While a lot of money is being spent on agricultural projects, not much is seen in terms of outcomes in water availability and newer seeds. While the cap on subsidies is fine and the market-linked policy on newer products and expansion of urea capacity is well taken, it is nobody?s case that much advantage to agriculture can be expected in the short-run. So, it is the price and profitability signals that will be the centre point of any short-run revival strategy after the bad kharif last year. But nobody is worrying about all this out there.

The Economic Survey made the valid point that despite the ?hype? over food prices, producer prices in agriculture only grew by 6%. GDP deflators are a box only national income statisticians know. The reconstituted Statistics Commission together with the chief statistician has to take us forward on price statistics for agricultural policies and the spread between consumer and harvest prices, but the rough trends are known. Since the chief economic advisor wrote on the ?hype? over agriculture prices, a lot of water has flown down the rivers. The Wholesale Price Index has fallen for food and if one uses the language some papers have used, it is now at an annual negative rate of above 25%.

But more seriously, harvest prices are falling. In western Maharashtra agricultural markets about two weeks ago, tur dal prices were running below Rs 30 per kg, just above the minimum support price (MSP), and so was soya. Potato prices started falling, and now there are reports of potatoes selling at Rs 2 per kg in village markets because of which potato-producing regions like West Bengal and northwestern Gujarat have been sending SOS messages to non-existent saviours. Sugar prices are also on their way down and we are in the falling cobweb, with the factories no longer buying sugarcane.

The response of policymakers has been fascinating. I argued for an examination of the possibility of a mild degree of tariff protection and MSP support. The government was kind enough to tell oilseed and pulse farmers, largely in very poor rain-fed areas, that duty-free imports will continue until March 31, 2011, putting paid to any fancy ideas (s)he may have of making money this kharif season or even the next rabi season because by March-end the larger cropping decisions will have been made.

The Reserve Bank of India, meanwhile, coolly kept on churning its information machine. In the period April 2009 to July 2009, for which they gave us the latest figures this month, edible oil imports went up by 77.7% and pulses imports grew by 34.6%. Meanwhile, the ministry of shipping was generous in saying that more is on the way. The government not only imports these food products, it also subsidises them. Take pulses, where the numbers are less frightening. The April-July numbers suggest an annual rate of $1.5 billion.

Since we subsidise farmers in OECD and other countries who sell us these pulses at 15% premium over local market prices, we will give them $115 million. That?s roughly Rs 500 per tonne. If we look at acreage response elasticities, we could probably get 10% growth in pulses, provided we were equally generous to our own farmers. The numbers in edible oil, where we now import more than three-quarters of what we need, are even more promising. However, I wanted to take the less favourable case for my argument.

The chief economic advisor tells us very validly that the way you present your argument will convince the policymaker. He gave a very interesting example of a vacuum cleaner improving the welfare of domestic servants. I taught my pulses example in a course for college teachers in economics last week. The students loved it and we were all very happy. It is textbook stuff from Krugman and Obstfeldt and great fun. I didn?t know whether it was funny or tragic that the government went out of its way to reject the Alagh Committee on using tariff policies in tandem with pricing and monetary policies, yet accepted the objective of ensuring global competition for our farmer. Actually, I only wrote the stuff four years ago and some of the top economists in the government have argued for a variable tariff policy for agriculture.

As I drive down to my retreat, next to a nature park, there is the enervating thought that our economists are really good and our senior ministers are even better and maybe somebody out there is reading. At seventy-one years young, I am still an optimistic kind of blighter.

The author is a former Union minister