Yesterday i read an informative article in businessworld, which was exploring the reasons behind the soaring inflation rates.
On the demand side, it states the inability of the government to foresee the increase in spending power of rural population because of programmes such as MNREGA as one of the reasons. People have more money so the consumption went up.
More prosperity also meant that farmers who were earlier selling milk now use it for their own consumption.
But It is on the supply side, that we have a lot of problems.
1) First and foremost our agricultural production is not efficient. This is evident from the fact that about 60% of population work in agriculture sector, but this sector only provides about 16% of the GDP.The govt has done little to increase productivity in this sector.
2) PDS - (public distribution system) in India is probably the worst in east asia.The distribution network is not so strong and we do not have good storage facilities also. The middle man steals food grains which are supposed to be sold on subsidy.
To solve this problem, a committe headed by Montek singh aluvalia has suggested introduction of smart cards for people, who can then use to buy food grains at a subsidy.The goods will be transported at market prices(and not on subsidized prices) ,so this will take away the incentive for middle men to steal.
3) Unseasonal rains.
- But how unseasonal rains in one area affected the whole country?.-
4) AFMC - some rule which states that farmers can only sell through mandis and not to retailers.(retailers can only get 1 year licences , which are to be renewed every year). Nitish kumar of bihar has abolished this and more chief ministers should follow.
To follow up , i read another article by paul krugman today morning on Hindu which mentioned global warming was one of the reason for unseasonal climactic changes which is one of the reasons for rising food costs. The future does not look very glossy!..
On the demand side, it states the inability of the government to foresee the increase in spending power of rural population because of programmes such as MNREGA as one of the reasons. People have more money so the consumption went up.
More prosperity also meant that farmers who were earlier selling milk now use it for their own consumption.
But It is on the supply side, that we have a lot of problems.
1) First and foremost our agricultural production is not efficient. This is evident from the fact that about 60% of population work in agriculture sector, but this sector only provides about 16% of the GDP.The govt has done little to increase productivity in this sector.
2) PDS - (public distribution system) in India is probably the worst in east asia.The distribution network is not so strong and we do not have good storage facilities also. The middle man steals food grains which are supposed to be sold on subsidy.
To solve this problem, a committe headed by Montek singh aluvalia has suggested introduction of smart cards for people, who can then use to buy food grains at a subsidy.The goods will be transported at market prices(and not on subsidized prices) ,so this will take away the incentive for middle men to steal.
3) Unseasonal rains.
- But how unseasonal rains in one area affected the whole country?.-
4) AFMC - some rule which states that farmers can only sell through mandis and not to retailers.(retailers can only get 1 year licences , which are to be renewed every year). Nitish kumar of bihar has abolished this and more chief ministers should follow.
To follow up , i read another article by paul krugman today morning on Hindu which mentioned global warming was one of the reason for unseasonal climactic changes which is one of the reasons for rising food costs. The future does not look very glossy!..
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