Tuesday, January 4, 2011

Food security to be this decade's biggest worry

A few days ago, Amul raised the price of milk - for the third time in a year. Anyone who is betting that the gains in food prices will fade with time needs to get ready to put the loser's share of money on the table. Runaway food prices are here to stay and taming that will need far greater structural changes than temporary clampdowns on hoarding and exports. If the last decade was about India's [ Images ] economic growth, food security is what we should worry about this decade.

As the economy expands, India's hungry mouths are going to open wider and want more variety and quantity of food. The growth in population and incomes will mean that as we munch our agricultural production, we will also be forced, increasingly, to use our stock of greenbacks to buy food in the international marketplace. Our enormous consumption will do to food prices what China's lightning-paced build-up has done to commodity prices - push them on a one-way street, up north.

Anyone can see this coming, but India's complacency is somewhat comical. In many ways, the government may have aided the food predicament without realising how great a role it has played in shaping it. Its zeal in implementing the rural employment guarantee plan and other social sector schemes has put money into the hands of thousands who previously had frugal access to food, if at all.

Getting food to all is most certainly a good thing especially when you consider how an economy growing at almost 9 per cent annually still needs to have a plan in place for such a fundamental right. So while we've earned big brownie points on that score, we lose heavily on how poorly we have anticipated our food needs.

Agriculture accounts for only about 15 per cent of our gross domestic product, and our crop yields are still low. The World Bank estimates that rice yields in India are a third of China, and half of Vietnam. Given that all countries have a finite amount of natural resources available to them, the only option is to vastly step up investment in improving agricultural productivity per hectare. The government, however, over the years seems to have focussed quite heavily on providing subsidies to the sector.

Subsidies, while politically popular and sometimes necessary, eventually rob us of greater efficiency, because they makes us lazy towards cost effective innovation. Agriculture has lagged when it comes to better seeds, technology and improved farming practices. Weather patterns world over are getting harder to predict and our own hapless dependence on Mr Monsoon has already taught us that we will have to be in a constant state of preparedness for bailouts and imports, as we haven't developed a dependable irrigation system as a substitute. Our troubles don't quite end there. We already know of wheat rotting for lack of storage and onions getting soaked in unseasonal rain.

Much as we may claim buffer stocks, rotting food reserves are as much use to us as baby clothes to a teenager. It's time we took storage and distribution out of government hands and gave it to the private sector to do it effectively, with pay-outs and penalties for targets met and slipped, so it remains efficient and without leakages.

As urbanisation and industrial projects compete for land, some agricultural land will no doubt be swallowed up.

Farmers have been arguing that the increase in basic minimum wage as a result of the employment guarantee program has made labour scarce and expensive, making farming less lucrative.

Add all of this up, and ensuring food security looks like the biggest challenge India's likely to battle. To depend increasingly on external markets to rescue us, while dragging our feet on improvements at home, will likely end in tears, not just over onions but in wasted greenbacks as well.

Anjana Menon is executive editor, NDTV Profit. Views expressed here are personal.

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