TCA Srinivasa-Raghavan: How about an Indo-US F-deal?

LINE & LENGTH

India will be a food importer for a long time but there is no one managing food security.

Four years ago, India had over 40 million tonnes of food stocks. Today it has around one million tonnes. This development has to be seen in the context of another fact: just the other day everyone was feeling very pleased that India had finally overcome the "too-little-food and too-little-foreign exchange" problem. The food problem was licked, so to speak, in the 1970s, thanks mainly to the reforms of the late 1960s that led to the Green Revolution.

So when the drought of 1979 came along "" the worst in a century it was said "" its impact was not as awful as it used to be. Certainly, no one died of starvation and the international media did not notice anything amiss.

But the foreign exchange problem remained until about five years ago. Then, thanks to the gradual financial sector reforms of the previous nine years, it too disappeared. India now has over $150 billion of reserves.

Many economists were, and continue to be, unhappy that India was not putting the reserves to better use. But more sensible people argued that this was not the way to look at the issue.

The debate was never properly resolved. Much to the annoyance of the critics, the Reserve Bank of India (RBI) went ahead with its hoarding anyway. Having had to live through the trauma of the crisis of 1991, as an institution it wasn't going to be caught wrong-footed again.

The manner in which the food stocks have vanished "" just as forex reserves did in the latter half of the 1990s, not to mention in the mid-1950s "" should remind us that for countries like ours, insuring against a rainy day has to be an essential element of policy. The cost of holding these "excess" reserves may be high in purely commercial terms, but the cost of not holding them could be even higher in political, social and economic terms.

The contrast between the management of food stocks and foreign exchange reserves raises an even more fundamental question. For latter, the Reserve Bank of India (RBI) is statutorily and institutionally responsible. Parliament has asked it to maintain the "monetary stability of India".

But for food security which is the counterpart institution? The Ministry of Food? The Food Corporation of India? The answer is neither because their functions with respect to food security do not correspond to the RBI's functions in respect of foreign exchange. The result is there for all to see "" a sudden and worrying dip in food stocks because no one is responsible for food in the same way as the RBI is responsible for foreign exchange.

It therefore needs asking: should something be done to reduce this asymmetry? If so what? Or should nothing be done because, as the marketwallahs say, nothing needs to be done, just leave it to the market? That would mean imports, mainly, but at what price and cost? Is there any merit in the argument that futures markets "" which we have just introduced and which the Left is blaming "" raise prices? If prices rise, is that not good for the farmers, even if they are bad for the net buyers of grain? Is the prime minister right in stressing only credit but not the structural factors that have kept productivity in agriculture low and the production of wheat constant for at least seven years? There are many more questions.

There is almost no discussion of these issues within the government, as there is within the RBI in respect of managing the monetary stability of India. The food and agriculture ministry (by whatever name) is seen as a lousy posting by civil servants and as a kamadhenu by politicians because of its huge budgets.

The key to the final answer can perhaps be found by also comparing not just the legal obligation but also the levels of competence. Indeed, it is no coincidence that government departments that have a dedicated cadre perform far better than those that don't. Atomic energy, missiles, space, railways, telecommunications, posts, power etc are cases in point. Does the management of food security have such a dedicated cadre?

Governments, both at the central and the state level, for several well-established reasons of politics, methods of recruitment, and Article 311 which provides government employees with an iron-clad defence against sacking, are full of very incompetent and/or venal persons. They simply don't know what to do or do things for personal gain. So they go on making a mess of things.

As Swaminathan Aiyar wrote in his inimitably perceptive way some months ago, food imports are here to stay. Simple demand arithmetic would suggest that, even if we didn't go into the domestic supply side issues, which are several and impossible to resolve quickly.

India hasn't quite woken up to the prospect that lies ahead. China has, and is taking the necessary steps. For example, it leased 100,000 acres in Tajikistan several years ago to grow grain. It would also like an international food security agreement which bans the use of food as a weapon, just as in the case of chemical and biological weapons. It has recognised that given the structure of its land holdings, its best lies in horticulture for export in return for importing grain.

So here is an idea: after the nuclear deal with the US, let us also have a food (F) deal. We don't seem to be able to focus our minds in the absence of such imperatives.