Thought for
the day
“If the facts don't fit the theory, change the facts.”
-
Albert
Einstein (German, 1879-1955)
Word of the
day
Lam (v)
To beay; thrash
(Source: Dictionary.com)
Shri Nārada Uvāca
A large majority of Delhites indulge in a variety of
corrupt acts in their daily routine –squatting on public land being the most
popular act of corruption.
No political party has spoken about this so far.
Food inflation conundrum II
…continuing from
yesterday
As we suggested yesterday, to bring down food inflation on a sustainable
basis, it is critical to make agriculture a viable business.
In our view it would take a combination of administrative,
legal, social, economic and financial sector reforms to achieve the objective.
In short the following three things need to happen, viz., (a)
Substantial rise in productivity; (b) Substantial rise in price of agriculture
produce; and/or (c) fall in price of agriculture land.
Rise in productivity
Our discussion with many farmers, agriculture scientists and
rural activists across states in North India, suggests that a substantial rise
in productivity is possible without cumbersome land, marketing and labor
reforms or building expensive infrastructure.
Some aggressively promotion of collective farming,
institutionalization of farm equipment rental business, creating more awareness
about intensive farming and moving the farmers away from traditional cereal
crops towards cash crops could enhance yields by 50-100% in most cases.
In our view, the Food Security Bill, if implemented in right
earnest could transform Indian agriculture from a mere self sustenance activity
into a truly commercial activity.
Financial inclusion is another tool that could enhance
productivity by making affordable institutional credit to small and marginal
farmers.
Substantial rise in prices of agriculture produce
A substantial rise (2 to 3x) in most agriculture produce could
potentially bring back interest in agriculture sector and incentivize
substantial investment leading to higher productivity and eventually lower food
inflation.
This one time measure could help making taxation of this sector
politically and finically feasible thus improving the fiscal balance of the
country.
The negative could be substantial rise in food inflation in the
short term leading to higher rates and thus lower industrial growth and lower
overall household savings.
Substantial fall in land prices
Substantial fall in prices of agriculture land could also help
in improving yields and therefore attract fresh investments in the sector.
Such a fall, however could have serious impact on the consumer
discretionary spend, as a large part of the growth in discretionary spending
has been contributed by the wealth effect created through higher land prices.
The best solution therefore would come only from a mix of the
above three. Any solution on these lines would take 3-5years to implement and
another 3-5years to have a meaningful impact on structure of food inflation.
Tomorrow we shall discuss a real life case study to illustrate
our point.
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