1. Good time to fix food management

Good time to fix food management

The steep fall in global commodity prices, from food through energy to metals, is good news for India as commodities account for 58% of the total imports. Lower commodity prices will cool inflation further—retail inflation in September, at 6.5%, is the lowest new consumer price index. Even wholesale price index-based inflation was at a five-year […]

Updated: August 11, 2016 3:37 PM

The steep fall in global commodity prices, from food through energy to metals, is good news for India as commodities account for 58% of the total imports. Lower commodity prices will cool inflation further—retail inflation in September, at 6.5%, is the lowest new consumer price index.

Even wholesale price index-based inflation was at a five-year low, at 2.4%, in September. Though lower price means no wheat exports this year, its impact will be marginal. But the commodity price slide has presented the government a big opportunity to fix the food management.

The minimum support price (MSP) hikes, which kept the returns high in rice and wheat and have been behind the farmers’ aversion to diversification to other crops, have to be kept under check as global prices of various crops are near MSP levels. Sharp increases in MSP from FY08 to FY14—paddy by 76%, wheat by 40%, maize by 111%, and rapeseed/mustard by 69%—have resulted in higher returns for farmers for these crops.

A shift to per acre subsidy policy will also help in this as all the subsidies can be clubbed for various crops under one umbrella. Then, Aadhaar-based cash transfers can be introduced across food production and distribution to curb leakages at all levels.

 

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