December 24, 2009


While the government would make us believe that all is well with the economy, and that the Indian economy is resilient enough to withstand the shocks of global recession, one visit to any vegetable market in Delhi or for that matter anywhere in the country actually gives a very different kind of a picture. Food prices, in the last one year or so, have skyrocketed to such an extent that many items have become beyond the reach of the common man. For the common man in India, the staple diet consists of things as basic as potato, pulses and rice. But given the way the prices have increased in the recent past, today they can no more be called the ingredients of the common man’s diet. The price of pulses is almost touching Rs 100 per kg, while that of potato is hovering around Rs 40 per kg. Even a year back, pulses were available in the market for less than half the price and almost a fifth in the case of potatoes. So does it mean that all of a sudden the farmers of the country have decided to quote higher prices and pocket the abnormal surpluses?

Well, if that had been the case, then I would surely have been one of the happiest persons, as then for a change, the tables would have turned towards the farmers, whose increase in income and thus the purchasing power, would have definitely helped the Indian economy to grow manifold. It would have also ensured that the farmers are able to come out of the debt trap and become self sufficient. But unfortunately, that is not the case. While the common man is finding it difficult to make both ends meet and is probably even contemplating skipping one meal a day to make sure that the house budget doesn’t go beyond control, the farming lot of the country continue to be equally distressed. A recent piece of news carried in The Times of India had stated that there is a 400% increase in the price of vegetables by the time it reaches the vegetable vendor from the dealer via the mandi. This is not just shocking but outrageous. The issue here is that if the farmers continue to get a pittance for all their effort, then would they ever be able to be financially viable and self sufficient? As such, there is not much organized debt available and farmers are always vulnerable to private money lenders, who charge the most obscene interest rates (the biggest reason for farmers suicides in India); and on top of it, there is no viable option for the farmers to market their produce.

There is no reason why the middlemen in Indian agriculture should get such high margins. More shocking is the fact that in the case of no other commodity, especially in the industrial sector, have the manufacturers been a deprived lot as is the case with the Indian farming community. The middlemen add no value whatsoever and yet corner hefty margins. Most of the elements involved in these activities have strong political lobbies because of which they are always able to prevent the entry of organized retailers in this business. We all know how e-choupal of ITC benefited the farming lot. Similarly, if organized wholesalers like Metro Cash & Carry or Reliance Field Fresh are allowed to enter into contracts with the farmers directly, then the farmers would surely get far higher prices than what they get right now. Also, along with all that, the central government should take necessary steps to amend the Agriculture Produce Marketing Committee (APMC) system. It is through this that state governments control agriculture in their respective states. And this is the system because of which farmers cannot sell their produce directly to the end user or the retailer. Reform in the APMC would go a long way in correcting the anomaly in the agricultural market. In an era where the price of everything is going down, there’s no reason why the price of farm produce should increase – and given that, why the farming community should continue to be the deprived lot.

In fact, the villain of peace with respect to Indian agriculture is none else than the government itself. Asymmetries are being deliberately engineered in this sector simply because that’s the only way political parties can go about extorting votes from farmers (as they form the majority of the voting population and their illiteracy being the biggest boon for politicians). The dynamics is pretty simple. First, you make the farming community perennially vulnerable by denying them organized debt while guaranteeing market distortions. At the peak of their vulnerability, to extort votes, you become a demi-god by waiving off loans to the tune of thousands of crores for the farmers. And why would you not! After all, waiving thousands of crores is a visible and populist act, and on top of it, it is the tax-payers’ money. So why bother at all! As such, tax payers are just 2% of the entire population and most of them are so disgruntled that they don’t even vote. So while this continues, the middle men make merry by cornering abnormal margins and money which in turn finds its way into election campaigns.

All in all, Indian agriculture is a classic case of sustained political abuse. Otherwise, it had the potential to not only feed the entire nation but the world at large. It is so unfortunate that we have converted the world’s food bowl into a begging bowl.



psudo said...

