Sharad Pawar has told FAO that India will lift its ban of food exports. It was about time there was some ministerial assurance on this matter. But it should have been buttressed with economic logic as well. Pawar, a man of vast administrative experience and not someone unsympathetic to liberal economics, argued that export bans lower food prices. In fact, trade bans always fuel inflationary expectations in domestic markets because market players get a signal of supply shortage fears. Plus, at the global level, a ban by one country on food exports sends prices upwards in importing countries?those effects double back. As these columns had argued earlier, intelligent market-respecting cooperation by major countries, including India, is essential in times of food price inflation. India, in any case, exaggerates its food fears. Its share of food imports in total imports is a shade lower than the global average of 7%. It has about 161 million hectares of arable land, the second largest after the US. As many studies have established, a small increase in productivity can produce a big increase in farm production and that small increase can be achieved by an intelligent increase in capital spending and consolidating farming operations. Low productivity pushes down India?s per capita GDP of the farm population to just $201 (at constant 2000 prices), a fifth lower than that of our neighbours Pakistan and China and a miniscule compared to per capita output in rich agriculture countries like Australia, Canada and the US, where the figure ranges between $20,826 to $27,651. This is what agriculture ministers should be concentrating on.
India also needs to look at its food consumption by extrapolating its current consumption levels. Current levels of calorie consumption of 2,440 kcal/person/day should be heading towards the global average of 2,800 kcal/person/day, and closer to the 3,770 kcal/person/day figure for rich countries?that will be the effect of secular increase in income levels. Policymakers may suddenly get caught short by specific import needs if they don?t track growth and consumption smartly. The smart way to do it is never to forget the power of properly integrated markets to deliver. Market fragmentation is as much of a local reality in India as it is globally. As we keep saying, farming doesn?t need help, it needs reform.
