I went for a haircut?literal, not metaphorical!?after the Budget. My barber smilingly said that he was doing his patriotic duty by not raising his charges this month. But, he asked seriously, ?aa doodh ane shakbhajinu shun thashe (what is happening to milk and vegetables)?? A couple of days ago I heard a remark at the chemist?s that while call rates and cell phones now cost less, they do not soften the hit in medicine prices. And this morning, the normally chirpy radio disc jockey carried on mournfully about the expected R3/litre hike in petrol prices.
These reactions speak of the overriding worries of Indians more eloquently than Mr Pranab Mukhejree?s bland statement that ?food inflation … still remains a concern.? His assertion that ?these challenges … need urgent attention in the short term? was followed immediately by a discourse on ?structural concerns on inflation management.? We have to wade through 50 more paragraphs (one quarter of the total Budget speech) before finding what turns out to be a most superficial treatment of the problem that has blighted budgets of most Indian households this last year.
Would you pat yourself on the back for having shown prudence in dealing with the recurring serious problems of your R10 lakh car by allocating R1,500 to deal with them? That is what the finance minister has done with horticulture: he has provided R300 crore to address the productivity problems of an activity that produces an output valued at more than R2 lakh crore a year at present. He has also provided an equal sum for fodder development to help overcome dairy production problems, which activity also produces an annual output of well over R2 lakh crore.
Mr Mukherjee?s multiplication table for 300 crore did not seem to go beyond the first rung. He provided R300 crore each for pulses, coarse grains, oil palm and livestock development. He tried to explain this by claiming that three was his lucky number! This feeble attempt at a joke by an intelligent politician cannot hide his awareness that all these were perfunctory and token actions.
Therein lies the tragedy of this Budget as far as agriculture is concerned. The old adage of necessity being the mother of invention was never more applicable. We have suffered high spurts of food prices repeatedly in the last three years, starting with early 2007. Every single time the problem has been on the supply side that is shortages in production. Weather-related factors may have played a role at times, as in the general drought in 2009 and the aberrant rains in late 2010, but the main cause is the stagnant productivity of land in case of almost all crops, already low as compared to global averages.
We wake up to this problem only when it reaches crisis proportions as we did last December. Everyone from the Prime Minister downwards calls for a second Green Revolution. The Delhi gharana of economists take time off from their macro policy concerns and discover spooks in agriculture marketing and whip the usual suspects: hoarder middlemen, rapacious retailers, wasteful market chain and so on. When the problem subsides for a bit, as it has now, the persistent problems of agricultural productivity are forgotten and the policy wonks continue to split hairs on the monetary and fiscal fronts.
The reason why the problem of short supplies rectifies itself?albeit temporarily?is that unlike popular belief, markets provide the right signal to producers, who do their best to follow it promptly. The 15% increase in pulses production this year, more than 50% increase in onion acreage for the present crop, and an enthusiastic switch to Bt cotton over the last three years are all indicators of effectiveness of markets to provide the stimulus and farmer responsiveness.
What stands in the way of the growers to produce even more is largely technology: right varieties that yield more and resist adversities such as water shortage or disease and pests. Farmers have avidly adopted wheat hybrids, gene-modified cotton and various higher yielding varieties of fruit and vegetables all over the country. The task now is to move beyond what is available now to newer frontiers.
That process normally would be slow. It need not be, as we demonstrated between 1965 and 1968, bringing in wheat hybrids from Mexico and adapting them to Indian conditions under the guidance of Dr Norman Borlaug and Dr MS Swaminathan. Unfortunately, a neo-Luddite environment also stands in the way now. On the strength of some representations and personal soundings, Mr Jairam Ramesh has single-handedly put on hold the Bt brinjal despite GMAC clearance for a year and has probably halted all further work. Dr Borlaug?s wise counsel that an enlightened gene-modification approach takes the trial-and-error approach out of plant breeding and is the key to feed the world in the current century has been forgotten.
The 1965 drought gave us a jolt to give a big push to agriculture research. The events of the last three years could have been used to provide a similar thrust all over again. When confronted with domestic shortages, our policy response is always to resort to import. If ever such an approach was more than required, it is with appropriate agriculture research now. We could not only import existing research but also outsource time-bound programmes. If we can employ foreign managers in our enterprises, including in the public sector, why not foreign scientists for relevant productivity-enhancing technology?
The Budget, one had hoped, in view of the concerns expressed in the Economic Survey, would provide a big push to agriculture. A greatly enhanced higher allocation to agriculture would have added a small fraction to the deficit, wholly justifiable under the circumstances. It has instead stopped at merely using Mr Kaushik Basu?s pet terms.
No, finance minister, there is no cheer in the litany of three. You could have made your own luck and Indra and Lakshmi would have blessed you bountifully. Until you do that, my barber?s question will continue to haunt perhaps not Dalal Street, but certainly the main chauraha!
The author has taught at IIMA and helped set up IRMA