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2011: Anticipated Global Food Crisis

GRK Murty
Agriculture is the lynchpin of India’s food and livelihood security. For, it
still provides employment to around 52% of the workforce, though its
share in India’s GDP (at constant prices of 2004-05) slid from 18.9% in
2004-05 to 15.7% by 2008-09, while growth rate itself fell from 4.7% in
2007-08 to 1.6% by 2008-09.

Against this backdrop, and particularly the known quantitative and


qualitative status of undernutrition and malnutrition prevailing in our
country being what it is, the recent warning of the Food and Agriculture
Organization (FAO) of the United Nations that “with the pressure on
world prices of most commodities not abating, the international
community must remain vigilant against further supply shocks in 2011,”
is sending shockwaves.

For, when prices of food commodities spike in global markets, they


tend to transmit to domestic markets, particularly when markets are
integrated—a stage towards which India is currently heading; and it is
the consumers in the developing countries that are worst-hit, as they
spend a high share of their incomes on acquisition of food, that too,
having no or little options in their food choices.

Now the question is: What should India do in 2011 to obviate the
forecasted crisis? Of course, as the Steering Committee on food and
nutrition set up to advise the UN Committee on food security observed,
India must draft and execute “a comprehensive coordinated approach,
not piecemeal approaches, to tackling chronic, hidden and transitory
hunger.”

Fortunately, we have suitable policies already in place, but what is


needed is: political will to implement them in letter and spirit. The first
policy that comes to mind for immediate execution is the
recommendations of the National Commission on Farmers, which
emphasized the importance of “imparting an income orientation to
agriculture” by affording water and nutrients, timely credit and assured
and remunerative marketing system that ultimately result in higher
productivity per unit of land.

The mission-criticality of this simple requirement can best be


appreciated only when one is aware of the basics of Indian agriculture.
More than four-fifths of India’s total operational holding of 1,077.1
lakhs fall under the category of small and marginal farmers consisting of
less than 2 ha. Essentially, every farmer is a risk-taking entrepreneur—
even today, the entrepreneurship of an Indian farmer is a gamble on
the monsoon system. Besides, they also face the risk of spurious inputs
such as seeds and pesticides, pest and disease attacks, and
inadequate/untimely credit supply, coupled with procedural hassles
from the banking system and price uncertainties.

And the small and marginal farmers are the worst victims of all these
risks, for they do not have the wherewithal to micromanage these
innumerable risks; nor do they have the asset-backing to stay put with
the consequences of any of these risks—particularly, the consequences
associated with the risk of extremities of weather, like the one the state
of Andhra Pradesh suffered in the current kharif season.

So, what immediately needs to be done is to build risk-mitigation


mechanisms in an integrated way into the system. It, of course, calls for
a multi-pronged strategy to address both covariate and idiosyncratic
risks: one, macro level agricultural insurance system to be
strengthened, besides making it meaningful; two, encouraging local
collective group insurance initiatives; three, so streamlining the credit
delivery system that it adopts a flexible and cyclical credit system in
sync with weather behavior; four, institutionalizing the price support
mechanisms and procurement for greater transparency; and five,
creating a reliable and well-regulated market infrastructure. So far as
the policy initiatives for providing ex post risk-related relief are
concerned, a distinction needs to be made between normal risks and
risks that are rare but having high consequences for individuals over
larger areas, and importantly, institutionalizing these measures to limit
the scope for corruption.

Are we then ready to plunge into action—of course, right action?

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