial in the Mint. Everyone agrees about that and on what needs to be done. But no one has worked out how this will lead to votes. Farmers are suffering from democracy.

No comments: