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<div class='ite_mg_banner ads__container'><div class='it_mg_bnrBox'><div class='ite_bnr_cont'><div class='ite_cont_dtl'> <h4>Subscribe to India Today Print + Digital. Your First Month Is On Us. <span class='bold_text'> ₹299/month</span> thereafter. Cancel anytime.</h4><a href='https://ancillary-proxy.atarimworker.dev?url=https%3A%2F%2Fsubscriptions.intoday.in%2Findiatoday%3Futm_source%3Dtop-web-banner ' class='ite_subscribe_btn origin_conscent_url' target='_blank'>SUBSCRIBE</a></div></div></div></div>

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<div class="itg-mosimage"><amp-img src="https://ancillary-proxy.atarimworker.dev?url=https%3A%2F%2Fakm-img-a-in.tosshub.com%2Fsites%2Fmedia2%2Findiatoday%2Fimages%2Fstories%2F2011September%2Fmontek_091611091356.jpg" alt="" height="425" width="650" class="" layout="responsive"></amp-img><p>I do not think it matters if inflation reaches the double-digit mark in one week... but in the next two-three months, the overall inflation will come down as the food prices are declining," said Montek Singh Ahluwalia, deputy chairman of the Planning Commission and the Prime Minister's closest aide on economic policy. You could be forgiven for assuming that he said this in the last week of August 2011 as food inflation hit double digits once again. In fact, he had made that statement in March 2010. Eighteen months and 11 interest rate hikes later, food inflation shows little sign of abating. How have Montek and the Government's top economic policy brass got it so horribly wrong?</p><p>The reason is simple-they are shying away from telling the truth. In fairness, Montek went half-way in telling the truth some months ago when he said that food inflation was a price the country was paying for prosperity. There is no denying that two decades of sustained high growth combined with the UPA's aggressive income redistribution programmes like nrega have raised purchasing power across the board. Food is always the first port of call for consumers. What has not happened in the last two decades is a supply response from agriculture to match the rising consumer demand. If Montek and Co. wants to take credit for India's prosperity, it must also take the blame for neglecting agriculture and letting the food inflation genie out of the bottle.</p><p>Here's why. One of the least highlighted aspects of Manmohan Singh's economic reforms programme of the early 1990s is the sharp cuts made in public investment, particularly in agriculture in real terms-in irrigation, in rural supply chains, and new technologies. Such investment had already been declining through the 1980s after the peak years of the Green Revolution, but it fell even more sharply as Manmohan and Montek looked for the easiest places to cut expenditure and restore fiscal order. It has never recovered since. We are paying the price now.</p><p><span>Manmohan and Montek could have done something for agriculture in the early 1990s by unshackling it from the licence-raj of price and quantity interventions. But they did not. The </span>UPA<span> Government has exploited their timidity to the detriment of inflation-hit consumers. The Government has shown little hesitation in consistently hiking the minimum support price (MSP) paid to farmers of certain commodities like wheat and rice to assert its populist credentials. The problem with the msp is that it only goes up ever year. The rise eventually gets passed to the consumer. Worse, it dissuades farmers from growing other crops which have no msp. A case in point is vegetables which have no MSP, have the greatest supply shortages and are the biggest contributor to food inflation.</span></p><p>There are other problems. On occasion, when spooked by food inflation, the government responds by banning exports-of wheat, rice or onions. The ban helps increase local supply and lowers prices in the short run. In the medium term, lower prices act as a disincentive to farmers. Supply of that commodity will therefore fall causing more inflation.</p><div class="itemcenter"><amp-iframe height="62" title="" width="320" sandbox="allow-forms allow-scripts allow-same-origin allow-popups allow-top-navigation allow-top-navigation-by-user-activation" allowfullscreen src="https://ancillary-proxy.atarimworker.dev?url=https%3A%2F%2Fakm-img-a-in.tosshub.com%2Fsites%2Findiatoday%2Fbanner%2Fpreferred-source-new.html%3Fv%3D1.014%5Cu0026native%3D1" class="mrBt15 preferred-source-banner"> </amp-iframe></div></p><p>When the Government's economic policy brass accepts these uncomfortable truths, it will finally begin to address food inflation with more than just words.</p><div id="tab-link-wrapper-plugin"><div class="authors__container"><div class="authors__by"><div class="authlable">Published By: </div><div class="authdetaisl">AtMigration </div></div><div class="published__on"><div class="authlable">Published On: </div><div class="authdetaisl">Sep 16, 2011</div></div></div><div class="sendros">--- ENDS ---</div></div></div>

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dhiraj-nayyar

Dhiraj Nayyar

<div class="itg-mosimage"><div class="itgimage"><img  title=""  class="" alt="" src="https://ancillary-proxy.atarimworker.dev?url=https%3A%2F%2Fakm-img-a-in.tosshub.com%2Fsites%2Fmedia2%2Findiatoday%2Fimages%2Fstories%2F2011September%2Fmontek_091611091356.jpg" loading="lazy" /></div><p>I do not think it matters if inflation reaches the double-digit mark in one week... but in the next two-three months, the overall inflation will come down as the food prices are declining," said Montek Singh Ahluwalia, deputy chairman of the Planning Commission and the Prime Minister's closest aide on economic policy. You could be forgiven for assuming that he said this in the last week of August 2011 as food inflation hit double digits once again. In fact, he had made that statement in March 2010. Eighteen months and 11 interest rate hikes later, food inflation shows little sign of abating. How have Montek and the Government's top economic policy brass got it so horribly wrong?</p><p>The reason is simple-they are shying away from telling the truth. In fairness, Montek went half-way in telling the truth some months ago when he said that food inflation was a price the country was paying for prosperity. There is no denying that two decades of sustained high growth combined with the UPA's aggressive income redistribution programmes like nrega have raised purchasing power across the board. Food is always the first port of call for consumers. What has not happened in the last two decades is a supply response from agriculture to match the rising consumer demand. If Montek and Co. wants to take credit for India's prosperity, it must also take the blame for neglecting agriculture and letting the food inflation genie out of the bottle.</p><p>Here's why. One of the least highlighted aspects of Manmohan Singh's economic reforms programme of the early 1990s is the sharp cuts made in public investment, particularly in agriculture in real terms-in irrigation, in rural supply chains, and new technologies. Such investment had already been declining through the 1980s after the peak years of the Green Revolution, but it fell even more sharply as Manmohan and Montek looked for the easiest places to cut expenditure and restore fiscal order. It has never recovered since. We are paying the price now.</p><p><span class="Apple-style-span">Manmohan and Montek could have done something for agriculture in the early 1990s by unshackling it from the licence-raj of price and quantity interventions. But they did not. The </span>UPA<span class="Apple-style-span"> Government has exploited their timidity to the detriment of inflation-hit consumers. The Government has shown little hesitation in consistently hiking the minimum support price (MSP) paid to farmers of certain commodities like wheat and rice to assert its populist credentials. The problem with the msp is that it only goes up ever year. The rise eventually gets passed to the consumer. Worse, it dissuades farmers from growing other crops which have no msp. A case in point is vegetables which have no MSP, have the greatest supply shortages and are the biggest contributor to food inflation.</span></p><p>There are other problems. On occasion, when spooked by food inflation, the government responds by banning exports-of wheat, rice or onions. The ban helps increase local supply and lowers prices in the short run. In the medium term, lower prices act as a disincentive to farmers. Supply of that commodity will therefore fall causing more inflation.</p><div class="itemcenter"><iframe scrolling="no" allowfullscreen="" frameborder="0" width="100%" height="62" awidth="320" aheight="62" amplayout="fixed" src="https://ancillary-proxy.atarimworker.dev?url=https%3A%2F%2Fakm-img-a-in.tosshub.com%2Fsites%2Findiatoday%2Fbanner%2Fpreferred-source-new.html%3Fv%3D1.014" class="preferred-source-banner" loading="lazy"></iframe></div><style>.preferred-source-banner{  margin-top: 10px; margin-bottom:10px;}</style></p><p>When the Government's economic policy brass accepts these uncomfortable truths, it will finally begin to address food inflation with more than just words.</p><div id="tab-link-wrapper-plugin"><div class="authors__container"><div class="authors__by"><div class="authlable">Published By: </div><div class="authdetaisl">AtMigration </div></div><div class="published__on"><div class="authlable">Published On: </div><div class="authdetaisl">Sep 16, 2011</div></div></div><div class="sendros">--- ENDS ---</div></div></div>

One of the least highlighted aspects of Manmohan Singh's economic reforms programme of the early 1990s is the sharp cuts made in public investment, particularly in agriculture in real terms-in irrigation, in rural supply chains, and new technologies. 

India Today

Food for thought - India Today

UPA has exploited their timidity to the detriment of inflation-hit consumers

Food for thought

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UPA has exploited their timidity to the detriment of inflation-hit consumers

One of the least highlighted aspects of Manmohan Singh's economic reforms programme of the early 1990s is the sharp cuts made in public investment, particularly in agriculture in real terms-in irrigation, in rural supply chains, and new technologies.

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