It is said that British realized in 1857 revolt was funded by Indian farmers. So they decided to break there back by taxing them heavily. It was said in there discussion in British parliament to keep money in there hand for mere sustenance. Post 1947 most of govt policies are unchanged towards farmers. See they want to win election by withdrawal of farmers debt. But want them poor so that they are dependent on govt mercy election after election

Technology Journal said...

Then will India see food riots and water riots in recent months just like in SA.

shush said...

Arindam what I can observe from your article is, All the problem of Indian Agriculture sector is its weak supply chain, which unable an Indian farmer to sell its produce directly to the retailer/wholesaler.Albeit few of the MNC's Like Pepsi,ITC,Reliance are engaged in educating the Indian farmer about technical know how of agriculture, but still we need government support to bring a revolution along with other MNC's in Indian Agriculture sector.

Abhinandan Banerjee said...

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raju said...

Respected Sir,
While completely agreeing with your pragmatic views, I want to submit my views:
1. The food production can be considerably increased by making available fertile lands resulting from reduction in the unnecessary conversion of arable land into plots for concrete urban jungles.
2. The Public Distribution System of pulses, food grains, vegetables and fruits can be made more equitable by assigning the job to the co-operatives(like Amul in case of Milk) totally avoiding intermediaries, whose only interest lies in profit making at the cost of a common man.

Guha Rajan said...

The funniest part is though the price to the consumer has increased manyfolds in the last one year. The govt says inflation is -ve. This is very surprising, they should stop providing inflation based on WPI(wholesale price index) and look at CPI(consumer price index).

Like the farmer who are the producers the worst affected in 2008-09, is the salaried class. There has not been a much of salary hike for salaried class (leave alone layoff) and they had to take hike of increased commodity price which is now eating up the common man budget.

Chetan Gupta said...

I love u Arindam Sir...!!!

The rise in food prices is excessive but there will be a decline in January. What you see now is speculative, probably due to the drought situation. The stock situation is relatively OK.

Luv u Sir!!

Chetan Gupta said...
This comment has been removed by the author.
pankul gupta said...

well I have read many articles regarding the rising food prices but this one has so far been the best!!!!!

Common Hindu said...

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- a blog for Daily Posts, News, Views Compilation by a Common Hindu
- Hindu Online.

paul said...

Sir, Mr.Chidambaram, has touched this issue in his book ' a view from the outside', where he says, consumers are not ready to give Rs1/kg extra for farm products which will raise the standard of living of the farmers to a great extent, but his conclusion is probably wrong, the point is consumers are paying heavily for farm products, but the point is as you have said, the profits do not reach the farmers, instead the middle men eat up the surplus whatever consumers pay. for instance. Rs 25/ kg onion in the retail market, but farmer is paid only Rs 5/-. It is so sad that the real producers of farm products do not get the benefits. There should be proper government controlled channels to regulate prices and to ensure that the benefits flow to the poor farmers. It is again a case of system failure in this country.

rohitprabhakar said...

It is totally unfortunate but we have to agree with you. I recently visited India after 2 years and was surprised to see the prices. The food items in India almost cost as they cost in USA. I would say food items are cheaper in USA if I compare to India. A dal that costs Rs.110 in India costs around 2 USD (maximum) which is indeed cheaper in India. This thing was the main topic of discussion while my stay in India.

The most sad part of the whole story is that the Government doesn't seems to be taking any concrete step to fix this problem. The cost paid to farmers is still the old price the price rise is all in between what we call MAD cost.

Rohit Prabhakar

deepak said...

Dear Sir,

Everywhere the same thing- corruption. You talk about politicins,judicial system, indian administration- corruption is the only thing what we can see. Major part of our population is suffering because of corrupted politicians and their pathetic system.
Can we do something- can we change- can we do something very positive for the people and the society?? When??
Being a part of this society I feel that I should do something- but I dont know how--If you have any idea than pls let me know.

daniel khan said...

its all bcoz of not some but many corrupted people who are in this food supply chain who are just thinking of their own....
they want to live king like lifestyle and want others to just starve till death.
who the hell says that India is an independent country...its my opinion that india went under slavery from 1947 and not till 1947.

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