Indias food policy can be dated to the Bengal famine of 1942. The subsequent Foodgrains Policy Committee(1943) led to systems of procurement, rationing and statutory price controls. There were minor flip flops till the 1960s. And in the 1960s, the food crisis, imports under PL 480, Lyndon Johnson and the Foodgrains Policy Committee (1966) refined and reshaped the system of procurement, buffer stocks, government monopolies, controls under the Essential Commodities Act and a public distribution system (PDS). The Green Revolution has happened since then. A country that used to import foodgrains is not only self-sufficient. It also exports wheat and rice. Yet the syndrome of state intervention is impossible to overcome.
Proponents of reform in agriculture argue for relaxations along four main strands liberalisation of domestic trade, revamping composition of public expenditure on agriculture and reforming rural finance. Whenever such suggestions are made, hackles are raised. The mindset continues to be one of the Bengal famine of 1942 and PL 480. Therefore, any exercise to negate this mindset is welcome. Pradeep Sharmas slim volume, which seems to be a revised version of a Ph.D dissertation, is such an exercise. This is the Pradeep Sharma who co-authored a paper with Ashok Gulati in 1991 on government intervention in agricultural markets. You thus know the philosophical underpinnings of the book.
Apart from the introduction and conclusion, there are five main chapters. One of these is on agricultural prices and price policy. This is a review of the literature and discusses determination of administered prices like minimum support prices and procurement prices.And these are contrasted to issue prices and open market prices. This is a good explanatory chapter. For example, the non-agricultural economist often finds it difficult to understand the difference between minimum support prices and procurement prices. As a review of literature, the chapter is not exhaustive, but perhaps deliberately so. The next chapter moves on to production and absorption (demand) of rice and wheat. Supply and demand functions for rice and wheat are estimated and there is scope for quibbling about functional forms, independent variables and econometrics. This takes one to a chapter on government operations in rice and wheat markets. This means procurement, imports, buffer stocks and public distribution. There is a fair
degree of literature on the PDS. The USP of this chapter lies in explaining how procurement works and in a section that discusses the economic efficiency of the Food Corporation of India (FCI). Not surprisingly, the FCI is inefficient, regardless of the criteria used to define efficiency.
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All this has been leading up to the most important chapter in the book. This is a simulation model (1969-70 to 1988-89) for rice and wheat markets, incorporating dualism. Consider the following simulations. What is the impact of a 10 per cent hike in fertiliser prices? What is the impact of a 1 per cent increase in irrigated acreage? What is the combined effect of the two? The simulations bring out the superiority of non-price variables (irrigation) over price variables. The two concluding chapters draw upon this finding.
The penultimate chapter is on economic reforms and Indias food economy. This doesnt add much to what is already known, such as in Pursell and Gulati. There is too much of a focus on external trade liberalisation. The chapter would have been richer had Pradeep Sharma dwelt more on domestic market liberalisation. For example, the Essential Commodities Act is mentioned, but there is not much discussion. There is little on futures trading. The discussion of the PDS is also fragmentary and ways of reforming the PDS are inadequately explored. The strongest part of this chapter are sections where the author takes up positions on the FCI. In a liberalised foodgrain economy, the canalising role of FCI would also disappear...The present system of FCI doing everything from buying gunny bags to constructing storage godowns is inefficient...If the PDs were replaced by the food stamps system, there would be no need for FCI to procure and distribute foodgrains. Nor is it clear why the concluding chapter on policy
implications was delinked from the penultimate one on economic reforms. The two are related. Apart from that, the concluding chapter is essentially a rehash of simulation results.
Trickle down benefits of growth will not begin until agricultural reforms are introduced. Nevertheless, there is enormous resistance to such reforms. This book provides additional arguments for agricultural reform. Not a very good read. But certainly a useful one.
Foodgrain Economy of India, Government Intervention of Rice and Wheat Markets
Pradeep K Sharma Shipra Publications Rs 280/160 pages